Utility cites flak in Texas over coal
Posted on Thursday, August 23, 2007
Opposition to coal-fueled electricity in Texas and the prospect of a tough permitting process played a key role in selecting Arkansas for a proposed $ 1. 4 billion power plant, Southwestern Electric Power Co. officials said Wednesday.
During the fourth day of Arkansas Public Service Commission hearings that could decide the 600-megawatt facility’s fate, a Southwestern Electric Power official gave a detailed overview of how a site 15 miles northeast of Texarkana emerged ahead of six other bids to build the plant that the Shreveport-based utility wants operational by mid-2011.
Another deciding factor: The Hempstead County site cost about $ 16 million less than its closest competitor — the site of the lignite-powered unit at a Hallsville, Texas, plant that Southwestern Electric Power has operated since 1985, said Tom Brice, the company’s director of business operations support.
Public rumblings over 11 coal-fired plants that TXU Corp. hoped to build in Texas by 2010 also left an impression on Southwestern Electric Power decision makers. Plans for eight of those plants, which were opposed by mayors from several of Texas’ largest cities, have since been scrapped as part of a $ 32 billion private equity deal to acquire TXU, the Lone Star state’s largest power producer.
“The risk was greater in Texas,” Brice said. “When you look at what happened with TXU, we certainly took that into account.”
Rick Addison, a Dallas attorney who represents opponents of the Texarkana site, asked Brice if Arkansas was chosen to avoid “whatever concerns” exist in Texas — regardless of any economic benefits or environmental effects or how much Arkansas ratepayers would gain from the plant.
After several objections and clarifications to the question, Brice said that was not the case, even though Texas customers stand to consume most of the Arkansas plant’s output. “Did we believe the risk was greater in Texas ? Yes. But it doesn’t mean we thought the permitting process would be any easier here,” Brice said. “Due to the conditions in Texas, it’s something we considered. I’m not saying it’s the entire reason. But it’s something we considered.” To determine finalists for siting a base-load plant — one that serves as a main source of power for a large geographic area with minimal downtime — Southwestern Electric Power officials weighted 60 percent of the decision on cost and 40 percent on “noncost” factors.
Seven bids, including four “in-house” proposals from Southwestern Electric Power or its parent company American Electric Power and three from outside providers, were evaluated after requests for proposals were issued in 2005.
An independent third party, Seabrook, N. H.-based Merrimack Energy Group, served as a monitor for the process. Southwestern Electric Power also had in place specific rules that barred communication between its proposal teams and its project evaluators, Brice said.
Each bid involved either coal from Wyoming’s Powder River Basin or lignite as the fuel source, with coal-gas or ultrasupercritical technology as the generation source.
All three outside bids were rejected, Brice said. Two fell short because they lacked the minimum net worth of $ 500 million that Southwestern Electric Power requested. The third was rejected because Southwestern Electric Power was asked to make the initial fuel purchase for the plant and because neither the bidder’s parent company nor its banks would back the proposal, Brice said.
The names of each bidder were kept confidential to protect their ability to make future proposals for other projects.
Although the Hallsville, Texas, site was initially deemed to be cheaper than the Arkansas site, a re-examination of Hempstead County property taxes found them to be less than initially thought. Another factor that changed the comparison concerned lease costs for additional lignite mining if another unit was built at Hallsville.
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