Power-Price Cap: California Dreamin'
By Craig Shere
The California Senate passed legislation Monday to implement an effective cap on power prices through state taxes. S&P sees this move as political grandstanding, given that the cap, which California regulators previously scrapped, is below the cost of many generators. And producers are already increasing their long-term contracts with the state.
Some 2,000 megawattts still are offline because of the state's inability to pay the bills. Politicians are impotent in face of reality: only higher supply can both meet demand and reduce prices.
S&P continues to overweight independent power producers and has a 5 STARS (buy) recommendation on shares of Dynegy (DYN ), Calpine (CPN ) and Mirant (MIR ).
Craig Shere is an energy analyst for Standard & Poor's
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