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These excerpts taken from the PEG 10-K filed Feb 26, 2009. COMPETITIVE ENVIRONMENT Power Various market participants compete with us and one another in buying and selling in wholesale power pools, entering into bilateral contracts and selling to aggregated retail customers. Our competitors include:
Our business is also under competitive pressure due to demand side management (DSM) and other efficiency efforts aimed at changing the quantity and patterns of usage by consumers which could result in a reduction in load requirements. A reduction in load requirements can also be caused by economic cycles and factors. It is also possible that advances in technology, such as distributed generation, will reduce the cost of alternative methods of producing electricity to a level that is competitive with that of most central station electric production. To the extent that additions to the transmission system relieve or reduce congestion in eastern PJM where most of our plants are located, our revenues could be adversely affected. In addition, pressures from renewable resources, such as wind and solar, could increase over time, especially if government incentive programs continue to grow. We are also at risk if one or more states in which we operate should decide to turn away from competition and allow regulated utilities to continue to own or reacquire and operate generating stations in a regulated and potentially uneconomical manner, or to encourage rate-based generation for the construction of new base load units. This has occurred in certain states. The lack of consistent rules in energy markets can negatively impact the competitiveness of our plants. Also, regional inconsistencies in environmental regulations, particularly those related to emissions, have put some of our plants which are located in the 16
Northeast, where rules are more stringent, at an economic disadvantage compared to our competitors in certain Midwest states. Also, environmental issues such as restrictions on carbon dioxide (CO2) emissions and other pollutants may have a competitive impact on us to the extent it is more expensive for our plants to remain compliant, thus affecting our ability to be a lower-cost provider compared to competitors without
such restrictions. PSE&G The electric and gas transmission and distribution business has minimal risks from competitors. Our transmission and distribution business is minimally impacted when customers choose alternate electric or gas suppliers since we earn our return by providing transmission and distribution service,
not by supplying the commodity. The demand for electric energy and gas by customers is affected by customer conservation, economic conditions, weather and other factors not within our control. Energy Holdings New
additions of lower cost or more efficient generation capacity in Texas could
make our plants in the region less economical in the future. A number of
competitors have announced plans to build additional coal-fired and gas-fired
generation capacity in ERCOT. Although it is not clear if this capacity will
be built or, if so, what the economic impact will be, such additions could
impact market prices and our competitiveness. Over the past several years, substantial amounts of wind generation capacity have been constructed in ERCOT, particularly in western Texas, where our Odessa generation facility is located. At the end of 2008, ERCOT had approximately 8,000 MW of installed wind capacity. Given the favorable
wind conditions in western Texas, these wind generation facilities are able to produce power during a substantial period of the year, resulting in an additional source of base load power in western Texas, especially during off-peak seasons. While numerous competitors have announced plans to build substantial amounts of new wind generation capacity, an issue impacting the likelihood of these projects being built is the constrained amount of transmission capacity between western Texas, where wind generation units are typically
sited but where power demand is relatively low, and the rest of Texas. The Public Utility Commission of Texas (PUCT) has designated five Competitive Renewable Energy Zones in western Texas and the Texas Panhandle in an effort to address the constraint issue. The PUCT has requested that ERCOT develop transmission construction options within these zones
that would allow for much greater levels of delivery of wind power from western Texas to customers throughout the ERCOT grid. Although it is not clear if these efforts at transmission expansion will be successful or, if so, what the economic impact will be, it is possible that substantial
additional amounts of wind generation will be built in ERCOT as a result of such potential transmission expansion, which could impact market prices and our competitiveness. COMPETITIVE ENVIRONMENT Power Various market participants compete with us and one another in buying and selling in wholesale power pools, entering into bilateral contracts and selling to aggregated retail customers. Our competitors include:
