Power-Plant Bidding Called Sham

Power-Plant Bidding Called Sham

Sep 10 - Deseret News (Salt Lake City)

They are phrases most people struggle to understand: real levelization, discounted megawatts, next best alternative, independent evaluator.

Yet their meanings represent high stakes in the multimillion- dollar process of acquiring new electrical generation.

In Utah, the debate persists over whether Utah Power customers will pay the least amount possible for a string of new power plants scheduled to be built in coming years.

Two new power plants -- the Currant Creek plant near Mona and the Lakeside plant in Vineyard -- costing a combined total of nearly $700 million, are at the center of the debate.

On Thursday, Earl Gjelde, managing director of Summit Power NW, which was selected to build one of the plants, told members of the Legislature's Energy Policy Task Force that PacifiCorp's bidding process was fair and not "out of line" when compared to bidding practices found in other states.

On the other side is Ron Walter, executive vice president of California-based Calpine, the losing bidder to Summit, who said PacifiCorp's bidding process and Utah's regulatory process are deeply flawed.

"Even if we had been selected, I would have to tell you there were serious flaws in the system anyway," Walter told the Deseret Morning News. "The biggest flaw in the process is that there really isn't a process. This is simply a sham for the utility to be able to pick itself."

The task force has asked for a report from the state Division of Public Utilities on ways to improve the bidding process. Those recommendations, expected to be released in coming weeks, could result in new legislation or rules.

Gjelde, who served as chief operating officer for the U.S. Department of Energy in the Reagan administration, cautioned the task force to be broad in forming new legislation or rules.

"It tends to always be out of date at some point," Gjelde said. "It may have fit the situation being evaluated at one time, but it doesn't fit the next situation."

Scott Gutting, president of Salt Lake-based Energy Strategies, which represents Utah's large industrial companies and supports a tightening of the bid process, said the bidding for the Currant Creek power plant near Mona did not result in a "least-cost" determination.

"Let's be real clear on this: The order on the Currant Creek project didn't determine least cost, the order determined there was a need," Gutting said. "That is the lowest common denominator threshold that the (Utah Public Service) Commission has."

Ric Campbell, chairman of the Public Service Commission, agreed with Gutting's assessment, saying that the PSC did not make a determination of the least-cost bidder because under statute it was not required.

Stan Watters, senior vice president of commercial and trading for PacifiCorp, said a clear, consistent process for procurement is needed.

"We believe that we do need rules," Watters said. "In the end we just want clarity. We want it streamlined."

E-mail: danderton@desnews.com

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