NEW YORK ( TheStreet) - Rising out of the ashes of bankruptcy in 2008, the nation's leading power provider Calpine ( CPN) is poised to benefit from two reforms in the energy industry.
Houston-based Calpine, which sells electricity to the wholesale market, is expected to gain an advantage from the Obama administration's push to cut carbon emissions and also reforms being sought by the nation's largest electricity grid operator PJM. The grid operator wants its power plant partners to deliver greater reliability with uninterrupted electricity.
Earlier this month, PJM, which coordinates the flow of power by working with power plant operators such as Calpine, received approval from its board to file an enhanced capacity performance proposal with the U.S. Federal Energy Regulatory Commission.
PJM's reforms were sparked by the "transformation of the PJM generation fleet," due to the abundant supply of cheap shale gas, as well as "last winter's polar vortex weather events," said Brett Kerr, Calpine's spokesperson, in an email to TheStreet. Those events led to one of the highest levels of winter electricity demand, which undermined PJM's grid operations.
Consequently, PJM revised its incentive plan, seeking to enhance its compensation to power plant operators that provide greater generator availability during periods of system stress, while substantially penalizing those generators that underperform.
PJM is planning to hold a capacity auction in May and could apply the new structure that favors those power plant operators that can deliver a continuous supply of electricity throughout the year, in every season, and have dual-fuel capabilities.
Calpine is in a strong position to capitalize on the auction, because "more than 22% of Calpine power generation capacity is located within PJM's territory" and fulfills these requirements.
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