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

Obtaining an environmental compatibility certificate from theArizona Corporation Commission “is certainly a green light” alongthe path to construction of the plant,” said Patrick Hurston, aBethesda, MD-based spokesperson for PG&E Generating Co., whichproposed to build and operate the facility. It envisions sellingpower in the fast-growing, three-state market of Arizona, southernNevada 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 thelatter half of 2003. Other approvals include county planning andenvironmental services reviews; state land development (for rightsof way) and environmental quality agency (aquifer protectionmeasures); and the U.S. land management bureau.

“There are at least four or five more steps in the process alongthe way, but this was a big hurdle that we have overcome, so we arehopeful we can get on an aggressive timetable with the rest ofthese,” Hurston said.

The proposed plant will be near major interstate natural gaspipelines from the Southwest and major transmission lines servingthe three-state area and northern Mexico. With a fuel requirementaveraging about 180 MMcf/d, PG&E will have firm transportationagreements 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 outof – they could come from the Rocky Mountains, Permian Basin, SanJuan Basin or Gulf Coast supply areas,” Tramuto said. “We’ll tradeand price the most economically attractive supplies we can get intothe plant.”

Environmental issues – not fuel supplies – are the biggestchallenges. “The most sensitive issue, as you can imagine, is watersupply,” said Hurston, noting that PG&E has agreed to use waterfrom the Central Arizona Project. The plant will follow whatPG&E characterizes as “much more stringent” restrictions ongroundwater use even though it characterizes the Harquahala Valleyas “an area with extensive groundwater supplies.”

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