Transmission line could help prevent another crisis

Kevin Rademacher

Wednesday, April 6, 2005 | 10:55 a.m.

Utility experts are hailing plans for a massive Western electricity transmission line as an important step in averting a repeat of the 2000-01 Western energy crisis that cost Nevada utilities and their customers millions of dollars.

On Monday, the governors of four Western states, including Nevada, signed a memorandum of understanding that was described as the first step toward the creation of the Frontier Line, which could cost as much as $20 billion.

Project documents said that across the West, electricity load has grown by more than 60 percent over the past 20 years. At the same time, however, high-voltage transmission has expanded by less than 20 percent.

"This project will increase reliability and ease transmission bottlenecks throughout the region," documents said.

Those bottlenecks helped energy traders -- such as Enron Corp. -- manipulate the market and drive up prices during the Western energy crisis.

"They were gaming those bottlenecks, and there were only a few transmission corridors," said Jake Mercer, a utilities analyst with Piper Jaffray & Co. "If the transmission capacity was expanded, it would be a lot harder to game that market."

Richard Burdette, energy adviser to Gov. Kenny Guinn, said Mercer's statement was accurate.

"I would agree with that assessment," he said, while adding that market congestion was not the only factor in the crisis. "Enron and others hid prices of the product. One of the ways they hid the prices was through congestion, and they were able to impose some of that congestion at their own will."

That problem is particularly acute for Nevada Power Co. of Las Vegas, which purchases more than 50 percent of its peak power load on the open market.

If successful, the line could be as long as 1,700 miles, include a series of power plants and connect resources in Nevada, California, Utah and Wyoming.

Officials from the involved states are indicating that the total savings for Western customers created by the project could reach as much as $1.7 billion annually. That savings would be driven by the increased efficiency created from the ability to move power resources around the region.

An exact Nevada savings was unknown, but Burdette characterized the amount as "million of dollars."

California, project documents said, could see an annual savings of as much as $400 million.

In Nevada, as in the other states, the line is needed in order to allow utilities to keep up with demands for power that is being driven by rapid population growth.

Burdette said that over the next five or six years, Nevada Power will have done all it can to meet load growth through measures such as conservation and management of existing resources.

The Frontier Line would allow Nevada utilities the ability to tap new clean-technology coal-fired power plants slated for construction in Montana and Wyoming in order to meet local demand. The availability of additional resources will help drive down prices, Burdette said.

Don Soderberg, chairman of the Public Utilities Commission of Nevada, said that the project would improve the Western system.

"The (memorandum of understanding) represents a new label of cooperation and a step forward in the effort to increase the effectiveness of the West's transmission grid," he said.

The Frontier Line also would allow Nevada utilities, which are currently under a state mandate to develop renewable energy resources, to export that "green" power to other states.

The line also would connect Nevada Power's system with that of its Reno-based sister utility, Sierra Pacific Power Co. That would give Nevada Power access to geothermal resources in Northern Nevada while giving Northern Nevada access to solar power resources under development in the south.

Carolyn Barbash, executive in charge of transmission for Sierra Pacific Resources, parent company of Nevada Power and Sierra Pacific Power, said the concept of the project would be worthwhile for the utilities, but true benefits for Nevada are still unclear as the project continues to take shape.

Burdette, who will sit on the coordinating committee for the project, said the next step would likely be an engineering project to determine the possibilities for the line and begin examining the permitting process necessary for a line that will cross a number of jurisdictions.

"This is enormously complex," Burdette said.