$5-Billion Power Play Against Edison Begins to Pay Off for Anaheim

Thirteen years ago, the $5-billion power plant that went on line here last month was little more than a glimmer of an idea in the mind of Anaheim Utility Director Gordon Hoyt.

The idea germinated, Hoyt said, in informal discussions among public utility managers at a 1973 Public Power Assn. conference in Washington. There were long lines at gas stations in those days, and utility officials across the country were scrambling for better ways to deal with the energy crisis.

Today, the coal-fueled plant has become the most dramatic stride yet in one city’s battle to establish its independence from Southern California Edison Co.; if Anaheim can achieve and maintain that independence, Hoyt says, it will mean lower electricity rates for residents and businesses in the city.

The Intermountain Power Project, located in a sparsely populated area 100 miles south of Salt Lake City, is producing electricity for a number of Utah municipalities and six Southern California cities, including Los Angeles and Anaheim. Unit 1 began generating power July 1; Unit 2 is expected to be in operation by next July.

Electricity is being transmitted directly to California through lines built especially for the project.

The impact of the project, Hoyt says, is already being felt.

The Anaheim City Council recently approved a 5% reduction in electricity rates--or a $2.02 cut in the average $43.56 monthly residential bill. The Intermountain project was one of several factors to which city officials attributed the cut.

For years, Anaheim offered both residential and business customers in the city cheaper electricity than Edison sold in surrounding areas--at times, as much as 30% lower, said Ray Merchant, public utilities communications specialist for the Anaheim Public Utilities Department. The city did this by buying power from Edison at wholesale rates and distributing it through city-owned lines. But in the early 1970s, Edison began raising the price of its wholesale power, forcing Anaheim to raise its rates, too, city officials said.

“That’s what prompted Anaheim to begin looking for other sources,” Merchant said.

As of Aug. 1, when Anaheim’s rate reduction went into effect, the city’s typical customer was paying 2% less than the typical Edison customer, Merchant said.

Between the Intermountain Power Project and a contract beginning next year with the Bonanza Power Plant Deseret Generation and Transmission Cooperative in Utah, Anaheim will be getting more electricity from coal-fueled plants than from Edison by 1990, Hoyt predicted. In fact, officials hope that Anaheim, which was totally dependent on Edison in 1970, will be getting only a fraction of its electricity from the behemoth power supplier by 1990.

Anaheim Has 13.5% Share

Besides Los Angeles and Anaheim, the California cities participating in the Intermountain Power Project are Riverside, Burbank, Glendale and Pasadena. Los Angeles’ 44.6% interest gives it the largest share. Anaheim has a 13.5% interest.

Along with 29 Utah municipalities and rural electrical cooperatives and the Utah Power and Light Co., the six California cities got the project under way by forming the Intermountain Power Agency in 1974. The agency, which owns the project, issued tax-exempt power-revenue bonds to finance the construction.

Why a coal plant, and why in Utah?

Coal is abundant and less expensive than oil, officials said. The supply also is more constant, and the cost is more stable.

The Southern California cities could have looked for a spot closer to home for the plant, but that would have meant shipping coal from a locale where there is plenty of it--like Utah.

“It’s cheaper to shift the energy by wire than it is by railroad car,” said Steve Hinderer, public affairs director for the Los Angeles Department of Water and Power.

Anaheim has a 17.6% interest in the Southern Transmission System, the lines built especially for the project, and Los Angeles has a 59.5% interest, said Dennis Whitney, resource planning and development manager for the Department of Water and Power.

Variety of Sources

Los Angeles typically generates 80% to 90% of the electricity used within the city--from a combination of coal, oil, gas, nuclear and hydroelectric power--and owns all or a part of eight different thermal plants, said Norman Nichols, assistant general manager of DWP.

Unlike Los Angeles, Anaheim for years has relied mostly on Edison for the power it distributes to customers.

“What we were looking for all along is the lowest cost for a reliable source of power,” Hoyt said. “If we could have gotten it from Edison, we would have. That would have been the easiest way, but we couldn’t.”

Through the years, Anaheim has successfully battled Edison over rate hikes on a number of occasions.

In several cases, Edison and Anaheim officials said, the scenario has been like this: Edison applies for a rate hike, which the Federal Energy Regulatory Commission grants; Anaheim files a protest that the hike is too high; meanwhile, the city and its electricity customers are obligated to pay it; then the commission rules that the rates are unreasonable and forces Edison to give the money back, with interest, to Anaheim; the city, in turn, refunds the money to its customers.

This is, of course, not the only source of refunds to customers. Some are the result of regular adjustments built into the rate structure, including refunds to accommodate changes in fuel costs, Edison spokesman Steve Hansen said.

In the past year, the hike-refund scenario changed a little. The Anaheim City Council established what it calls a rate stabilization account. An $11.3-million refund received last year and one for $7.4 million earlier this year have gone into the account, which is to be used to diminish future electricity rate hikes.

Alleged Price Squeeze

In its latest battle with Edison--a $300-million antitrust lawsuit that went to trial July 8--Anaheim is claiming the city paid about $60 million more than it should have for electricity over about a decade. Edison is accused of putting a price squeeze on Anaheim and four other cities to discourage their efforts to find cheaper power.

The cities of Anaheim, Riverside, Azusa, Colton and Banning accuse Edison of charging them higher rates than other large Edison customers and preventing them from using transmission lines to get power from the Pacific Northwest.

Hansen said the five cities’ claims “have absolutely no merit.”

Irwin F. Woodland, an attorney representing Edison in the antitrust litigation, said the California Public Utilities Commission and the Federal Energy Regulatory Commission--not Edison--set rates. It is Edison that requests rate changes, however.

