PacifiCorp Selects Itself for Plant Construction

PacifiCorp Selects Itself for Plant Construction

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SALT LAKE CITY (AP) -- PacifiCorp put its proposed new power plant in Utah out to bid, and, after reviewing the proposals, announced that the best company to do construction was -- PacifiCorp.

Opponents contend the selection process was flawed and the utility was choosing its own "best interests over the best interests of its customers."

PacifiCorp chose itself last November to build a 525-megawatt, natural gas-fired power plant near Mona. The company, which took over Utah Power & Light and was acquired itself by Scottish Power, put the plant's capital cost is about $343 million.

PacifiCorp maintains that its self-build option was $320 million less expensive over the life of the plant than the next-best cost alternative bid it received.

The project is subject to approval by the Utah Public Service Commission, which will hold hearings on it next week.

Lincoln Wolverton, an expert in electric-energy economics, said in a filing to the PSC last week in behalf of the Utah Association of Energy Users that PacifiCorp made several errors in its comparison of bids.

"My overriding conclusion is that PacifiCorp has not demonstrated that the manner in which it compared bids ... was fair or reasonable," Wolverton said. "This is hardly surprising, however. It is simply contrary to human nature to expect PacifiCorp simultaneously to be a fierce competitor in its (bid) process and a fair and impartial judge."

Wolverton contended the company made an inappropriate cost-analysis comparison, unreliable long-term market-price projections and improper comparisons of so-called "peaking bids" against "base-load" and peaking operations.

"We reached basically the same conclusion that the industrial users' expert reached," said Steve Mecham, an attorney representing Spring Canyon Energy LLC, one of the bidders. "What you have is a situation where somebody can come in and offer a lower price to build the plant, and yet the way that it's analyzed it winds up costing more over the life of the plant."

Mecham, a former member of the Utah Public Service Commission for more than 12 years, said PacifiCorp's incentive in choosing itself to build the plant is that it gives the utility a return on the investment to shareholders.

Gary Dodge, an attorney for the Utah Association of Energy Users, said PacifiCorp limited bid contracts to 20 years but costs of the plant were amortized over a 39-year period.

Dave Eskelsen, a spokesman for PacifiCorp, said the company's model took into account corrections for comparing the value of one project to another fairly.

"We can argue that point, and we will," Eskelsen said. "One of the things that a regulated monopoly like PacifiCorp will do is it will intentionally recover the costs of a resource over its useful life, and that's not something other businesses do. Typically other businesses want to recover the cost of their investment as quickly as possible.

"The reason that regulated utilities recover the costs over the life of the generating unit is that it's lower cost for customers," he said.

The Utah Division of Public Utilities, which conducted its own investigation into the bidding process, concluded that PacifiCorp's self-build option was the best alternative of 79 individual bids competing for the award.

In testimony filed last week with the commission, Artie Powell, an economist with the division, said that the closest bid to PacifiCorp's was more than four times "less economic."

(Copyright 2004 by The Associated Press. All Rights Reserved.)

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