POWERHOUSE

Electricity is a modern marvel. It may shock you to learn it is difficult to provide to our households and workplaces. In this story, I discuss how its production impacted me.

 

POWERHOUSE

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On August 10, 1999, I read that SRP planned to build a 500 to 750 megawatt gas-fired generating plant in metropolitan Phoenix to meet future projected load growth./

The announcement made me laugh because some twelve years earlier, SRP canceled work on a 250-megawatt coal-fired generating plant in St. John’s, Arizona.  

It made me cry because my last 18 months of employment were spent helping to undo about one hundred contracts and purchase orders created to build this plant addition. Reading the article brought back to mind all the rancor and bitterness that suppliers, contractors and the residents of St. Johns heaped on SRP when it made this decision based on financial concerns.             Not everyone in the company agreed with the decision, especially those employees who worked in Power Generation. They predicted dire consequences would occur if power needs exceeded the company’s ability to produce its own, forcing it to purchase power on the open market.

In retrospect, the company made the right decision. It has done a remarkable job the past decade of providing an increasing demand for power at a low price. It cut costs to the bone. It pared its work force from over 6,000 to 4,500. It negotiated changes with its long-term suppliers of coal to obtain lower prices. It received an award this year as one of the two most customer-favored utilities in the country. My hat is off to the management team that produced these results.

At the same time, concerns about the new plant arise in my mind. Will the company be able to finance it through to its completion?  One canceled power plant is one too many in the life of a utility.

During my years at SRP, from 1967 to 1989, the company’s power generating capacity grew enormously, driven by the tremendous population growth in Phoenix that far exceeded the norm. During the early part of the century, utilities had no difficulty in planning for future growth. It increased its capacity every year by about 3%. Every third year, a utility could plan to add to its generating capacity. Regulatory commissions across the country approved utility rate requests in a perfunctory manner. Utilities built larger and larger plants to obtain cost benefits, despite the increasing capital costs involved. The business became monotonously predictable and boring.

The Arab oil embargo changed this picture forever. Almost overnight, the cost to operate old oil and gas plants sharply increased. The new rate increases hit customers hard. Regulatory boards refused to grant utilities much rate relief, blaming them for their failure to provide low-cost power, regardless of the circumstances.

A frenzy of construction took place throughout the 1970’s as utilities strove to build new generating plants, either coal-fired or nuclear powered. As capital costs increased, utilities joined forces to take advantage of economy of scale. A consortium would build a very large plant operated by one firm. All the construction, operating and maintenance expenses would be shared pro rata. During these years, SRP joined forces with a number of other utilities, owning parts of coal-fired plants in California, Colorado and New Mexico.

SRP added power generation capacity to its system on a continuing basis all during my working career. In 1968, SRP installed new hydro-generating units at its historic Roosevelt Dam, which included a pump-back feature. Water flows from the dam’s reservoir (Roosevelt Lake) through turbines, which produces power. At night, using power from base-loaded fossil fuel plants, SRP reverses the turbines, and pumps water from the lower reservoir (Canyon Lake) to Roosevelt Lake. This pump-back storage system is very economical, but the total amount of hydropower generated represents but a small fraction of the amount SRP needs to serve its customers.

In 1974, the company completed construction of the Navajo Generating Station at Page, Arizona. When it went into service, it became the largest coal-fired plant west of the Mississippi. When all three of its units are operating, the plant can consume 8,000,000 tons of coal a year.

Construction of the Coronado Generating Plant took place at St. Johns, Arizona, during 1975-78. It consisted of two coal-fired units, with room to add a third. SRP axed this ill-fated Unit 3 in 1988.

High summer usage forced SRP to add still more additional power generating facilities, ones that could meet peak demand quickly. SRP installed a number of gas-fired turbine units in this same time frame. Some were located at existing local generating facilities, others at a new plant site in Gilbert, Arizona.

All these units paled in comparison with the mighty Palo Verde Nuclear Power Station, capable of providing almost 4,000 megawatts of power to the grid. When first constructed in the late ‘70s, SRP owned about 30% of the plant. It sold off a portion of its share for various reasons, but still owns a significant amount of the plant’s capacity. The Palo Verde plant did not always live up to its owner’s expectations. It experienced a variety of operational faults, and was not as cost-effective as anticipated. It encountered numerous machinery problems, none related to the nuclear generating part of the plant. Over time, operating conditions have improved dramatically. For many recent years, the plant has rated near the top in the industry.

Some former employees may scoff at the news that SRP now plans to build a new plant. “I told you not to cancel Unit 3,” they may chide. In a manner of speaking, the situation brings to mind the Fram Oil Filter commercial, in which the speaker says, “You can pay me now or pay me later.”  The continuing growth in population forced SRP to continue adding power plants to its system.

It is one thing to recognize the need to build a new plant. But where to build a new generating station is a very difficult decision to make. Equally difficult is the decision whether to burn oil, gas, or coal. Nuclear units are no longer a viable option for numerous reasons, some justified, many unjustified. Air quality constraints make it almost impossible to build a plant anywhere else in the state. Hence, it forces utilities to build new units on existing sites.

I enjoyed working for SRP during a period of unprecedented growth. The decision to cancel the CGS Unit 3 left a sour taste in my mouth. No one likes castor oil, even if it cures you. That unit seemed to be such a good addition to the system. 

In contrast, a few questions about the new plant come to mind. Does SRP have the financial wherewithal to complete it?  Once built, will it have access to low-cost fuel?  Who can predict how OPEC will set prices or regulate production. Would it have been possible to add a new unit at the Navajo Generating Station fueled by coal provided by the Navajo Nation? Who needs casinos when you have a coal mine in your back yard to produce jobs and revenue?

Few people give a hoot as to where the power comes from when they flip a switch. It is something we take for granted in our country. Hippies used to chant, “Power to the People.”  Let me assure you, it is easier to say than to provide.

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