Utility head stumps for coal plants

Kevin Rademacher

Wednesday, Dec. 10, 2003 | 11:10 a.m.

Amid increasingly volatile natural gas prices, Walter Higgins, chief executive of Sierra Pacific Resources, and other utility executives on Tuesday emphasized the need to pursue coal-fired power plants.

Higgins, speaking at the Power-Gen International convention in Las Vegas, said building new power plants in Southern Nevada will be critical to meet growth demands of Las Vegas. With that, he hailed the state Public Utilities Commission's recent approval of a resource plan that calls for the construction of at least two new Southern Nevada power plants.

"We expect to reach 5,000 megawatts of peak demand in 2004," he said. "That's up about 250 megawatts from this year. ... Every year we are growing by about half (the capacity of a major) power plant."

Until recently, however, state regulatory policy called for meeting that demand by purchasing power on the open market. That strategy kept rates low in Southern Nevada as wholesale power prices remained stable and Nevada Power Co., the Las Vegas-based electric company and subsidiary of Sierra Pacific, escaped the capital expense of building expensive new plants.

That strategy unraveled with the failed move to deregulation in California and the ensuing Western energy crisis that drove up power prices, causing Nevada Power to build up a heavy debt load securing power contracts. The local utility currently generates only about 40 percent of the electricity needed to serve its customers.

While the new plants approved by the PUC will help, rising prices for natural gas, which will fuel both of the new plants, has caused concern for Nevada Power and other Power-Gen attendees.

David Walker, senior vice president for Bechtel Power Corp., a San Francisco-based power plant builder, said natural gas prices are currently as much as three times higher than they were in the late 1990s.

Higgins said such price fluctuations put added emphasis on a PUC-approved feasibility study into Nevada Power's construction of a new coal-fired plant.

"With gas hitting a peak of $7 (per million British thermal units) yesterday, it certainly reminded me of the need to diversify our resources," Higgins said. "It also reminded me of the importance of a possible coal plant that could be online in 2010."

Walker said that while nearly 200,000 megawatts of generation have been built in the United States since the 1990s, nearly all of that capacity has been powered by natural gas.

Utility executives -- including Southwest Gas Corp. Chief Executive Michael Maffie -- have said that demand has been complicated by the lack of a national energy policy that would balance access to new drilling territories with added consumption.

Congress, however, has failed to pass such an energy bill.

"An energy bill is like the plastic rabbit that races ahead of the dogs at a greyhound track," said Brian Schimmoller, managing editor of Power Engineering Magazine and chairman of the Power-Gen conference. "It's always there, always elusive and always desirable."

While coal plants had fallen out of favor because of environmental concerns, Walker said advances in technology that have created cleaner-burning plants should mark a revival.

"I think we have proof that with today's plant management technology and an abundance of (coal) supply and low prices, there is a viable alternative that balances economics and the environment," he said.