Friday, Aug. 2, 2002 | 9:16 a.m.
Two years ago an energy shortage propelled power costs skyward and power wholesalers, flush with investor capital, rushed to build new generating plants in Nevada and throughout the West.
While many of those new plants are under construction, many others have been scrapped or indefinitely postponed. Power wholesalers, who a few years ago seemed to be the kings of capitalism, now find themselves buffeted by skittish investors, changing regulations and uncertain markets.
Between April 2000 and February 2002, plants capable of producing more than 10,000 megawatts of electricity were proposed for Nevada alone -- enough power for perhaps five million homes in Las Vegas during the summer months, when air conditioners greedily consume electricity.
But today, power plants that were to supply nearly 40 percent of that power have been delayed, deferred or outright cancelled.
Jon Wellinghoff, a former Nevada Consumer Advocate in the attorney general's office, said he believes that prices have come down, and that has cut the wholesalers' appetite for new plants.
"Demand has leveled out," Wellinghoff said. "Also the FERC (Federal Energy Regulatory Commission) has stepped in and put in price caps. It certainly stopped the gaming that went on at one time to manipulate prices."
Tim Hay, the present Consumer Advocate, said he believes there was not the generating shortage that producers trumpeted.
"I think this is a function of the market shaking out financially, and supply issues were somewhat overblown," he said.
However, spokesmen with the power wholesalers say they still see at least potential shortfalls in power. What they do not have is access to the capital to build the plants, which can cost hundreds of millions of dollars.
"Capital is very hard to get these days," said Richard Wheatley, a spokesman for Houston-based Reliant Energy. "Power plants take years to get sited, built and up and running.
"We looked at our full portfolio, and have prioritized the projects that made the most economic sense."
One of those projects that did not make the cut was Reliant's proposed 575 megawatt, gas-fired generating plant 20 miles north of Las Vegas. Wheatley said Nevada still has a regulatory climate amenable to building power plants, and the project could come back in the future.
Reliant is still constructing a 550-megawatt plant in Primm, which should come online in the summer of 2003.
"In general, most of the companies in the energy sector are examining all their planned projects and prioritizing them," agreed David Payne, spokesman for Atlanta-based Mirant. "There has been a great reduction to our access to capital markets. We are tightening our belts and improving our liquidity."
Payne said his industry has generally been hit hard by the shock waves generated by the collapse of Houston-based Enron Corp. He said the perception that all energy companies are potential Enrons is unfair.
"We are a very different company than Enron. Companies are being unfairly tied to Enron," he said.
Payne said the big difference is that Mirant has a huge amount of real assets, which Enron, investors learned, did not.
Regulatory officials, including staff with the Public Utilities Commission of Nevada, agree that the new plants that are still coming on line will bring generally lower prices and a more reliable power supply to Southern Nevada. The region in the summer uses more than 4,000 megawatts for the population of about 1.8 million, but produces just about half the energy needed.
The rest must be imported from other states. One of the advantages of the power plant construction boom that started two years ago is that the officials hope that the region will be largely self-sufficient in energy needs.
Still on track for construction is a total of about 2,500 megawatts by the end of 2003. Plants that would provide thousands more megawatts are under construction in California and Arizona.
"Once they're up and running, they will benefit the electric consumer in Nevada," Cynthia Messina, a PUCN spokeswoman, said.
PUCN staff said they believe what is under construction will be enough to satisfy energy demand for at least several years to come, as the population and economy of Southern Nevada and the Southwest continue to grow.
But Wellinghoff, among others, warns that another wave of power-plant construction will probably come -- and it may arrive after another round of shortages.
"Energy and the economy are linked," he said. "Ultimately, if we see an upturn in the economy, which we expect to see in the next year to three years, we will see shortages again."
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