L.A.?s Out-of-State Coal Project Checkmated

After a spate of protests and bad publicity, Los Angeles mayor James Hahn ordered the Los Angeles Department of Water & Power this week to discontinue investing in the coal-fired Intermountain Power Plant (IPP) in Utah and redirect those resources to renewable energy. The Intermountain plant may, however, find financial support elsewhere. Los Angeles? withdrawal may be PacifiCorp?s opening to invest in the new unit at Intermountain. ?By abandoning further investment in IPP, the Department will truly signal its commitment to investing in 21st-century power generation technology,? mayor Hahn wrote in an August 24 directive to Enrique Martinez, LADWP acting general manager. ?At a time when the department is planning to reopen three in-basin power plants by 2008 and invest in renewable energy sources to meet my commitment to a 20 percent energy supply by 2017, I have not been sufficiently convinced that precious ratepayer dollars should be spent on investment to generate unneeded surplus power? from the Intermountain plant, Hahn stated. Clean-air advocates, along with city council members and neighborhood organizations, successfully prodded LADWP to adopt a green portfolio standard by 2017 ( Circuit , July 23, 2004). Mayor Hahn appointed a ?green ribbon commission? last month to oversee the department?s renewables plan. About half of the electricity from the Los Angeles muni derives from coal. Clean-air advocates warned that power from Intermountain would undermine the renewables development policies recently adopted by the city. Center for Energy Efficiency and Renewable Technologies executive director V. John White characterized the call for LADWP to switch energy gears as ?historic.? The move also will ensure that the department makes a ?real commitment? to the state?s renewable energy portfolio goals, according to White. ?I hope this is the end of the project,? added Cathy Van Dame, director of the Wasatch Clean Air Coalition in Utah. In the midst of the state energy crisis, the department agreed to spend three years, a period that ends in October, helping to plan and obtain permits for the facility, according to Doug Hunter, general manager of Utah Associated Municipal Power Systems, a primary proponent of the project. However, LADWP was never committed to helping finance its construction, he said, and would have provided only 10 to 15 percent of the $2.1 billion project tab. The department earmarked $2.5 million for planning and permitting of the proposed 950 MW unit 3 at the Intermountain site and has spent $1.7 million, according to Darlene Battle, LADWP spokesperson. If the unit ultimately is built, the department will be reimbursed for the expended funds, she said. If not, it will be written off. Whether the project will go forward without the muni?s hefty investment remains to be seen. Mayor Hahn?s decision not to participate in the project came as coal prices rose as a result of increased demand for electricity and for exported U.S. coal. LADWP?s potential financial contribution to the project was seen as key to pushing down the price of the coal plant?s other two units that serve the muni. By pulling out, the department ?dealt an injurious blow? to the cost-effectiveness of the plants serving the department, said Rhonda Mills, CEERT spokesperson. Some of the state?s public power managers said they believe the plant?or one like it?will be built anyway. The price of coal remains well below that of natural gas; thus, there may be private financing of the power project. ?There?s enough demand in the West that somebody will probably build a unit there,? said Ken Noller, interim general manager of Anaheim Public Utilities. The municipal power agency gets up to 13.2 percent of the 1,900 MW capacity yielded by Intermountain Power?s two existing coal units. ?It?s an ideal place to build a unit,? he said. Anaheim, however, declined last year to invest in construction of the proposed unit 3 and decided instead to focus on renewable power development, he said. ?There?s a whole variety of entities that have expressed possible interest in the plant,? maintained Thomas Evans, public utilities director for the city of Riverside and member of the Intermountain Power Agency coordinating committee. Intermountain Power Agency general manager Reed Searle said that the city of Los Angeles? decision not to go forward clears the way for PacifiCorp to become a participant in the project. The company, he said, has been interested, but with LADWP in the picture, PacifiCorp could not obtain enough output from the proposed project to make its participation worthwhile. The department?s withdrawal could be a ?hidden blessing,? said Searle. ?Expansion of Intermountain Power Project is an option for PacifiCorp,? confirmed company spokesperson Dave Eskelsen. PacifiCorp is experiencing 2.6 percent growth in its baseload, and it projects that it will need 4,000 MW of additional generation capacity by 2013. Eskelsen said that the company envisions adding ?coal-based resources? to help meet that need. However, PacifiCorp participation may be complicated. State regulators expect the company to use a bid process to acquire new resources, and there are potential restrictions on private participation in projects funded by tax-exempt municipal bonds. Eskelsen said that the bid process is voluntary, not compulsory, under state law, and thus would not prevent PacifiCorp?s participation if it proved to be in the public interest. Eskelsen noted that increased use of wind power and energy conservation also will be included in PacifiCorp?s updated resource plan?due late this year to the public utilities commissions in the states it serves. The plan, he said, will not commit the company to any particular coal power plant projects. William J. Kelly also contributed to this report.

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L.A.?s Out-of-State Coal Project Checkmated

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