Firms’ Use of Backup Diesel Generators Attracting Heat

Beyond talk of rolling blackouts and the need for a lot more megawatts, solutions to California’s electricity crisis hinge on difficult choices facing a suddenly engaged citizenry.

One debate that could become especially pointed is that between electricity-craving businesses and regulators, as many fear the power crunch could threaten 30 years of progress in cleaning up California’s air.

State regulators decided years ago to allow businesses to buy, with little or no red tape, diesel-fueled emergency electricity generators if they promised not to run them more than 200 hours a year, enough to handle any short-term problem.

But state and local air quality authorities didn’t foresee the current power crunch. They didn’t realize how many companies would try to save on their power bills by firing up the generators routinely in times of electricity shortages. And they didn’t know that diesel emissions would become one of the state’s gravest air quality concerns.

Now environmental officials are beginning to tighten the screws on private use of the generators, a move that could cost companies millions of dollars for cleaner-burning equipment. The prospect of added costs comes at the same time their regular electricity bills are expected to rise under the broad legislation Gov. Gray Davis signed Thursday.

Although the rules vary from area to area, some air quality districts are moving to bar use of the generators during so-called Stage 2 power alerts. Others are demanding that companies that might need to operate generators for more than 200 hours obtain cleaner-running models that can cost 50% more than standard $250,000 versions.

Clean-air activists welcome such proposals, given their fears that unchecked use of diesel generators could hurt a company’s nearest neighbors.

“It’s important to keep in mind that there may be a lot of variances in one community,” said Paula Forbis, a co-campaign director for the Environmental Health Coalition in San Diego. “There is a high potential for localized impacts for residents who live around these facilities.”

But the idea of new restrictions rubs some businesses the wrong way, even those that concede the generators would be a pollution problem if used too often.

“We prefer not to use backup generators at all,” said spokesman Chuck Mulloy of Santa Clara-based Intel Corp., one of the Silicon Valley companies that oppose new permitting requirements and proposals to restrict when they can run the diesels.

Given the lack of sufficient electricity in the state, “it seems like they ought to be helping, instead of hurting,” John Mogannam, a San Jose real estate developer, said of air quality regulators. Mogannam says his proposed complex of Internet-friendly office buildings--equipped with blackout-busting diesel generators--is in jeopardy.

Some California companies already have been paying three ways for the power crisis: in penalties for using utility power after being asked to unplug from the electricity grid, in lost business due to power cuts and in buying or leasing additional generators or other backup systems.

Take the plight of Moog Inc.’s Torrance operation, which makes devices that adjust the flaps to control flight on commercial and military planes.

Moog was among the scores of companies that shaved their electricity rates by agreeing to drop off the electrical grid when their utility needed them to.

At the time, none of the companies that signed up for “interruptible” programs thought the calls would come anywhere near as often as they have.

Since last summer, Southern California Edison has called Moog 25 times, plant manager Dan Aynesworth said. The penalty for not switching things off: $15,000 to $20,000 an hour.

When it got the first calls, Moog sent most of its 375 plant employees home. But with airliner assembly plants waiting for its products, the company began juggling to figure out what most-needed parts it could turn out using the least utility power, swallowing hundreds of thousands of dollars in hourly fines despite the improved efficiency.

“We had to figure out a way to stay up enough to meet customer needs,” Aynesworth said. Last month, Moog leased a new 2-megawatt generator, which should be enough to run the factory in a “reduced-consumption” mode.

State utility regulators gave Moog and other interruptible customers a major break Jan. 26 when the Public Utilities Commission halted the voluntary program that had left them at the mercy of their electricity suppliers.

But the power picture is uncertain.

“We’re going to be in a power-conservation mode no matter what happens,” Aynesworth said.

Moog has joined other companies in seeking permission from regulators to run their generators more than the 200 hours a year the standard permits allow.

