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PT&P History: The First Thirty-Five Years

Index | Acknowledgements | Milestones | Introduction | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Read More

Chapter 8: New Opportunities in Electric Power and Engineering

As Piping Technology & Products continued to grow and expand its product line using the equipment obtained by the acquisitions of two leading expansion joint manufacturers in the late 1990s, changes in the electric power generation industry provided unexpected new opportunities that would lead to a greatly enhanced engineering department.

During the late 1990s, many states, including California, began deregulating their electric power industries. The original impetus for this wave of deregulation is found in the Public Utility Regulatory Policies Act, passed by Congress in 1978, which set the stage for deregulation and greater competition in the electric power industry by giving non-utility producers of electricity access to wholesale power markets. In 1992, Congress passed the Energy Policy Act, which encouraged greater competition in the bulk power market. In 1996, the Federal Energy Regulatory Commission (FERC) issued Orders 888 and 889 to "remove impediments to competition in wholesale trade and to bring more efficient, lower cost power to the Nation's electricity customers." The directives mandated "open and equal access to jurisdictional utilities' transmission lines for all electricity producers." These directives were the final steps making it possible for individual states to restructure the electric power industry, allowing customers direct access to retail power generation. The result of this in many states was the transition of the electric power industry from highly regulated, local monopolies providing a total package of all electric services to a system of competitive companies providing the electricity while the utilities continued to provide transmission and distribution services. States also began moving away from their traditional roles of regulating electricity rates, and toward what could be described as an oversight function of a deregulated electric power industry in which competitive markets would determine prices. This brought about the rise of the independent or merchant power plants.

One of the firms that saw opportunity in the electric power deregulation was a California energy company, Calpine, founded in 1984 by an engineer, Peter Cartwright. With California's population rising and electricity in increasingly short supply, Calpine, which had been growing steadily since its creation, was poised to take a leading role in this newly formulated, deregulated industry. An electricity crisis in California during 2000–01 added a sense of urgency as power companies tried to meet the increased demand. Consequently, Calpine purchased a large number of gas turbines from General Electric with a plan to construct as many as 100 of the small, efficient, natural gas–fueled merchant power plants, with many of them being located in California. During the spring of 2001, Calpine announced its plans and sent out a request for proposals (RFP) to engineering and construction firms and piping companies. This was a major opportunity for companies who could provide both the engineering and the piping products required for these projects.

The Battle for Calpine

Among the firms responding to the RFP was the Shaw Group, Inc., headquartered in Baton Rouge, Louisiana. The Shaw Group was established in 1987 as Shaw Industries, Inc., a pipe fabrication company. During the next ten years, Shaw embarked on a series of expansions including the 1994 acquisition of Fronek Company, Inc. and F.C.I. Pipe Support Sales, Inc. In 1996, Shaw purchased Pipe Shields, Inc., a highly regarded California manufacturer of pre-insulated pipe hanger supports.

During this time, more energy companies began requesting package bids that included the engineering design work and "just-in-time" supply of piping, pipe hangers, and pipe supports. The Shaw Group embarked on an expansion strategy that enabled the company to provide this complete range of services and products for its clients. In time, Shaw developed into one of the world's largest vertically integrated providers of engineering, construction, manufacturing, and other diverse services, with operations in North America, South America, Europe, the Middle East, and Asia. Thus, by 2001, Shaw Group was well positioned when it received the RFP from Calpine to provide the kind of package bid the company requested. As Randy Bailey recalled, "Calpine's RFP that went out to pipe fabrication shops was for a complete package where they not only wanted the pipe fabricated, they also wanted the engineering design done on the pipe supports and everything married at the same time—done together." Shaw Group's earlier acquisition of Fronek and Pipe Shields anticipated these changes in the industry. "They had bought the Fronek group a while back," said Bailey. "With this pipe support group, they were going to be able to book the Calpine job, they were going to book all this other work, and this is how they could offer a complete package back to the operating companies."

Randy Bailey Checking the Strength of a Sway Brace Following a Test

At the time that Calpine requested bid proposals, a large part of PT&P's business came from projects related to the petrochemical industry. The company's management saw the opportunity of getting more involved in electric power plants as something that was doable and potentially very profitable. PT&P began working with Turner Industries, an industrial contractor and fabrication company headquartered in Baton Rouge, Louisiana, to submit a proposal to Calpine. Turner would provide the piping, and PT&P would supply the pipe hangers, supports, and other products. Bailey and Agrawal were confident that PT&P could do a better job of providing pipe supports and other products for the Calpine jobs than any other company. Bailey, along with one of the PT&P engineers, joined the Turner representatives and flew to California to meet with Calpine's top management. After Bailey completed his presentation, he told Ross Cates, one of Calpine's executives, that while he might get his piping delivered on time by another firm, no one else had the capacity of PT&P to get the large number of pipe hangers, supports, and other products produced and delivered on schedule. Much to the amazement of the astonished Turner Industries representatives, he challenged Cates to visit PT&P's plant, saying: "Ross, I'll tell you what. If you are going to go ahead and place this order with them [Fronek], you may as well just open the window, get out on the ledge and jump out. I want you to do one thing…because if you don't come in and look at our shop and go look at their shop before you make this decision, then I think you are going to regret it." Cates took up Bailey's offer and visited both the PT&P plant and Fronek. In the end, Calpine awarded the contract for pipe supports and pipe fabrication to PT&P and Turner Industries.

Mailing: P.O. Box 34506, Houston, TX 77234-4506 Location: 3701 Holmes Road, Houston, TX 77051
Our Subsidiaries: U.S. Bellows: Metallic & Fabric Expansion Joints, Bellows
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