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PG&E Power Plant Plans Pass One Test, Face Many Others in AZ

PG&E Power Plant Plans Pass One Test, Face Many Others in AZ

PG&E Corp. is the latest energy giant to seek a toehold in the fast-growing Arizona merchant power plant market, gaining an initial state approval last week, but facing up to a half-dozen county, state and federal environmental reviews for a proposed $500 million, 1,040 MW natural gas-fired plant near Phoenix.

Obtaining an environmental compatibility certificate from the Arizona Corporation Commission "is certainly a green light" along the path to construction of the plant," said Patrick Hurston, a Bethesda, MD-based spokesperson for PG&E Generating Co., which proposed to build and operate the facility. It envisions selling power in the fast-growing, three-state market of Arizona, southern Nevada and southern California.

Construction could start as early as the end of this year, according to the spokesperson, but the target start-up date is the latter half of 2003. Other approvals include county planning and environmental services reviews; state land development (for rights of way) and environmental quality agency (aquifer protection measures); and the U.S. land management bureau.

"There are at least four or five more steps in the process along the way, but this was a big hurdle that we have overcome, so we are hopeful we can get on an aggressive timetable with the rest of these," Hurston said.

The proposed plant will be near major interstate natural gas pipelines from the Southwest and major transmission lines serving the three-state area and northern Mexico. With a fuel requirement averaging about 180 MMcf/d, PG&E will have firm transportation agreements and then play the markets in the West and Southeast, according to a Houston-based manager in the national energy group, Jim Tramuto.

"We don't have any one particular area dedicating supplies out of --- they could come from the Rocky Mountains, Permian Basin, San Juan Basin or Gulf Coast supply areas," Tramuto said. "We'll trade and price the most economically attractive supplies we can get into the plant."

Environmental issues --- not fuel supplies --- are the biggest challenges. "The most sensitive issue, as you can imagine, is water supply," said Hurston, noting that PG&E has agreed to use water from the Central Arizona Project. The plant will follow what PG&E characterizes as "much more stringent" restrictions on groundwater use even though it characterizes the Harquahala Valley as "an area with extensive groundwater supplies."

Richard Nemec, Los Angeles

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