Our business is also under competitive pressure due to demand side management (DSM) and other efficiency efforts aimed at changing the quantity and patterns of usage by consumers which could result in a reduction in load requirements. A reduction in load requirements can also be caused by We are also at risk if one or more states in which we operate should decide to turn away from competition and allow regulated utilities to continue to own or reacquire and operate generating stations in a regulated and potentially uneconomical manner, or to encourage rate-based generation for 16 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Northeast, where rules are more stringent, at an economic disadvantage compared to our competitors in certain Midwest states. Also, environmental issues such as restrictions on carbon dioxide (CO2) emissions and other pollutants may have a competitive impact on us to the extent it is more expensive for our plants to remain compliant, thus affecting our ability to be a lower-cost provider compared to competitors without PSE&G The electric and gas transmission and distribution business has minimal risks from competitors. Our transmission and distribution business is minimally impacted when customers choose alternate electric or gas suppliers since we earn our return by providing transmission and distribution service, Energy Holdings New Over the past several years, substantial amounts of wind generation capacity have been constructed in ERCOT, particularly in western Texas, where our Odessa generation facility is located. At the end of 2008, ERCOT had approximately 8,000 MW of installed wind capacity. Given the favorable While numerous competitors have announced plans to build substantial amounts of new wind generation capacity, an issue impacting the likelihood of these projects being built is the constrained amount of transmission capacity between western Texas, where wind generation units are typically The Public Utility Commission of Texas (PUCT) has designated five Competitive Renewable Energy Zones in western Texas and the Texas Panhandle in an effort to address the constraint issue. The PUCT has requested that ERCOT develop transmission construction options within these zones This excerpt taken from the PEG 10-K filed Feb 28, 2008. Competitive Environment Although PSEG Texas’ generating stations operate very efficiently relative to other gas-fired generating plants, new additions of generation capacity could make PSEG Texas’ plants less economical in Over the past several years, substantial amounts of additional wind generation capacity has been constructed in ERCOT, particularly in western Texas, where PSEG Texas’ Odessa generation facility is While numerous competitors have announced plans to build substantial amounts of new wind generation capacity, an issue impacting the likelihood of these projects being built is the constrained ERCOT’s upcoming transitions to nodal pricing from zonal pricing, currently targeted for December 2008, may impact the competitiveness of PSEG Texas’ generating plants. A nodal electricity This excerpt taken from the PEG 10-K filed Feb 28, 2007. Competitive Environment Although TIE’s generating stations operate very efficiently relative to other gas-fired generating plants, new technology could make TIE’s plants less economical in the future. Also, several competitors have announced plans to build a substantial amount of capacity in the Electric Reliability Council of Texas (ERCOT) market. Although it is not clear if this capacity will be built or, if so, what the economic impact would be, such additions could impact market prices and TIE’s competitiveness. Also, as ERCOT transitions to nodal pricing from zonal pricing the competitiveness of TIE’s generating plants could be impacted. As TIE represents a substantial portion of Energy Holdings’ and Global’s business, volatility in that portion of the business will impact Global’s and Energy Holdings’ overall portfolio results. Of the remaining portion of Global’s business, the majority of its earnings are generated by two major rate-regulated distribution businesses in Chile and one in Peru. Although these entities are not granted exclusive franchises, there is minimal competition for distribution companies. See Regulatory Issues—International Regulation for a discussion of the ratemaking process in Chile and Peru. Global also owns a 10
hydro generation facility in Peru. Although new generation capacity is being built in Peru, there are not many opportunities for hydro expansion, mitigating competition with Global’s hydro generation
investment. This excerpt taken from the PEG 10-K filed Feb 28, 2006. Competitive Environment
Energy Holdings and its subsidiaries continue to experience substantial competition, both in the U.S. and in international markets. In the U.S., an overbuild in generation facilities has led to a large capacity surplus in several regions. This has resulted in reduced operating margins for both independent power producers and 14
utility generators where the marketplace has been evolving from a rate-regulated structure to a competitive environment. These matters in Texas showed improvement in 2005, evidenced by improved margins and increased utilization of Global's facilities. With respect to Global's distribution businesses in Chile, Peru, Brazil and Oman these investments are rate-regulated and are exposed to minimal market risks from competitors. See Regulatory Issues—International Regulation for additional information. This excerpt taken from the PEG 10-K filed Mar 1, 2005. Competitive Environment
Energy Holdings and its subsidiaries continue to experience substantial competition, both in the U.S. and in international markets. In the U.S., an overbuild in generation facilities has led to a large capacity surplus in several regions, including Texas. This has resulted in reduced operating margins for both independent power producers and utility generators where the marketplace has been evolving from a rate-regulated structure to a competitive environment. Global anticipates that these matters in Texas may improve in the long term, leading to higher capacity prices and increased utilization of its facilities. In addition, the Polish government is seeking to renegotiate existing PPAs that it believes to be uncompetitive in the local energy market. With respect to Global's distribution businesses in Chile, Peru and Brazil, these investments are rate-regulated and are exposed to minimal risks from competitors. See Regulatory Issues—International Regulation for additional information. 14
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