“That’s one of the biggest issues we’ve been pushing for,” said Gino DiCaro, spokesman for the California Manufacturers and Technology Assn. So-called distributed generation of power, which includes diesel and natural-gas-burning generators, “is a golden solution to California’s energy problem,” DiCaro said.

Los Angeles-area requests for variances on diesel generator emissions have come from a waste-water treatment plant in Rancho Cucamonga, a women’s prison in Chino and Sony Pictures Entertainment, according to the South Coast Air Quality Management District.

Sony fired up its Culver City backup generator half a dozen times in January, and about 10 days ago won permission to raise its annual cap from 50 hours to 200, spokesman Steve Hagey said.

The air quality district recently announced that essential public-service providers, such as police and fire stations, would automatically have permission to run up to 500 hours a year.

The district expects more private-sector applications for extended hours, said Mohsen Nazemi, assistant deputy executive officer.

“We’re getting a number of calls,” Nazemi said. “We are considering what options may be available to them.”

The South Coast district has issued permits for about 5,000 generators but doesn’t know how often they’ve been running. Companies that have multiple generators include Exodus Communications Inc., which runs banks of computer servers housing Web sites; AboveNet Communications Inc., which is in the same business; and telephone firms such as Pacific Bell and Verizon Communications Inc.

The state has been trying to encourage power generation from more sources, and a 1999 study by the California Energy Commission found that “natural gas and diesel engines are the most attractive option for customer peak-shaving, due to competitive equipment cost and fuel efficiency.”

The problem is that although diesel generators are among the most cost-effective tools when prices for energy--especially natural gas--spike, they also are among the worst polluters around.

The same study determined that diesel generators would spew nearly 15 times as much nitrogen oxide and 40 times as much volatile organic compounds as small gas-powered turbines producing the same amount of energy.

Diesel generators produce far fewer emissions overall than diesel trucks and other heavy machinery, because far fewer of them exist.

But diesel emissions on the whole are a major concern for regulators. The California Air Resources Board recently declared that 70% of the health risks from air pollution in the state are the result of diesel emissions.

Local and state regulators were just starting to clamp down on diesel generators before the crisis hit. Now they feel caught between two powerful forces.

In Los Angeles, Nazemi said, the air quality district may begin granting variances with the condition that generator owners promise to upgrade to the cleanest possible engines or install expensive emission “traps” as that technology becomes available.

In the San Francisco area, where many Internet data centers have multiple generators, air quality authorities are writing rules to prohibit their use during Stage 2 alerts, which triggered the interruptible-power rules. In addition, the Bay Area Air Quality Management District plans to deny permits for more than 200 hours of annual use unless the generators are the cleanest models possible.

The aggressive tack of air quality regulators unnerves some Silicon Valley companies, which are exploring everything from increased generator use to pooled efforts to build large turbine plants.

And it has thrown a wrench into the plans of privately owned U.S. DataPort, a real estate developer that had been hoping to avoid regulators’ scrutiny.

DataPort is planning a $1.2-billion office complex in San Jose with 10 buildings and Internet data centers full of computers, and its own 49-megawatt gas-fired turbine--1 megawatt shy of the level that triggers the state’s lengthy approval process for new power plants. But the company also counts on having enough small diesel generators to keep every tenant humming in the event of a blackout.

“We can’t rely on the grid,” said Mogannam, DataPort’s senior vice president.

State regulators argued that the diesel backups would push the project over the 50-megawatt cutoff, and Mogannam said that, unless his company prevails at a hearing Wednesday, the project is sunk.

Nevertheless, some regulators are digging in their heels in the face of such pressure.

“We are of the belief that diesel generators are so dirty that they are inappropriate as a primary source of power,” said Michael Scheible, deputy executive officer for the state Air Resources Board. A policy that allows the generators to be turned on during Stage 2 alerts, or even more often, “is not appropriate,” Scheible said.

To allow routine use would be “a terrible policy,” he said, “if we get forced to implement it.”