Power Plant Juggernaut Slowed by Internet Giant

COYOTE VALLEY, Calif.-In its push to provide California an 8,000-megawatt fix, the Calpine Corp. has traveled border-to-border hawking and building its newest model of power plant, encountering scarcely a bump on the long road.

Then it arrived in this gentle valley where the electricity-guzzling Internet is seeking to make its own great stand.

Now Calpine’s proposal for a new power plant here, one of the bulwarks in the state’s massive buildup to grow California out of its current energy crisis, has been derailed by a giant of even bigger girth--Cisco Systems, the world’s leading e-commerce provider.

Efforts to revive the project, whose merits are being debated before the California Energy Commission, have captured the attention of Gov. Gray Davis and power plant builders statewide who have, until now, gotten their projects approved with little opposition.

Although the controversy surrounding the proposed Metcalf Energy Center has been swirling through this green valley for more than a year, the state’s electricity crisis has made it a matter of urgency for Californians everywhere.

“This might seem like a local battle between giants, but it’s an important fight that has broad implications for the state’s response to the electricity crisis,” said V. John White, director of the Center for Energy Efficiency and Renewable Technologies in Sacramento.

“On one hand, we are being pressured to build more new power plants that are clearly cleaner and more efficient but they still pollute the air and water. On the other hand, we have this Internet giant leading the opposition at the same time that it and the rest of the Silicon Valley are increasing their demand for electricity. It’s troubling.”

Before landing here, Calpine had grown from a tiny energy recycler into a powerhouse now poised to become the single biggest supplier of electricity in the state. It didn’t know defeat, at least not in the wild and liberated marketplace of deregulation.

Most other communities where Calpine had proposed a new power plant were too impoverished, too feckless or too resigned to put up much fight. Ask the residents in the town of Pittsburg, across the bay from San Francisco, where Calpine is now trying to build its 12th plant.

“When you have mandates from the governor saying you will put these power plants in . . . then what hope does a little community like us have?” said Paulette Lagana, who fears environmental fallout.

But here, 15 miles south of downtown San Jose, Calpine came across an opponent that it could not win over with its deep pockets and soft pedal--behemoth Cisco. Or, to put a finer point on it, this is where Calpine and its building partner, Bechtel, met their match in Cisco and its building partner, Sobrato Development, on a knoll called Tulare Hill.

For months now, both sides have been engaged in a rancorous fight over two competing visions for this valley, and the outcome could influence the tone and direction of state electricity policy as it wends it way through crisis.

One vision proposes a power plant to serve a larger Silicon Valley that has emerged as one of the biggest consumers of electricity in the state. The other vision foresees a new $1.3-billion worldwide headquarters for Cisco that would house 20,000 employees and possibly open the floodgates for thousands of new houses and strip malls.

Like any battle between big boys accustomed to getting their way, it has been long and bloody, and no winner has yet emerged. So much is at stake in a state where nine power plants have been approved and 14 sit in the pipeline that Davis and the Energy Commission have been drawn into the fray. Davis has called the new push for plant building the pillar of his solution to the problems unleashed by deregulation.

As a result, the state’s energy commission finds itself in the middle of a highly charged political and economic dispute laden with symbolism.

The panel--with the echo of Davis saying all Californians must share the pain--must decide whether to overrule a recent zoning vote by the San Jose mayor and City Council. That vote killed Calpine’s $300-million, power plant in favor of Cisco. The Internet king had argued that the power plant would harm the aesthetics of its huge campus-like headquarters.

What happens next will probably turn on a fundamental question of fairness now being asked in Sacramento and in public hearings before the Energy Commission in San Jose:

Why shouldn’t Santa Clara County, the home of Cisco and the biggest electricity-consuming firms in the West, be willing to carry its fair share of power plants? Why should Pittsburg and Antioch and Kern County shoulder it all? And will the state Energy Commission exercise the muscle it has rarely used before and override a local community’s desire to say, “Not in my backyard?”

Off the record, both sides throw colorful barbs at each other. On the record, they prefer to argue their case in the parlance of single and double turbines and nitrogen oxide loads.

Cisco says it is tired of being portrayed as greedy and callous to California’s electricity crisis. “We are as interested as anyone in having a sufficient power supply. And there is a shortage right now. But what we need is a responsible solution, one that is environmentally sound, respects the community and addresses the immediate need for energy. This plant is not that solution,” said spokesman Steve Langdon.

“Calpine prefers not to talk about the impacts on the surrounding neighborhood, 20,000 Cisco employees and 800 of their children in day care. This is about health and safety.”

