SDG&E; Plans $1 Billion in Plant Improvements : Power: Specters raised by utilities in merger bid vanish. SDG&E; says construction won’t cause rate rises.
In contrast to previous predictions of gloom without a utility merger, San Diego Gas & Electric said Wednesday it will invest $1 billion in new power facilities over the next 12 years, providing customers with more and cleaner power at no appreciable cost.
The plan, part of a mandated blueprint for growth filed every two years with the state Public Utilities Commission, was in marked contrast to the bleak scenario painted by proponents of the SDG&E-SCEcorp; merger, which was unanimously rejected by the PUC in May. SCEcorp is the parent of Southern California Edison.
Merger proponents, including former SCEcorp Chairman Howard Allen and SDG&E; Chairman Thomas Page, had issued dire warnings on various occasions that a rejection of the merger could cause power interruptions, increased pollution and higher rates resulting from the need of a stand-alone SDG&E; to build new plants or upgrade existing ones.
The utilities claimed that, “if they didn’t merge, they would have to build new power plants and rates would skyrocket or you might have brown-outs,” said Michael Shames, executive director of Utility Consumers’ Action Network, a San Diego-based utility watchdog group that actively opposed the combination of the two utilities.
Bob Resley, SDG&E; director of electric resource development, denied any contradiction, saying that SDG&E; all along noted that, “without the merger, there would be power supply problems that would have to be solved . . . . There’s quite a bit of commonality between the old (premerger stand alone) plan and the new one.”
“On summary, the merger looked like the best alternative to taking care of those goals,” Resley said.
The SDG&E; plan, formally titled a Biennial Resource Plan Update, is a document that details how a utility intends to meet consumer power needs over the next 12 years. All four investor-owned power utilities in California were required to submit the plans by Wednesday.
In its plan, SDG&E; said it will add 1,600 megawatts of power capacity to its existing 3,000-megawatt grid. The increase is needed to accommodate the growth from the current 1 million customers to an anticipated 1.35 million by the year 2000. SDG&E; said its peak power load is growing at a 2% annual rate.
In 1989, former SCEcorp chief Howard Allen hinted darkly in a San Diego speech that reliable power supplies to San Diego hospitals and research centers could be jeopardized if the two utilities were not allowed to merge. In PUC testimony in support of the merger, SDG&E; chairman Page raised the specter of the utility regaining the dubious title it once held of selling some of the nation’s highest-priced power.
On Wednesday, SDG&E; laid out a different view of the future, saying it can meet increased power needs over the coming decade without raising utility rates by more than inflation, which the utility estimated at 5% per year for the rest of the decade.
“It’s good news for rate payers,” consumer activist Shames said. “The basic thrust is there is a lot of energy out there, and it is not going to cost a lot.”
If the plan is approved by the PUC, the utility intends to “repower” or replace one of four generational units at its 690-megawatt South Bay plant in Chula Vista and one of the five generators at its 921-megawatt Encina power plant in Carlsbad.
The two new generators, which run on natural gas, would be more powerful and less polluting than the old engines, Resley said. They use 20% less fuel and cause a tenth of the pollution, while offering three times the power capacity. The old turbines each generate from 100 to 150 megawatts of power, and the new ones generate up to 450 megawatts each.
The first turbine to be replaced would be the South Bay unit, with the new device coming on line in 1997. The new engine could be operated in conjunction with a desalination facility that SDG&E; and the San Diego County Water Authority are studying.
The $1-billion plan also calls for a 300-megawatt power plant to be built in Blythe that would open in the year 2003, as well as a 50-megawatt geothermal power plant in the Imperial Valley. The utility failed at a previous attempt at producing geothermal energy and was forced to sell at a huge loss its interest in a $188-million geothermal plant that was shut down in 1987.
“The plan is a balance between the need to provide a reliable source of power at a low cost to rate payers and that we be environmentally sensitive,” Resley told a press gathering. “The bottom line is, SDG&E; will spend $1 billion on new construction that will clean the air and reduce fuel costs.”
The need for more environmental sensitivity was heightened by the PUC in June when the panel created incentives for the state’s utilities to generate or buy energy from sources with less pollutants, said Barbara Hale, an adviser to Public Utilities Commissioner G. Mitchell Wilk.
SDG&E; has been steadily reducing its reliance on heavier pollutants such as coal and fuel oil to the point that 97% of its self-generated energy comes from burning natural gas.
PUC guidelines call for public hearings later this year to discuss SDG&E;'s proposal. SDG&E;'s investment plan is also open to outside bidders to give independent power producers the opportunity to match SDG&E;'s costs. The bidding process begins in February, with winners to be selected by June 1992.