Shock Treatment

California eats lots of power, but it doesn't like growing its own power plants. Instead, Arizona is becoming the new power farm for the Coast.

"I'm not denying these things are cleaner than coal or nuclear plants," Hogan says. "But nobody has answered what the cumulative effects of all these plants really might be, if there is one. The utilities say there isn't one because they are highly mobile pollutants, but that's not always real comforting to only hear from a private utility company."

Steve Branoff, an engineer with the Environmental Protection Agency, says the plants are environmentally sound.

And since modern natural gas-fired plants are all nearly identical, Branoff says, the EPA can make projections of the plants' impact based on already existing plants.

Generating capacity at the present San Tan facility will be doubled under SRP's proposal.
Paolo Vescia
Generating capacity at the present San Tan facility will be doubled under SRP's proposal.

"Despite the fact that these are very large plants, their emission specs really are very low," Branoff says.

Hogan has one other pending lawsuit, against Arizona Public Service. In that case, Hogan questions the legality of Arizona's plan to remove price caps in 2004.

The problem there, Hogan says, is almost the reverse of one of California's major problems. In Arizona, companies such as Pinnacle West didn't have to sell off their generation assets. They just had to separate their distribution and generation assets. One subsidiary will sell power to the wholesale market, the other will buy the power and sell it to customers.

That's dangerous territory for customers, Hogan says.

"The way the law sits now, APS is going to be able to charge whatever they want on the open market for wholesale power and then pass on any cost increases to their customers. I believe deciding now that we're going to let them pass costs on is not only illegal, but a really bad idea until we know what the situation is with deregulation in Arizona."

If an adequate supply is in place, others argue, the market will take care of itself. With lots of power out there, wholesale market prices will remain low.

That is, as long as there is enough inexpensive natural gas. Besides the cost of construction of the facility, paying for natural gas is the greatest expenditure in operating the new high-tech turbine plants. Natural gas prices, SRP officials and others argue, are higher than they should be right now. And that doesn't bode very well for the future.

"Natural gas prices have to rise to the $3 range, that's reasonable considering they have to get a new supply," says SRP's Mark Bonsall. "But we've been seeing six bucks, eight bucks, and that's just way, way too high."

"This is all unprecedented territory," Hogan says. "We better know what we're doing or it will be a disaster."

In 1999, representatives of Arizona's public-power utility, SRP, and two private utilities, Dynegy and NRG, approached Tempe and Gilbert officials with a plan.

Dynegy and NRG, two of the most aggressive and most profitable companies in the new power market, were going to help SRP enter into "the brave new world of deregulation," Gilbert councilman Mike Evans says he was told.

SRP proposed a new 825-megawatt plant. Dynegy and NRG would build and operate the plant. SRP would provide the land. SRP would use the power from the plant for its burgeoning Phoenix market. In return, SRP would give 500 megawatts to Dynegy and NRG for the companies to market in California.

SRP officials say the deal was the cheapest way for SRP to get much-needed power generation in the East Valley market. Bonsall says that while the utility has power to spare elsewhere in the state -- northern Arizona and the West Valley -- it is short in the East Valley and would need to build massive new power lines to ship its own power there.

Power lines are expensive, hard to get approved, ugly and just move existing power around. The Dynegy/NRG plant would have allowed SRP, for the same price as new transmission lines, to get more efficient power and a much-needed generating pillar to support the East Valley power grid.

Critics, though, question SRP's timing and logic. They say SRP, like other power companies, just wants additional power to sell to California. They point out that Dynegy and NRG have been two of the companies profiting most from California's woes.

Worst of all, in SRP's case, the generators weren't being planted in remote desert. They were being planted in the suburban East Valley.

SRP's first choice for the new plant was in Tempe, where SRP has an existing substation located on top of the El Paso gas line.

SRP figured it could use its legal status as a quasi-government entity to avoid a review process by the City of Tempe. But critics pointed out that with Dynegy and NRG involved, much of the power would, in essence, be shipped out of the Valley. The plant would be a merchant plant.

Because companies other than SRP were involved, the plant would have to go through the normal Tempe review process.

The deal collapsed. A much smaller Tempe plant will be built without Dynegy and NRG.

But SRP soon came up with another proposal -- to add 825 megawatts of power at its substation at Val Vista and Warner roads in Gilbert.

The Gilbert plant, called San Tan, will sit 250 feet from a recently built subdivision of middle-class homes.

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