Ground was broken this month for development of a $275 million,540 MW natural gas-fired power plant in Arizona by San Jose,CA-based Calpine Corp., and close observers of California electricrestructuring are indicating this plant may be the first of manymore out-of-state plants designed to serve California.

California’s cumbersome power plant siting process ultimately isgoing to increase the numbers of new merchant plants in thesurrounding states as a result, several observers said. There arefewer economic hurdles for out-of-state plants selling into theCalifornia grid, assuming gas supply availability and electrictransmission bottlenecks are not a problem.

Calpine will be shopping for gas supplies totaling about 90 Bcfannually for this power plant, which is located less than a milefrom El Paso and Transwestern interstate pipelines near theconvergence of the California, Nevada and Arizona borders. Itexpects to finalize gas supply deals during the construction of theplant on the Ft. Mojave Indian Reservation. The plant, called theSouth Point Power Plant, is scheduled to begin operating early in2001 as the first merchant electric plant on an American Indianreservation. It will sell power in Arizona and Nevada in additionto the California market.

The investment community reportedly is losing interest inCalifornia power plant projects because of the added permittingtime and environmental restrictions relative to other states. “I amdoing business coast-to-coast,” said one national energy managerfor a major industrial operator. “And I can build a power plantanywhere I want in two years time and have it online a year fasterthan I can in California. The differential is the permitting. Ihope California is not using the federal two-year time frame forpermitting as a model that indicates their one-year process isokay. It doesn’t make them look very good compared with states youcan get through in three to six months. It’s pretty sad.”

Actual permitting time for the Arizona project took about 14months, according to Calpine’s environmental specialist, EdMerrihew, noting that there is a lot of required public involvementin the process of reviewing draft environmental impact statements(EIS). “All this takes time, and I don’t think it can be done insix months, but I think the usual time for an EIS process-start tofinish-is twelve months. If you ran into problems, it might take 18months. If you said 12 months in California, you would be lying,however. You would be looking at 18 months-plus in California frommy experience.”

Calpine’s first new gas-fired plant to gain state approvals inCalifornia in Sutter County north of Sacramento took more than twoyears undergoing the California Energy Commission’s stringentenvironmental processing. “That is easily 18 to 24 months,”Merrihew said. “Trying to get this project in California would havetaken three years.”

Richard Nemec, Los Angeles

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