Calpine officials, meanwhile, argue that their proposed Metcalf power plant between San Jose and Gilroy in the far southern reaches of Santa Clara County shares nothing with the 1950s- and ‘60s-vintage models that spew smog-forming particulates into the air and flush pollutants into the ground. In fact, the local Sierra Club chapter has given its OK to the project, citing the proposed plant’s environmental superiority.

“We find it highly hypocritical that a company developing a new campus for 20,000 workers continues to point the environmental finger at our project,” said Curt Hildebrand, a Calpine vice president and manager of the proposed venture.

In a statement released by his office, Hildebrand noted the vastness of Cisco’s own plans for the area, which pose greater environmental concerns, according to the high-tech firm’s own assessment.

Lack of Plant Construction

For more than a decade, California brought no new power plants online, even though the state Energy Commission had predicted just such a current crisis back in 1990. In recent days, Davis has repeatedly pointed to the lack of new construction as a major culprit in the energy crisis.

T.C. Cheng, an electrical engineering professor at USC, said the recession of the early 1990s played a part in the decision not to bolster the state’s generating capacity. While demand for electricity has grown by leaps in Silicon Valley, the statewide demand has only increased by about 3% per year since then, he said. Historically, energy consumption increases about 6% per year.

Now, under deregulation, which has led to soaring wholesale prices, power generators such as Calpine, Enron, Duke and Sempra Energy Resources are earning huge profits.

“Our power demand is not increasing at an alarming rate,” Cheng said. “But our prices are.”

Those prices have been blamed, in part, on a shortage of supply, prompting the state energy commission to license nine new power plants, mostly in Northern California and Kern County, during the last nine months. Of the 22 power plants currently approved or in the pipeline, at least three are under construction--in Yuba City, Pittsburg and on the old fields of Kern County. When all is said and done, Calpine will have the lion’s share of plants.

The nine projects approved by state regulators will fire up between this summer and the winter of 2002, and they will generate 6,300 megawatts. In the last five years, demand in California has increased 5,500 megawatts, according to power generators.

Calpine is building both the Sutter plant near Yuba City and the Los Medanos plant in Pittsburg, and has several projects in the development stages, including one near the Mexican border.

It’s not easy mustering a meaningful opposition to the power plants, say concerned residents in several of those communities. The atmosphere of crisis had turned on them in a way that makes their objections sound sniveling at best and downright unpatriotic at worst. They do not have a powerhouse Internet firm running interference.

When Lagana opens the front door of her house in the Marina Park section of Pittsburg, she sees the giant smokestacks of Pacific Gas & Electric. It wouldn’t be so bad, she said, if not for the smokestacks of nine other power plants in the vicinity.

“This community and east Contra Costa County as a whole has shouldered an unfair burden, and it’s hard not to conclude that these companies have sited their plants here because we’re mostly a poor and uneducated community,” Lagana said.

She said she and her local environmental group, citing studies of poor health in the region possibly due to plant emissions, tried to mount opposition to Calpine’s Los Medanos plant. But only a handful of residents showed up at the public meetings. Their voices dwindled to almost nothing when the city received a $15.6-million check as payment for being a partner in the project.

Even when the state Energy Commission fined Calpine $75,000 for breaking its promise on the placement of infrastructure--a fine that Lagana considered a slap on the wrist--the community remained mum.

Now Calpine has proposed a 12th plant for her city across the bay from San Francisco, and Lagana has no doubt it will fly through in the current climate.

In similar fashion, the California Energy Commission has approved licenses for four new power plants in Kern County in the last year. All four faced little opposition, partly because they were proposed for sparsely populated and economically depressed communities in need of new revenue generators.

Mark Pryor was the Energy Commission’s project manager for three of the Kern County plants. He said only one organization formally asked to intervene in the licensing process, California Unions for Reliable Energy. But even that group did not raise obstacles to the permitting.

Robert Balgenorth, chairman of California Unions for Reliable Energy, said his group was mostly concerned that the power plants will not use so much water and generate so much air pollution that it hampers the future construction of businesses and homes in the area.

“We want to see sustainable growth in the state,” he said.

Showdown on the Hills

The moss-green acreage where Calpine and Bechtel want to build the 600-megawatt Metcalf Energy Center has the feel of a historical crossroads, where old ways and new, the past and present, high-tech and low, crowd into a small hill-crowded parcel as though competing for their survival.

The site is currently leased to a rancher, whose cows graze along a creek and on the oak-dotted hillside, which rises 300 feet. It also is a junkyard, littered with the rusty carcass of an old truck, tires, bricks, discarded refrigerators and ovens.

