Crisis transforms Nevada into power broker

Saturday, Feb. 10, 2001 | 12:07 p.m.

As the lights flicker in California -- and officials warn that Nevada and much of the West could face the same fate this summer -- energy producers are looking to the Silver State to build more generating plants.

They are attracted by the relative ease in placing new plants, the proximity to California and the demand for power throughout the growing desert Southwest.

The march to build more power plants includes Gov. Kenny Guinn, policymakers from federal and state agencies and the companies that produce and distribute power.

Adding up the proposed plants in California, Arizona, Utah, Washington, Oregon and Nevada brings the number to nearly five dozen. Also, companies running existing plants want to expand capacity.

Although the construction and expansion could provide enough energy to power more than 30 million homes throughout the West, there are a few voices arguing that the wholesale construction of power plants needs to be more carefully considered.

And though there seems to be a rush to build, most of those plants will not come on line for two or three years -- not fast enough to avoid expected shortfalls that could threaten summer air conditioning.

But the decisions are being made now while the region is in a near panic over this summer's prospects.

"There's problems of not acting, and there's problems of overacting," said Rich Collins, a utility economist with the Utah Public Service Commission.

If every power supplier builds its proposed plants, there will be an oversupply, Collins said.

Energy producers aren't the best at responding to short-term fluctuations in demand and pricing, he said.

Short-term benefits

In the short term, an oversupply of power could reap benefits for consumers if power companies are forced to dump electricity to any available buyer. But that would be a rough ride for investors.

"They don't understand if there's excess supply, you're not going to collect your costs," Collins said.

The problem is that each state is thinking about power on its own, while the power system is on a grid that includes the entire West and parts of Canada and Mexico. What is needed is a stronger regional approach to planning, he said.

California has approved nine new plants for a total of 6,300 megawatts, and another dozen are in the state's expedited review process.

Utah, already a net exporter of power, is looking at doubling its generating capacity to 8,000 megawatts -- enough to power about 8 million homes.

The BLM is weighing proposals for seven natural-gas-fired electric plants and twowind-powered plants in Clark County.

According to Nevada Power Co., residents statewide use about 2,200 megawatts of generating capacity during the winter months, about what the existing power plants produce.

But in the summer, consumption rises to 4,600 megawatts or more -- and the difference comes from out of state.

The proposed plants in Southwest Nevada would add at least 3,970 megawatts. The combination of new and existing plants would generate more than enough for the entire state's needs, even in summer, Bureau of Land Management spokesman Phil Guerrero said.

Local observers such as Nevada Power President Steve Rigazio say the state will need that increased capacity soon because of the growth rate.

"We're supporting those folks who want to build power plants," Rigazio said. "Even if some of that power goes to other states, it will benefit Southern Nevada."

Power wholesalers and distributors generally agree that the new plants are necessary. "What could be the problem with too much power?" they say.

"Overcapacity is relatively cheap compared to the opposite situation," said Dennis Eyre, executive director of the Western Systems Coordinating Council, which includes 115 electric distributors and power producers from Mexico to Canada that plan investments in transmission and production.

"If you're going to err, it's better to err on the side of surplus capacity than not enough," Eyre said.

But some observers argue that the producers and distributors have a vested interest in building more plants, potentially more than are needed. Neither sector of the energy business makes money from discouraging use, they say.

"The incentive is to pass more electrons through their wires," said Christopher Sherry, research director for the Safe Energy Communication Council, a coalition of environmental and consumer groups. "Overall, the incentive is to deliver more power."

Long-term effects

The problem is that an oversupply will discourage conservation and have long-term environmental effects, environmentalists argue.

"We're going to have a huge oversupply," said Peggy Pierce, conservation committee co-chairwoman for the local arm of the Sierra Club, a national environmental organization.

She said building dozens of new plants and transmission facilities now will halt the introduction of technological innovations that could significantly improve efficiency. Those include improvements and cost reductions in renewable energy sources, such as solar and wind power, and other new technologies such as fuel cells.

Fuel-cell technology uses natural gas as the primary power source, as do most power plants, but doubles the efficiency.

"What happens if fuel cells show up in five years?" Pierce said. "There is a problem in California, but we need to respond in a sober fashion, not in a crisis-induced frenzy."

More needs to be done to encourage renewable energy, according to John Willinghoff, a Las Vegas attorney and member of Citizen Alert, a statewide environmental group.

"Yes, we need to build more power plants, but the ones we need to build in Nevada first are the ones that use our renewable resources," he said.

Wellinghoff said geothermal energy -- tapping the heat from water deep in the earth to produce energy -- is the best, most consistent way to go, and could provide 2,000 megwatts of affordable, clean power for Nevada.

Pierce fears that if power plants fail because of oversupply, "taxpayers will have to bail them out."

"If there are power plants that are going to be mothballed, these guys are not going to dismantle them," she said. "They are going to walk away and leave Clark County to clean up after them."

Jim Rexroad, development manager for Houston-based Duke Energy, said some of the concerns are misplaced. The company plans build a new energy plant northeast of Las Vegas.

Two factors could reduce the number of proposed power plants: regulatory roadblocks and market forces, he said.

"Some of these will run into environmental problems and will not get built."

Shrinking demand

As new power plants come online, the demand for others that take longer to build will shrink, Rexroad added.

Even those few concern environmentalists. They still worry that Southern Nevada will have to bear the environmental cost of providing energy to California.

"What concerns me is that we're going to end up here with a huge number of power plants, the power goes to California, the profits to Texas and the environmental consequences stay here in Clark County, and that's not acceptable," Pierce said.

Pierce and allies are alarmed by the rush to "streamline" the federal and county permit processes.

But speeding them up doesn't mean sacrificing the environment, state officials say. The state will continue to ensure that environmental standards are met, pledged Allen Biagi, director of the Nevada Division of Environmental Protection.

Biagi said the time savings will come from working closely with prospective power suppliers and the BLM is trying to streamline the process on the federal side.

State agencies must review applications for similar issues, and the Clark County Health District must approve plants because of their potential effect on air quality.

Capacity filled

But it is almost impossible to significantly add to the state's capacity before the hot summer adds to power demands throughout the Southwest,.

Guinn said last week that, if needed, he will institute mandatory conservation.

California Gov. Gray Davis already has established such rules.

Sherry and other environmentalists want more efficiency in the transmission and end-use of power.

Sherry said the critical, missing component in the formula is a regulatory commitment to encourage power conservation -- an effort that would allow the region to avoid "the clarion call to build more plants."

While Guinn and Davis have stressed conservation and efficiency, Sherry said more needs to be done.

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