Two Washington area companies, PG&E-Bechtel Generating Co. and Sycom Corp., have formed a new venture that hopes to profit from utilities' search for cheaper ways of providing electricity than building new power plants.
Sycom Ventures will focus on freeing power-generating capacity for new uses by reducing the amount of power that a utility's customers use.
PG&E-Bechtel, based in Bethesda, is itself a joint venture of Pacific Gas & Electric Co. and Bechtel Group Inc., both in San Francisco. It located its headquarters on the East Coast to participate in the increasingly competitive market for producing electricity.
While PG&E-Bechtel builds independent power plants that sell electricity to utilities, Washington-based Sycom competes in the same market by selling energy conservation as a way to stretch generating capacity.
PG&E-Bechtel is investing more than $6 million in the joint venture over the next several years; in return, it gets a 49 percent interest in the new venture, which Sycom will manage.
The genesis of the new venture is an effort by utilities and regulators to find cheaper alternatives to meet growing energy demands, instead of having utilities build new power plants.
For instance, utilities such as Virginia Power Co. have sought bids from companies that can generate power for less than Virginia Power can. Although PG&E-Bechtel did not bid for Virginia Power's business, it has sought such contracts in New England, Massachusetts and New York, and is also pursuing business in the Southeast, according to President Joseph P. Kearney. The company operates a power plant in Montana and is building more plants on the East Coast, he said.
In some cases, the utilities and regulators have also entertained bids from companies that propose to save -- rather than generate -- energy to help fill the gap between supply and demand. That's Sycom's business.
"It's a growing industry," said James Wolf, executive director of the Alliance to Save Energy, a Washington-based energy conservation group. "I think that the firms that are in there early and establish a track record will do well." Wolf said a handful of firms besides Sycom, including a subsidiary of Puget Sound Power & Light Co., have emerged.
"There are a handful of companies like us who have come up with an approach to finance it, market it, install it and maintain it," said S. Lynn Sutcliffe, a former general counsel to the Senate Commerce Committee, who is chairman and chief executive of Sycom. "It's just as if we were building a new power plant -- but more cost-effective."
The company saves energy by installing conservation equipment at no cost to some of the utility's large institutional consumers. It gets both a percentage of what the customer saves and of what the utility saves by not having to build new power generating capacity.
Conservation also can help utilities reduce pollution, giving them credits under the new Clean Air Act that the utilities can sell or use to obtain permits to build new power plants.
Combining Sycom's conservation services and PG&E-Bechtel's power plant experience in the new venture will allow them to provide "a very effective least-cost strategy for any utility," said Kearney. "It's a very interesting marriage for us."