The nearest private house is about half a mile away, on the other side of the hill. “As you can see, we’re not in anybody’s ‘neighborhood,’ ” said Calpine’s public relations manager, Lisa Poelle, as she led a reporter on a tour.

When Calpine brought its proposed Metcalf Energy Center to the staff of San Jose Mayor Ron Gonzales, the power producer knew it was in for the fight of its life. Like other generators, Calpine has reaped sizable profits from the state’s electricity market. The Metcalf facility was part of the company’s plan to produce 7,800 megawatts of power in California by 2004.

Calpine and its partner, Bechtel, a builder of 450 power plants worldwide, hired top lobbyists and consultants for the job of selling the project to City Hall. Problem was, Cisco, San Jose’s biggest employer, had done the same.

Early on, Calpine officials decided to pay a visit to John Sobrato, the builder teamed up with Cisco. Sobrato had just broken into the ranks of San Jose’s billionaires, and the Calpine team went to his office hats in hand, a model of the project in tow. Sobrato, fresh from his yacht, got right to the point. The proposed power plant could not co-exist with the Cisco campus and his plans to develop the surrounding property.

Mayor Gonzales and the City Council eventually agreed. The city’s general plan for the Coyote Valley--the last real open space left for the computer industry--would be breached for Cisco but not for a power plant.

Now Calpine is seeking a way around that vote, asking the state Energy Commission to do what its only done twice before: override a local zoning vote.

As the commission met Tuesday in San Jose to hear Calpine’s appeal, the manager of the proposed project remained behind, strolling across what he described as a perfect site for the plant.

Along the property’s northern edge are high-power electricity transmission lines stretching, ultimately, as far as Washington.

The lines are humming with 230,000 volts, said Calpine’s Kenneth Abreu, and stand only 200 feet from the proposed power generating station. They would be easily tapped, he said, and that was one prime reason for picking the place, along with the nearby natural gas pipeline.

High-power lines within a stone’s throw have a key environmental advantage of maximizing energy efficiency, he said, because the farther the power has to go, the more of it that goes to waste. Minimizing energy loss is one of the 10 reasons that the local Sierra Club chapter supports the building of the power plant.

As planned, the generating station’s most noticeable feature would be two 150-foot exhaust towers from the gas-fired turbines. The bulky steam evaporator would be outfitted with $5 million in equipment to prevent telltale plumes, said Poelle.

To cool the generators, the plant would draw 4 million gallons a day of recycled sewer water otherwise destined for the San Francisco Bay, boiling off about 3 million gallons and returning the rest to water treatment.

A concern of some homeowners on the other side of Tulare Hill, whose opposition helped kill the project, is whether the power plant would mar their view. One real estate agent has said that potential house sales have been wrecked by news of the possible plant building. But other homeowners and local business have supported the project.

“I don’t think it was a vote based on the merits of the project,” Abreu said. “There is no reason you cannot have the power plant here and the Cisco development. Zero reason.”

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Times staff writers John Johnson, Mitchell Landsberg and Hugo Martin contributed to this report.

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Power Surge

For the first time in more than a decade, new power plants are being built throughout the state. Here are their locations and approval status with the California Regulatory Commission.

Source: California Energy Commission

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The California Grid

Electricity is moved throughout the state on a 26,000-mile network of power lines carrying current at up to 500,000 volts. The electricity is “stepped down” in a series of substations and transformers for different levels of use in industry and in homes. Although the transmission lines are owned and maintained by utility companies, the California Independent System Operator, a nonprofit corporation created by deregulation, manages the flow of electricity along the lines.

Path 15

Energy bottlenecks sometimes occur on Path 15, a critical group of high-voltage lines that move power between Northern and Southern California. Congestion occurs when power demands exceed their transmission capacity of about 3,000 megawatts. Transmission congestion along Path 15 can be likened to going from three lanes to two on a busy freeway. Maintenance, accidents, vandalism and even lightning strikes can also lead to bottlenecks.

How We Get Electricity

1. Generating plants within and outside the state are powered by nuclear fuel, hydroelectric turbines, fossil fuels such as coal and natural gas and renewable sources such as wind and solar energy.

2. Transmission transformers step the voltage up to several hundred thousand volts to push the electrical current across long distances and reduce energy losses.

3. The current moves along high-power lines, some carrying 500,000 volts, that crisscross the state like freeways for electrical current.

4. Distribution transformers and hundreds of power substations throughout the state step down the voltage to several thousand volts for use by commercial and industrial users.

5. Pole-top transformers reduce the voltage to 110 and 220 volts for household use.

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Sources: California Energy Commission, California Independent System Operator; “The New Way Things Work” by David Macaulay

Researched by NONA YATES / Los Angeles Times