Longform

Shock Treatment

Page 3 of 7

After the meeting, El Paso killed the Tenneco projects. California's natural gas power plants, which sucked up 18 percent of SoCalGas' capacity, would remain captive customers of SoCalGas.

El Paso had wanted to run a pipeline to a massive natural gas power plant in Mexico, but SoCalGas had submitted a lower bid on the project. After the meeting, SoCalGas withdrew its bid.

According to the lawsuit, this tit for tat and several other subsequent agreements strangled the California and Baja supply and left the region at the mercy of monopolies.

"Fearing a new era of open competition and lower prices," the complaint alleges, "these latter-day captains of industry gathered secretly to hatch a conspiracy to dominate the unregulated aspects of the natural gas and electricity markets. . . . The conspirators sought to eliminate competition, take advantage of electric deregulation, drive up the price of natural gas and profit from the increased prices."

All three companies vehemently deny any wrongdoing. In essence, they accuse the plaintiffs of looking for media attention and an easy scapegoat in a complex crisis.

Also during this time, El Paso essentially sold the remaining available capacity on its lines to its own merchant subsidiary. Critics say this move gave El Paso control of all the noncontracted available space on the pipeline and, so, complete control of all available natural gas in California.

For Arizona, the deal, collusion or not, also had a profound impact. Tenneco's lines would have taken cheap gas into northern Baja. With the pipeline, attorneys in the case say, northern Baja would have been the easiest and cheapest location to build new natural gas-fired plants to feed Southern California.

But when the pipeline died, leaving Baja with expensive SoCalGas fuel, power companies needed a new power farm.



Where could they get facilities planted quickly next to major pipelines? Where was land and labor cheap?

"Arizona," says Astrella, a top energy attorney and one of the lead attorneys in the California class action suit.

"Basically, Mexico made the most sense for plants, followed by Arizona and Nevada," he tells New Times. "When that pipeline was cut, all eyes turned to Arizona. You would not be seeing this rush to your state if that pipeline had remained."

In 1998, as deregulation was rolling into effect in California, power companies began flooding the Arizona Corporation Commission with plant proposals. Arizona, with loose regulation, cheap land and labor and a penchant for tax breaks, was the most fertile ground for a quick crop of plants.



The plants were nearly identical in concept: Prefab buildings with several natural gas turbines, essentially engines like those on a 747 jet. Plants would produce an average of 800 megawatts of power. (One megawatt generally serves about 1,000 residents.)

Most would sit along an El Paso Natural Gas main line, which would allow them to avoid gas-delivery charges of subsidiary companies such as Southwest Gas.

Four plants are being constructed next to the Palo Verde Nuclear Plant west of Phoenix. The spot allowed plants easy access to the power grid and put them just outside the highly regulated Phoenix air shed.

Other companies looked for land anywhere in rural Arizona with infrastructure, organized support for economic development and, critics argue, unorganized opposition to questionable economic development.

As the proposals flowed into Arizona, so did company representatives, lobbyists and public relations people. Tax incentives, sketchy environmental impact studies and company-controlled public polling followed. And nobody, including the Arizona Corporation Commission or state government, seemed to be asking two critical questions:

What is the cumulative effect of all these plants?

And do we really need all this power?

"This rush for plants is all unprecedented," says Tim Hogan, director of the Arizona Center for Law in the Public Interest. "But even with all the unknowns, we keep blithely approving them. Beyond the critical environmental issues, I still have yet to hear any convincing argument that this whole mess will ever benefit the average Arizona customer."


The first three merchant plants sailed through the Corporation Commission quickly and quietly early last year. Consumer and environmental advocates were caught off guard.

Griffith Energy L.L.C. was the first to apply for approval from the Commission. It wanted to build a massive merchant plant up by Kingman in Mohave County.

Reliant Energy followed. Then two from Pinnacle West (APS' parent), then Harquahala Generating Co., Duke, Panda Gila, Caithness, Mesquite, Gila Bend Power Partners, SRP (twice) and Sundance Energy. Several other companies and utilities are expected to present proposals to the Commission in coming months, according to industry analysts.

KEEP PHOENIX NEW TIMES FREE... Since we started Phoenix New Times, it has been defined as the free, independent voice of Phoenix, and we'd like to keep it that way. With local media under siege, it's more important than ever for us to rally support behind funding our local journalism. You can help by participating in our "I Support" program, allowing us to keep offering readers access to our incisive coverage of local news, food and culture with no paywalls.
Robert Nelson