Dec 15 - McClatchy-Tribune Business News Formerly Knight Ridder/Tribune Business News - Tom Fowler Houston Chronicle

An alphabet soup of business and community groups is lining up to do battle over TXU Power's $10 billion plan to build up to 11 new coal-fired power plants in Texas.

On one side are cities, including Houston and Dallas, environmental groups and now a group of Dallas businesses. They say the plants will add 78 million tons of carbon dioxide pollution to the state's skies.

On the other side are communities where the plants will be located, the state's largest business organizations and manufacturers. They say the state's over-reliance on expensive natural gas-fired plants is putting a heavy economic burden on consumers in Texas.

The many voices in the debate have only until March 23 to say their piece. A judge in the State Office of Administrative Hearings ruled Thursday that arguments over a majority of the projects will be consolidated into one case that needs to be heard by then. A verdict on air permits for the plants must be rendered by April 23.

"This means full briefing, discovery and a trial have to happen by then," said Elana Marks, director of health and environmental policy for Houston Mayor Bill White. "It normally take a year and a half for just one permit. It's not much time."

TXU announced plans for the plants earlier this year, at a time when Texans were seeing some of their highest power prices, in large part because of spikes in natural gas prices.

The Dallas energy company argues the new coal-fired plants will help reduce wholesale power prices -- which are now driven by the price of the natural gas used for nearly half of all power generation -- by $1.7 billion.

Opponents say slow down

One of the first groups that came out against the plan was the Texas Clean Air Cities Coalition, a group of cities including Dallas and Houston, that wants to slow down the state permit approval process fast-tracked by Gov. Rick Perry.

The group said emissions from the plants could send cities like Dallas over their pollution limits and further endanger federal transportation funding.

Next came Texans for Affordable and Reliable Power, or TARP, a collection of communities where the proposed plants will be located. TARP sees the plants as an economic boon locally and a benefit to the state.

Just this week Texas Business for Clean Air, a collection of Dallas business leaders, announced its opposition to the plants, saying they could create health problems and hurt economic development.

Also Thursday, Texas Business for Clean, Affordable and Reliable Energy, a subgroup of the Texas Association of Business, said the new plants are crucial to head off a power crisis in the next few years.

The report points to data from the state's primary power grid operator, the Electricity Reliability Council of Texas, that says increasing energy demand could cause the state's spare power capacity to slip below a key safety margin by 2008.

"Only through the use of a broad spectrum of fuels such as coal, nuclear and wind generation can we keep Texas power supplies adequate for years to come," said TAB Chief Executive Officer Bill Hammond.

Keep plants operating

TXU may have undermined that claim made by TAB and others to support the new plants, however, when it told ERCOT last month it would increase the available generating capacity by keeping a number of gas-fired plants online into 2009.

This led Public Utility Commission officials to make a change to a draft report to the Legislature on the status of electricity competition. Rather than saying the state " ... will be slightly below" the required safety margin in 2008, "ERCOT projects that the targeted reserve margin of 12.5 percent will be met in 2008," according to drafts of the document filed with the PUC.

The report notes that concerns will continue beyond 2008, "unless new generation resources that have been announced are completed."

Tom Kleckner, a TXU spokesman, said the company is keeping some plants online longer than originally planned and bringing some out of mothball status because of the projected shortfall in 2008.

'Only a short-term solution'

"By keeping these less efficient units, it will help meet the demand, but it's only a short-term solution," Kleckner said. "We still need the new coal-fired capacity."

More coal capacity in Texas would have an impact on wholesale power prices, but only indirectly, said Craig Pirrong, a finance professor at the Global Energy Management Institute at the University of Houston's C.T. Bauer College of Business.

"Coal will be less expensive to operate ... , which means you're less likely to see gas plants running during off-peak times," such as during mild spring and fall weather, Pirrong said.

"But it won't have a big impact during the peak times, during the hottest days of the summer. It's pretty certain gas will continue to set the price at the margins."

tom.fowler@chron.com