- The Washington Times - Thursday, June 28, 2001

The California energy crunch has forced a PG&E; Corp. subsidiary to delay its plan for a new $100 million headquarters in Rockville, Md.

PG&E; National Energy Group was expected to start construction this summer on the 450,000-square-foot complex in Tower Oaks, a business campus off Interstate 270.

The plans are now on hold because of financial problems within the parent company that are rooted in the California power crunch, a spokesman said.

Another PG&E; unit, Pacific Gas and Electric Co., filed for protection from its creditors under Chapter 11 of the federal bankruptcy code in April. It listed an $8.9 billion deficit.

That unit, which has 13 million customers in California, suffered when the state changed its electricity regulations and the company was forced to buy increasingly expensive wholesale power without the ability to pass the rising costs to its customers.

"Even though our companies are completely separate, we believe it is prudent to put the project on hold and focus on other parts of the business," said David Mould, spokesman for National Energy Group.

The company develops and operates electric and gas power plants, and operates one of the nation's largest energy-trading businesses.

It announced a new $550 million line of credit from several investment banks last week and said in a statement it would use the money for working capital and to "establish a credit identity that is independent of PG&E; Corp."

National Energy Group currently occupies 320,000 square feet in Bethesda. It has about 650 employees.

This summer, the company expected to begin construction in Tower Oaks on a 10-story office building with roughly 280,000 square feet and an adjacent building with about 140,000 square feet.

Mr. Mould said he did not know when construction might begin, but that the company is "still committed" to the project.

A spokesman for the Tower Cos., the north Bethesda group that is developing Tower Oaks, declined to comment yesterday.

National Energy Group's decision to delay the project is "disappointing," said Stephen Christian, business development specialist for the Montgomery County Department of Economic Development.

But the department, which helped National Energy Group plan the new headquarters, believes the company will eventually get the project "back on track," Mr. Christian said.

A spokesman for the Electric Power Supply Association said power companies across the country are proceeding with expansion plans, even though some government officials and industry leaders believe the problems in California could signal a national energy shortage.

"The situation with PG&E; is unique because of the situation in California," said Mark Stultz, vice president of public affairs and marketing for the trade group, which represents power marketers and generators.

Energy giant Enron Corp. said yesterday it is nearing completion on a 1.2 million-square-foot addition to its headquarters in a Houston office tower.

Meanwhile, Orion Power Holdings Inc., a Baltimore company, said it still plans to build new electric plants in Southern Maryland and Kentucky.

Other companies are planning plants in Fauquier and Loudoun counties in Northern Virginia, although elected officials in those counties say they are not needed.

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