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Arizona Power Plants, part 1: Population growth, demand fueling bid to build power plants in Arizona

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Sample article text.Population growth and an expanding economy in Arizona and other Western states are fueling electricity demand, triggering a building boom of so-called "merchant" power plants that use natural gas to create energy.

That is the view of experts from government agencies, the power plant companies and electric utilities on why 13 merchant plants are in the works in Arizona.

Private power companies - and not public utilities - are building the plants - and the electricity generated will be placed on the power grid owned by the Western Area Power Administration.

"Overall, it is an artifact of growth in the Southwest: Arizona, Nevada and New Mexico," said Arthur O'Donnell, associate publisher and editor of California Energy Markets, a weekly newsletter based in San Francisco.

"There is a need for more (electric) generation throughout the West."

His assessment was shared by Craig Nesbit, manager of generation communications for Pinnacle West Capital Corp., the Phoenix-based parent company of Arizona Public Service.

Pinnacle West Energy, a subsidiary, is planning two merchant plants in Arizona and two others in Nevada.

"We've got two of the fastest-growing cities in the country in Las Vegas, Nevada, and Phoenix," Nesbit said.

"There is a huge demand for power, and that is what all this new construction is designed to meet from the merchant plants."

Also stimulating the growth of the power plants is an emerging deregulated, or competitive, market for electricity, in which homeowners, businesses and other consumers may pick the company that supplies their power, according to Heather Murphy, a spokeswoman for the Arizona Corporation Commission.

"It's really the environment of deregulation that has spawned this growth, coupled with the factor that we really are woefully short of power plants and transmission lines in Arizona," Murphy said.

Some 13 of the power plants are either proposed or are under construction in the state, Murphy said.

Power plants also are springing up in nearby states: the El Dorado plant in Boulder City, Nev., and the Blythe Energy Project proposed for Blythe, Calif.

Three of the Arizona plants are in the works in Mohave County: the Griffith Energy Project under construction off Griffith Road and Interstate 40; the South Point plant being built on the Fort Mojave Indian Reservation; and the Big Sandy Energy Project proposed for the Wikieup area.

Arizona has become a big draw for the plants because of access to transmission lines that go into California and other nearby states and access to natural gas lines, O'Donnell said.

"It's a strategic location," he said.

Melissa Chiechi, a spokeswoman for the WAPA in Phoenix, concurred with O'Donnell.

WAPA, a division of the U.S.

Department of Energy, markets and transmits electricity in Arizona and 13 other Western states.

Energy companies see an opportunity for profits, Chiechi said.

"That means the location needs to be near fuel and transmission lines and within a reasonable distance" to their customers, Chiechi said.

"In addition, land needs to be available.

If you look at northern Arizona, there is some land out there."

The power plants also are attractive because they use a combined-cycle generation that produces power cheaper, according to Thomas Williams, public affairs manager for Duke Energy North America in Morro Bay, Calif.

Duke and PPL Global are the partners for the Griffith project, a 600-megawatt plant due for completion during the summer of 2001.

He said each megawatt serves about 1,000 people.

The combined-cycle plants are 40 percent more efficient than most existing natural gas- and coal-fired plants, Williams said.

Fuel accounts for 80 percent of the costs for operating the plants.

Nesbit, of Pinnacle West, agreed with Williams.

"They are very efficient because they use the same heat twice to make more electricity," Nesbit said.

"It is like a jet engine, and the exhausts from the jet engine turns the turbine that is connected to the generator.

Then you recapture the exhaust, and you use that heat to boil water and you use that steam to drive that second turbine."

The lower costs in turn for producing electricity make the power companies more competitive since deregulation started with wholesale markets in 1992 and is spreading to the states, according to Williams.

He said a plant that produces 40 percent more energy with the same usage of natural gas "makes you the first one called on the grid."

Williams explained, "There is a market price for electricity that is established on an hourly and day-ahead business.

There is an exchange, like a stock market."

Plants such as Griffith Energy will sell to the WAPA grid and not directly to any consumers, Williams said.

A potential buyer of the electricity may be the Midland, Texas-based electricity cooperative that is buying the electricity division from Citizens Utilities, said Bill DeJulio, operations manager for the division in Kingman.

Cap Rock Electric Cooperative announced in February that it was buying Citizens' electric divisions in Arizona and Vermont.

Neither Citizens or Cap Rock operate and operate power plants.

"If the price is right, sure we will buy from them," DeJulio said.

"We have three transmission lines coming out of the Griffith substation....

We anticipate using those lines to support our system."

The additional power generated by Griffith will make the electricity supply more reliable, DeJulio said.

He added Griffith will tap a 230,000-volt transmission line at McConnico Road and a 345,000-volt line at the Peacock station under construction off Blake Ranch Road and I-40.

"It is going to be good for us, us being the electric company, for being able to provide a more reliable service to the customers," he said.

Citizens has some 58,000 electric meters in Mohave County.

DeJulio said the typical residential customer uses 600 kilowatt-hours per month.