Edison?s Devers Line Subject to AZ Scrutiny

By Published On: April 30, 2005

When asked to approve Southern California Edison?s proposed Devers?Palo Verde 2 transmission line from the Palm Springs area to the Palo Verde Nuclear Generating Station, the Arizona Corporation Commission will want to see how it benefits Arizona. ?They would not be approving something that is a one-way freeway from Arizona to California,? said Heather Murphy, Arizona commission spokesperson, adding that commissioners need proof the line is necessary. ?They would be looking for a line and a plan and a process that would provide equitable benefits to the area and the state. Absent that, California would be hard-pressed to earn the support to build such a thing.? Other considerations she listed include environmental and aesthetic issues, benefits to the region and the state?s ratepayers, and an improved power grid. She added that not much more could be said until there is a formal plan filed, which Edison expects to do this fall. Nearly half, or 102 miles, of the proposed 230-mile route is in Arizona. Arizona commissioner Mike Gleason told <i>Circuit</i> he would like to see Arizona utilities? access to the line and also proof of benefits. There is no doubt that Arizona can supply electricity from the Palo Verde area?with about 3,000 MW of generation available immediately, according to Gleason?but the problem is getting it to California. The Arizona commission could also find a need to keep the power in-state as Arizona?s population grows. ?If you want to go buy 1,200 MW of power or capacity right now, all you have to do is lay a check on the table. There?s 1,200 MW in Gila Bend looking for a home,? Gleason said. The 2,080 MW Gila River Power Project should be in the hands of lenders in May after a Chapter 11 bankruptcy filing. Another merchant project in the same area, the 1,092 MW Harquahala Power Project, also reverted back to its lenders after filing Chapter 11. That project was developed by a unit of Pacific Gas & Electric. A representative of that plant did not respond to a request for comment. Both were victims of plummeting energy prices and a state mandate that utilities should rely first on their own generation instead of independents, a ruling that kicked some Arizona merchant plants in the rear. Some changed hands at low sale prices, some are running at reduced capacity, and others just weren?t developed after earning state certification, which is good for five years and can be extended. Merchant plants come under a modicum of regulation in Arizona. Murphy noted that one condition of approval of a merchant plant is that Arizona gets first use of its output, if necessary, for the first two years it operates?no matter what other supply contracts the facility has. Gleason said that some of that extra power now without a home could come in handy for the future, which could be a bargaining chip for the commission when it comes to negotiating with Edison. According to the latest Arizona commission transmission assessment, ?No transmission improvements have been made to the preexisting 2,800 MW Palo Verde west transmission system capability to deliver power to California. Therefore, transmission from Palo Verde to California is inadequate to allow all new Palo Verde Hub generation full access to the California market.? Despite the plethora of merchant plant energy, the Arizona transmission study noted that the Phoenix area likely will be low in operating reserves in 2013. Arizona Public Service and the Salt River Project are investigating possible solutions. The U.S. Census Bureau expects Arizona?s population to grow to 10.7 million over the next 25 years, fueled, ironically, by a lot of Californians fleeing that state?s high costs. The bureau projects that Arizona?s population will be 5.87 million on July 1, increasing to 8.5 million in 2020. At the same time, California?s population also is expected to increase, from a projected 36 million by July 1 to 42.2 million in 2020. Pat Mullen, Duke Energy spokesperson, said that there haven?t been any problems moving electricity out of that company?s 570 MW Arlington Valley Energy Facility, a merchant plant about 50 miles southeast of Phoenix, but additional line capacity if Devers is built would make power transfers more efficient. ?For the most part,? he said, ?we don?t have a problem. Additional transmission access reliability is always a good thing because it provides more redundancy in case of upset conditions.? The California Independent System Operator, in approving the line in February, said purchasing power from Arizona is an overall better deal for state ratepayers than building combined-cycle power plants in California. In addition, the new line would, with some additional grid projects in California, improve Southern California?s reliability. According to CAISO?s economic evaluation of the line, comparing California?s combined-cycle power plants to Arizona?s with the Devers transmission costs, California?s power plants are about 10 percent less expensive at a 50 percent capacity and comparable in cost to Arizona?s combined-cycle plants plus transmission at a 90 percent capacity factor. In baseload, CAISO found that Arizona?s lower construction, operating, and gas costs were about on a par with California generation if costs for interconnecting California generation were not included. ?However,? the evaluation indicates, ?there may be significant positive interconnection costs in California urban areas where generation is most valuable, so the saving differential favoring Arizona [combined-cycle plants] will be positive.? The report also indicates that California will be needing at least 5,000 MW of new generation over the next five years to cover plant retirements and load growth, and the object was to select the most attractive generation/transmission options. If all goes as Edison expects, the line, estimated to cost $680 million in 2009 dollars, will be operating in 2009. The proposed 1,200 MW, 500 kV transmission line route will generally parallel Interstate 10.

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