| 'Insurance'
generators still idle in Page |
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| By TODD
GLASENAPP Sun Correspondent 07/19/2004 |
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The generators, designed to supplement the city's supply of power at peak times, have been made largely unnecessary by a series of unexpected events. They have never been operated, save for test runs.
Though Page sits between the hydroelectric generators at Glen Canyon Dam and Navajo Generating Station, the community of about 7,000 still has to purchase its power for peak periods from other sources like many other utilities.
Rather than subject itself to the wildly fluctuating rates of the open electric market when its low-rate power contract was about to expire in December 2002, semi-independent Page Electric Utility acquired the generators in 2001 to provide a jolt of electricity at peak times.
"Page was just panicked, like 'What are we going to do'?" recalled Bryan Hill, named PEU's general manager about 11 months ago. "In effect, what they did was, they bought those generators as a hedge against the market, thinking that if the market stayed where it was, we can even make money with them."
As it turns out, the generators are more expensive to operate than the hydroelectricity from the dam that powers Page, as well as the natural gas that will be used soon to meet the need for peaking power. But they are still seen as a valuable source of quick energy if needed.
Page's primary power sources are its annual allotment of power from the dam's Colorado River Storage Project and a contract effective Jan. 1, 2003 with the Department of Energy's Western Area Power Administration.
PEU had earned a reputation for shrewd business moves since Page voters approved the purchase of local electrical installations in 1985 from the Arizona Public Service Co. PEU receives its budget from Page City Council, and its board of directors is approved by the council.
Otherwise -- outside of some new council oversight that requires council approval of items valued in excess of $100,000 -- the utility functions somewhat like a private business.
PEU had built its reserves in anticipation of the expiration of its contract with the Rocky Mountain Generation Cooperative. RMGC guaranteed low-cost power at a time that rates on the electrical market were running $250 to $400 per kilowatt hour.
Rolling blackouts had begun to strike California and the open electrical market was turned on its ear, with rates going as high as $1,200 per kwh. It was only after the generators were purchased that the Federal Energy Regulatory Commission capped rates at $95 per kwh.
PEU, then headed by GM Kent Romney, also was pursuing a plan to buy into a proposed natural gas-fired plant at Payson, Utah for the purchase of low-cost peaking power. But the plan, part of Page's participation in Utah Associated Municipal Power Systems, was slow to materialize.
So the PEU board voted in February 2001 to buy the generators. The panel made it an emergency measure, relieving it of the need to put the project out to competitive bidding. Officials cited a time crunch to warrant the emergency vote.
The generators were rolled in a few months later. They were tested this year in March, with all six engines operating to produce 10 megawatt hours of power, according to PEU board minutes of April 10.
The generator purchase, together with a $5 million payment for the still-offline Payson Project, has reduced PEU's reserves to about $8 million.
Hill succeeded the retiring Romney last September, having served as the lead electrical engineer at Glen Canyon Dam.
"The way I view it is we purchased those generators like an insurance policy," Hill said last week. "If you buy auto insurance and you don't get into a wreck, you're beating yourself up for writing a check to the insurance agency. And that's kind of where we're at."
Hill said the deal with WAPA together with the Payson Project should guarantee continued low-cost power. Payson would provide some peaking power, and after that, the utility has the generators and then the open market.
"Our new agreement is for Western to provide all of our power requirements and we're putting them at the trigger of those generators and our share of Payson," Hill said. "So Payson will run into the market and supply Page in the summer and some of the high-load winter months."
The diesel-driven generators have a high heat rate and are therefore not as rate-competitive as power from coal, hydroelectric, nuclear and natural gas, Hill said.
"But what it is good for, and why Western is interested in having the strike rights to it, is the hourly market," Hill said. "If we lost a generator and Palo Verde goes down or something like that, or a big generator goes down, there's a big demand there. The beauty of the generators is they can strike them and run them instantly, and supply for those high-cost hours."
What remains to be seen, though, is how they would respond.
"Will they run?" Hill asked. "We hope so. We know that they'll probably run some hours. How many, we don't know."
The high cost of transmitting power to Phoenix prevents the generators from being tapped to help the state's biggest use area. A July 4 fire at the Westwing substation in the West Valley darkened some homes for hours.
"The generators simply contribute to the grid, and there's no transmission cost for putting that energy in the grid and supplying it to Page," Hill said. "If you were to run them and supply the energy for Phoenix, it really wouldn't be competitive because of the transmission costs."
Valley utilities instead are hauling a $400,000 replacement transmitter from Oregon and are asking customers to reduce their electrical use. The encroachment of wildfires on transmission lines in northern Arizona is another cause for concern
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