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Co-op agrees to buy power from Riesel coal-fired plant

Wednesday, September 05, 2007

By David Doerr
Tribune-Herald staff writer

A Waco-based electric cooperative announced Tuesday that it plans to purchase more than 40 percent of the power generated at a controversial coal-fired power plant near Riesel, causing environmental and consumer groups to cry foul.

In a news release, Brazos Electric Power Cooperative Inc. officials said they plan to purchase 375 megawatts of power from the proposed Sandy Creek Energy Station, a 900-megawatt coal-fired power plant, which is expected to be operable by 2012. The financing arrangement would allow project developers to break ground on the plant later this year, officials said.

Brazos Electric, the largest power generation and transmission co-op in the state, serves 16 member distribution cooperatives and two municipal customers, which include more than 460,000 customers in 68 Texas counties. Much of its customer base is in North Central Texas, stretching from near the Red River to the north and to Navasota to the south.

Meanwhile, Tom "Smitty" Smith, director of the Texas office of Public Citizen, a consumer watchdog group, issued warnings to Brazos Electric members, saying that proposed federal regulations of coal-plant emissions could make the deal a cost liability that is passed on to the co-op's customers.

Dynegy Inc., which recently purchased the generating capacity of LS Power Group, the company that initially led the effort to build the Sandy Creek plant, announced late last week in a news release that it had completed a $1 billion deal to finance the project.

In a release issued by Dynegy, company officials said that under the terms of the agreement, an entity called Brazos Sandy Creek Electric Cooperative Inc. owns 25 percent of the proposed facility's output, which equals 225 megawatts, through an undivided ownership interest. Brazos Electric Power Cooperative Inc. has contracted to buy another 150 megawatts a year for 30 years, according to the release.

Brazos Electric officials refused to answer any questions about the transaction when the Tribune-Herald asked them to elaborate on the news releases. And they would not explain details surrounding the creation of the Brazos Sandy Creek Electric Cooperative.

However, Clifton Karnei, executive vice president and general manager of Brazos Electric, did comment on the transaction in a release issued Tuesday.

In the statement, Karnei said the decision to enter into the arrangement with Dynegy was the result of exhaustive planning and research to determine the best interests of its members and the retail electric customers they serve.

Diversifying fuel

"The arrangement to purchase power from the planned Sandy Creek Energy Station is an important step in diversifying the fuel used to generate electricity for our members," he said in the written statement. "Today, the vast majority of the power we provide to our members is generated from natural gas. It is essential that we diversify the fuel used to generate our electricity to help protect our members from volatile price swings that can result from too much reliance on any one fuel type."

The demand for electricity among the member cooperatives it serves is growing by about 200 megawatts a year, Karnei said in the release, adding, "We are taking action to ensure the homes and businesses served by our member cooperatives continue to have a reliable and cost-effective source of power."

Smith, from Public Citizen, acknowledged the growth in demand but said he would rather see the problem dealt with by encouraging energy-efficient practices.

"Studies have indicated that you could save 80 percent in the growth in energy demand through energy-efficiency measures that are lower-cost than building a coal plant," he said. "We would urge Brazos Electric members to unplug the coal plant and instead plug into energy efficiency because it will be cheaper and have far more stable costs over the long term."

Smith argued that the emissions of the proposed Sandy Creek plant could put co-op customers at risk of paying higher electricity rates if the federal government begins regulating carbon dioxide or further clamps down on nitrogen-oxide emissions. He said the Environmental Protection Agency recently has proposed tougher regulations on smog-causing emissions.

"While there are some that argue that coal is a low-cost fuel, it has a high price because of the many hidden costs such as air pollution, climate change and water pollution from the mercury," he said.

Continued appeals

Smith also said the deal was financially risky because environmental groups are continuing to appeal air and water quality permits that LS Power already had obtained from state regulators. He said he believes there is a "high likelihood" that the appeals will prevail because of recent state and federal legal victories regarding air-quality regulation.

Kyle Minnix, a Brazos Electric spokesman, said he could not comment on Smith's assertions Tuesday.

However, David Byford, a spokesman for Dynegy, cited his own set of favorable rulings that he said provided the company with the confidence to move forward with the project financing.

"We're a full advocate for federal leadership on this issue," he said. "An important factor here is that electricity and demand for electricity in this region is growing, and what the country needs is a balanced, diversified portfolio for generating electricity and meeting customers' needs. This plant would contribute to that."

The developers of the Sandy Creek plant won an air permit from the Texas Commission on Environmental Quality last year after an administrative law judge rejected arguments by environmental groups that the plant would worsen smog problems in the Dallas-Fort Worth area and that it would not use the best available technology for pollution control.

But that permit has been challenged in district court by a group of the plant's neighbors that calls itself TPOWER, or Texans Protecting Our Water Environment and Resources. Ricky Bates, TPOWER co-chairman, said his organization plans to appeal to Brazos Electric members to reconsider the deal to purchase power generated at Sandy Creek.

"It wasn't a good idea when they started it, and it still isn't a good idea," he said. "I think when a lot of those people realize what they are buying into and what the money is going to be going for, there is going to be a changing of the heart."

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