May 25--Rapid growth in the Southwest threatens a current surplus in the
wholesale electricity market, the chief executive of Arizona's largest power
company said Monday. The executive, Bill Post of Pinnacle West Capital Corp., made the comment at
the opening of the 570-megawatt Silverhawk Power Station at the Apex Industrial
Park north of Las Vegas. "We're going to see a tightening of the market much sooner than people
expect," Post said after a ceremony at the plant Monday. Few power plants are scheduled to open between 2005 and 2007, said Post, who
also serves as chairman of the Phoenix-based company. Yet, the Southwest has the
fastest-growing demand for electricity in the country, faster than he has seen
previously. Power plants are built in cycles, he explained. When wholesale power prices
are high, merchant plant developers rush to build new plants, resulting
eventually in a surplus that causes developers to delay new projects. "We have more people waiting to come here to build plants than you can
ever imagine," said Gov. Kenny Guinn, who participated in the opening. Guinn said his office has heard from 15 or 20 power plant developers
interested in building in Nevada, but he said he intends to be selective in
deciding which projects to support. If a developer obtains a permit to build a plant and fails to do so, the
project still counts against air quality standards and could prevent another
developer from building a plant, the governor said. However, Guinn said he was not interested in merchant plants that use the
state's limited water and affect air quality so that they can export all of
their power to other states. The presence of the natural gas-fired Silverhawk will provide some price
stability to Southern Nevada that other areas do not have, Post said. At the
moment, Silverhawk is selling its power on the spot market, rather than forward
or future contracts, he said. Corporate executives continually reviewed whether to postpone the Silverhawk
project as power prices declined, Post said. But the company decided to proceed
because of the area's power-load growth and business climate. "The governor was really at the forefront of making it all happen,"
said Pat Mulroy, general manager of the Southern Nevada Water Authority, which
bought a 25 percent stake in the project. Guinn said he insisted that regulatory agencies streamline the approval
process for merchant plants, such as Silverhawk. The governor said he had no regrets about his decision in 2001 to halt
deregulation of the electric utility industry and to prevent competitors from
entering the retail power market. Also, by stopping Nevada Power Co. and Sierra
Pacific Power Co. from selling their existing plants, Guinn said he and the
Legislature ensured that the utilities could provide some power based on their
costs, rather than paying then skyrocketing wholesale power prices. In the 2005 Legislative session, he said the state will review Assembly Bill
661, which was designed to allow large commercial and industrial users to exit
the regulated utilities and buy power from competitors. None of Southern
Nevada's large users has met standards set by the Public Utilities Commission
for leaving Nevada Power. State Sen. Randolph Townsend, R-Reno, chairman of the Senate Commerce
Committee, said the state will continue to pursue development of renewable
resources, such as wind and solar power plants, despite difficulties with the
first round of projects. The financial weakness of Nevada's electric utilities
made it difficult to finance the projects. "We'll solve that," Townsend said. Bill Simko is the Silverhawk plant manager and has a staff of about 26
full-time workers. During the peak of construction, employment at the site
reached 600.