In the case of Anaheim, the federal commission sets the cost of electricity sold to the city because it regulates Edison’s wholesale rates, said spokeswoman Barbara Connors from the commission’s Washington office.

Edison makes rate-change requests to the federal commission. The hearing process can be a long one, and it is not unusual for the regulatory commission to allow the utility company to begin collecting the new rate before a final decision is reached, Connors said. If the commission then decides that the rates are “unjust and unreasonable,” the utility company is forced to make refunds, she said.

“Any difference in rates,” Edison’s Hansen said, “was as a result of differences in the costs of serving the two different classes of customers and of differences in the regulatory policies of the federal and state commissions that set electric rates.”

Sought ‘Unfair’ Share

As for transmission lines, Hansen said Anaheim could have arranged with Edison to use the utility’s if city officials had been willing to settle for interruptible service. But, he said, the cities wanted “an unfair share of the low-cost (hydroelectric) energy” available from the Pacific Northwest--which “would have resulted in increased costs for Edison’s retail ratepayers.”

While Anaheim officials seem to focus primarily on the cost of electricity in explaining their city’s participation in the Intermountain project, Los Angeles has other reasons for getting involved.

For the state’s largest city, getting electricity from the Utah plant means that it can keep up with additional growth while reducing air emissions in the basin. The power coming from Utah allows the city to cut the output from its existing generating plants, said Vern Pruett, systems development engineer for the Department of Water and Power.

Reducing air emissions is crucial for the DWP, officials said. In an out-of-court settlement of a lawsuit against the South Coast Air Quality Management District, Edison and the DWP agreed in 1982 to reduce emissions 80% by 1990, Whitney said. That settlement grew out of a lawsuit challenging a 1978 district decision mandating lower emission levels that both Edison and Los Angeles officials thought were “unobtainable.”

In the mid-1970s, opponents of the Intermountain Power Project accused Los Angeles of exporting its air pollution problems to Utah.

Circled by Mountains

The power plant near Delta sits on 4,614 acres of arid land surrounded by mountains--snow-capped during the winter--and a clear, blue sky.

Millard County Commissioner Mike Styler conceded that some Delta residents once worried that burning all that coal could give the sky a polluted, Southern California cast. But Styler said he checked out the air pollution control devices, and now, “I’m well satisfied that nothing escapes those smokestacks but steam.”

“Exporting of the pollution is obviously a very important issue,” Whitney said, adding that “the plant has all the presently available equipment” to keep the air free of pollutants.

When the Intermountain project was first proposed, a site near Caineville, Utah, was suggested; it soon faced strong opposition from environmentalists. The site was only 10 miles east of Capitol Reef National Park, and there were concerns about emissions of nitrous oxides, fly ash and sulfur dioxide.

At the current site, Intermountain officials have alleviated air pollution fears with “state-of-the-art air-emission control systems that remove particulate items, such as fly ash,” according to Dale Pohlman, Anaheim power resources assistant manager.

The plant’s air pollution control equipment cost more than $1 billion and accounts for about 25% of the facility’s total cost, Intermountain said.

But what Intermountain and utility officials call “state of the art” is a step below other available--though more expensive--Japanese technology, said Alan Miller, coordinator for the Utah Chapter of the Sierra Club.

‘Could Do a Lot Better’

“They could do a lot better,” Millern said, arguing today as he has from the beginning that the plant could reduce its emissions of oxides of nitrogen--which contribute to acid rain--by installing the more expensive equipment.

So far, inspectors from Utah’s Division of Environmental Health have found that “the facility is operating properly and in an acceptable manner,” according to Robert Dalley, an environmental health manager with the division’s bureau of air quality. “We are happy with the controls that were placed on the facility and the mode of operation.”

Miller said the Sierra Club still is concerned about emissions that could travel as far as 250 to 300 miles into the heavily forested area of the Uinta Mountains and pollute its lakes. But Dalley said there was discussion years ago regarding nitrogen oxide controls, and “we determined that the technology was not readily available to require them to have that.”

When it was announced in 1978 that the Intermountain plant was to be located near Delta rather than Caineville, concern in Delta wasn’t limited to fears of air pollution.

Initially, Delta residents didn’t know quite what to expect--except a lot of trouble, Commissioner Styler said.

“People were afraid they wouldn’t be able to cross Main Street during rush hour,” Styler said. And Main Street isn’t that big.

The apprehension eased, however, when some 4,300 temporary construction employees went to work for Intermountain without any noticeable adverse impact on nearby communities.

Jobs, New Facilities

Since then, the project has brought the community about 600 permanent jobs and a lot of buildings that residents here point out as “new”--a school, a jail, a hospital and City Hall. “Compliments of IPP,” site manager Rod Clark said.

The move away from Edison through participation in the Intermountain Power Project, with Anaheim’s $860-million commitment over the life of the project, is “the biggest thing we’ve ever, ever done and probably will ever do,” Anaheim Utility Director Hoyt said.

Anaheim officials boast that the Intermountain project consistently has been “ahead of schedule and under budget.” They talk of it proudly as another way to reduce dependence on Edison--an effort that has saved the city and its electric consumers $9.4 million in the past fiscal year, officials say.

As for the city of Delta, the project has meant more than its first movie theater. The giant plant that Hoyt describes as “really pretty” has become a source of jobs that, officials here say, will help to keep families together.

“We’re a fairly laid-back, slow-paced community,” county Commissioner Styler said. “We tasted how sweet it is to have this development. In fact, we would like to export more power to Los Angeles. It allows us to use more of our local resources, and keep our people here--where in the past, they would have gone to take jobs in Los Angeles.”