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Independent power generators are beginning to establish their businesses in the Northeast states where they believe the chances of achieving profits are high. The move is cited as a preparation for the deregulation of the utilities industry.

Independent power producers (IPPs) are optimistic about the stagnant electric power industry because of the impending deregulation. IPPs which are interested in the US market include Calpine Corp., AES Corp., PanEnergy, Marubeni Corp. and Power Markets Development Corp.

The shift towards a fee market for power generation necessitates the evolution of powerplant economics. Among the new marketplace realities are shorter payback periods, lower capital cost, shorter lead-times and enhanced plant operating flexibility.

Western independent power producers are troubled over the potential effects of the industry's regulation as they currently suffer from low power prices and stringent environmental standards. The only alternative that they have is the replacement-power market.

Independent power generators believe that they are in a good position to harness retail profits as the the basic kilowatt-hour charges have been extended beyond the wholesale level. However, the deregulation would also mean that they have to compete with larger utilities.

Several independent power producers have the false belief that they will not will be not be affected by the deregulation of the industry. They wrongly believe that their long-term purchase agreements will remain inviolate and that they will have the same chances as the utilities.

A drop in energy stability and independence due to huge capital investment in foreign projects harms the interests of the US population. The transfer of risk to original equipment manufacturers is leading to the acceptance of bad terms and prices.

Coal-fueled and hydro plants will be more useful assets compared to gas- or oil-fired units when deregulation takes effect as the latter are more economical. The finding was based on a Competitive Market Management System model by Decision Focus Inc. of Mountain View, CA.