CalEnergy deal: is it good for IID?

November 16, 2001|By RUDY YNIGUEZ, Staff Writer

The recent purchase by the Imperial Irrigation District of 170 megawatts of geothermal electricity from CalEnergy Operating Corp. is both good and bad, depending on whom you ask.

The power will be provided to the IID beginning with 40 megawatts, at 5.6 cents a kilowatt-hour for the first two years, followed by increasing deliveries until the full 170 megawatts is being provided. The price becomes 6.4 cents per kilowatt-hour in year three of the contract through 2014, and 7.2 cents per kilowatt-hour through the end of the 20-year contract.

The IID pays for the power whether it uses it or not, under terms of the contract. The IID Board of Directors voted unanimously last week to approve the deal.

The power plant will be designated Salton Sea 6 by CalEnergy, will likely be a single turbine-generator and will begin to produce power some time in late 2004 or early 2005.


IID Division 2 Director Bruce Kuhn said he voted for the project because he saw it as "win, win, win."

"I fought to get it," Kuhn said. "It's a source of energy in our own back yard."

Kuhn said the advantages include the creation of 60 full-time jobs after construction, about $1 million annually in royalties to the district because the project sits on land owned by the IID, about $3 million annually in county property taxes, that the project uses renewable energy and there will not be any power losses from transmitting the electricity from long distances outside the area.

"You can afford to pay more if the line losses are not there," Kuhn said. He also said the power will be produced with little to no pollution. "All I saw was win, win, win."

Kuhn said the initial asking price by CalEnergy was too high and was rejected, but eventually the price became acceptable especially in light of the overall advantages.

The project is expected to demand as many as 800 construction jobs.

Once the project is fully operational, the geothermal source will amount to about 19 percent of the district's overall load, and 40 percent of its base load, that is, power being supplied 24 hours a day because it is among the cheapest and least polluting.

IID board president Andy Horne said the deal was in the best interest of the ratepayers. He said important considerations include that it is a local resource that supplants a local industry with jobs and taxes, that it will provide power system stability, it will eliminate transmission losses, it allows the IID to continue its philosophy of diversifying its power portfolio and that geothermal power has proven highly reliable and is clean energy.

"The biggest factor for me was the stability of the price," Horne said.

Additionally, Horne said the contract requires CalEnergy to pay for any future environmental requirements.

"I didn't think we made a bad decision," Horne said. "Any time you lock in a price you're taking a chance."

Fluctuating natural gas prices have caused the price of electricity to fluctuate as well. Because of those fluctuations, the IID briefly considered purchasing a gas field.

Horne said the price of CalEnergy's power is "slightly higher" by about 5 percent of new natural gas resources.

There are concerns, however, that supplying 40 percent of the district's base load from a single turbine-generator would prove disastrous if it were to shutdown automatically during the summer.

Whether CalEnergy builds one or two turbine-generators is not yet settled.

Questions also remain about the price of the power.

Former IID Director Don Cox said according to his calculations, the district's overall rate will increase by one-half cent per year.

The overall average is the average cost of all of the IID's sources of power. Today, that cost is about 5.5 cents a kilowatt-hour, according to Horne.

Cox said his other worry is that so much of the district's base load would be supplied by a single generator, instead of two.

"The only thing I can tell you is I wish they hadn't done it," Cox said of the board's vote, adding that ultimately the deal might be a good one if the price of natural gas increases.

Horne said there is a requirement in the contract whereby CalEnergy would replace any power lost, but that there is a cap on the amount.

The project also concerns members of the IID's power consumers advisory committee, which was briefed on the proposal in September.

PCAC chairman Shorty Hickingbottom said in principal the PCAC agrees the project is a good one, but that the group was asked to recommend the project without knowing what the price of its power would be. He said no prices were offered at the presentation.

"They refused," he said.

PCAC member Gil Perez said unless the higher cost is offset elsewhere, there will be higher power rates.

"I think it's going to cost us more than they told us, per kilowatt-hour," Perez said.

Division 4 Director Stella Mendoza said she voted for the proposal because it offered the IID the opportunity to participate in a renewable and clean energy source, but that she has concerns.

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