Why Invest in Utah Coal Power Now?by Jennifer Sandmann
Times-News, October 15, 2006
BURLEY -- Local utilities that use power generated by federal dams will soon have the option to shop for a portion of their power supply.
Burley, Heyburn, Rupert and United Electric that serves customers in Cassia and Minidoka counties are attempting to prepare for that day.
They are considering investing in a new coal-fired power plant near Delta, Utah, scheduled to be up and running by 2012.
Electric service in the Mini-Cassia area is provided primarily by city electric departments and nonprofit utilities such as United Electric that buy power from Bonneville Power Administration.
BPA is a federal agency that markets power generated by federal dams on the Columbia River system.
The massive system includes Minidoka Dam on the Snake River near Rupert.
BPA-supplied local electrical needs for the better half of the 20th century by supplementing hydropower with power bought on the wholesale market.
But the Enron-era energy crisis of 2000-2001 changed that reliable mix. BPA wants to avoid acquiring large amounts of wholesale power on short notice because of market volatility.
Beginning in 2012, BPA will allow utilities to secure their own power if they need more than the federal dams can provide.
That is the same year the Utah coal plant is scheduled to begin operation, another reason for its local appeal.
A utility will still be able to opt for full BPA service through a tiered-rate system. Once a utility's BPA hydropower allocation is met, the second tier of rates will kick in with power that could be supplied at greater cost through the wholesale market.
Pros and cons are debated in terms of price risk.
"The future holds risks, whether you participate in buying from a power plant or buying from the market," said Ralph Williams, general manager of United Electric in Heyburn.
For United Electric and the cities, it comes down to positioning local communities for growth.
Affordable power rates are part of that.
Steve Eckles, electric department manager for the city of Rupert, said investing in the power plant provides a cushion.
"It'll be a reserve. It'll be there if we need it. If we don't need it, they'll sell it on the open market," Eckles said.
Awaited are final figures on transmission costs from Utah, but forecasts indicate that even with the cost of paying back debt for plant construction, rates will be lower than the wholesale market.
Investors still would be required to pay their debt even when the plant doesn't operate, Williams said.
But that risk is balanced by the fact that two other 900-megawatt plants already exist there, he said.
Local utilities would be able to use that power instead, although it would be two-thirds of their reserved amount.
Power unused by plant investors will be marketed.
Depending on market rates, power sales could help pay back construction costs. If wholesale rates are unexpectedly cheaper than what the plant can produce, sales won't fully absorb the plant costs.
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