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DELTA — The economic fallout is mounting after a "major" equipment breakdown in December at central Utah's largest power plant.
Two Salina trucking firms have laid off 88 truck drivers because the demand for coal has been cut in half at the Intermountain Power Project near Delta in Millard County, where one of two massive generators suddenly failed on Dec. 28.
Plant officials predict an increase in power costs from IPP, but they expect only minimal effects in Utah, despite estimated losses of nearly $1 million a day during the six-months it will take to repair the damage.
The power problem
"It's clearly a major incident and it's going to take several months to fix," said John Ward, spokesman for the Intermountain Power Agency, which owns the project. The failure occurred inside a steel shell, so no workers were exposed to any danger.
"We still don't know what caused it, whether it was an explosion or a break or what it was," Ward said. "That hasn't been determined."
- Groundbreaking: 1981
- First Unit Startup: 1986
- Location: Millard County, Utah, near Delta.
- Owner: Intermountain Power Agency (nonprofit)
- Participants: 23 municipalities in Utah, 6 in California. Generates electricity for 1.5 million homes
- Operating Revenues in 2011: $667.17 million
- Debt: $2.33 billion
- Largest buyer: Los Angeles Department of Water & Power. More than 80 percent of power goes to Southern California.
Consequences of Unit No. 1 Failure:
- Higher cost for electricity from Unit No. 2
- Some participants may see cost increases
- Daily electricity sales reduced by half
- Coal burning reduced by half
- 88 coal truck drivers laid off in Salina
IPP normally generates enough electricity for 1.5 million homes, most of them in Southern California. It's capacity is now cut in half until the damage is fixed.
Workers found major damage to the generator's field winding, which Ward described as the front of a large copper coil that generates electricity.
"There was a big chunk of the connector there on the generator that wasn't there any more," Ward said. "It was destroyed. So there's some major work that needs to be rebuilt."
General Electric serviced the two big generators last year. Until investigators determine the cause of the breakdown, it's not clear if a General Electric warranty will cover the costs of the damage.
"It's a very unusual kind of a breakdown for a power plant," Ward said. "That's one of the reasons it's going to take so long to fix."
Officials tentatively plan to restart the troubled generator the last week in June. That means the plant will be operating at half-capacity for at least a six-month stretch that began with the breakdown just after Christmas.
IPA has refused to quantify the financial impact of the shutdown, but the agency's financial statements imply lost revenue amounting to around $160 million, nearly $1 million a day, during the shutdown. Operating revenues in 2011 with both generators running totaled more than $667 million. That's an average of about $1.82 million per day.
The nonprofit plant was built three decades ago by 23 municipal utilities in Utah. More than 80 percent of the power is sold to six large cities in Southern California.
Economic consequence of the breakdown
The sharply reduced demand for coal at IPP is causing serious economic worries in Salina. Kim Robinson of Robinson Trucking said his firm laid off 38 coal truck drivers last week and Barney Trucking laid off 50. "We're losing 1,200 truck loads a month, between us and Barney," Robinson said. "We've been in business since 1946. This is the most we've ever had to cut for that period of time."
We're losing 1,200 truck loads (of coal) a month, between us and Barney. We've been in business since 1946. This is the most we've ever had to cut for that period of time.
–Kim Robinson, Robinson Trucking
Despite of drastically reduced revenues, the plant still has to keep making payments on $2.38 billion in debt. That means the cost of electricity from the operating half of the plant is being increased. But Ward said operating expenses are substantially reduced because of the lower demand for coal. He predicts minimal impact on participating utilities, but would not provide any actual numbers.
"The power that people are purchasing over the next few months will probably be incrementally more costly to them," Ward said. "But it's not a big number."
Allen Johnson, manager of Bountiful Light and Power, estimates his city's power bill will rise by $75,000 to $100,000 a month during the six-month shutdown.
Officials in other Utah municipalities predicted only a minimal impact or no impact at all on their budgets. That's because California cities buy most of the power from IPP and Utah towns buy theirs from multiple sources.
"We're diversified enough that it doesn't matter," said Hyrum Mayor Dean Howard. "It doesn't affect us at all.
"All of our power is laid off to California," said Von Mellor, director of Parowan's power department. "They pick up the power, and they'll pick up the cost."
Contributing: Jared Page