Friday, Jan. 28, 2005 | 10:52 a.m.
A massive power plant being built by Nevada Power Co. north of Las Vegas is ahead of schedule and under budget, utility executives told state regulators on Thursday.
When the 1,200-megawatt Lenzie Generating Station was approved in September, members of the state Public Utilities Commission urged the utility to complete the project quickly in order to maximize the benefit for customers.
If the projections outlined this week hold true, commissioners will get their wish.
"The good news is that the construction and progress on the facility is going quite well," Roberto Denis, Nevada Power's vice president for energy supply, told the commission.
Denis told the commission that the entire plant is on pace to be in service by March 31, 2006, positioning the plant to serve customers for the entire summer of that year. When the PUC approved the plan for the plant the deadline had been set for June 2006.
Denis also said that current construction-cost estimates for the project sit at $362 million, better than the original estimate of $367 million.
In approving the plant, PUC commissioners had expressed concern that a $42 million contingency estimate for unforeseen construction expenses was too high. At the time, Denis said it was necessary since the plant -- which was mid-way through construction when abandoned nearly two years ago by the original owner, Duke Energy -- had been idle for so long.
The contingency portion of the construction budget was ultimately trimmed by about $8 million.
On Thursday, Denis said the utility is receiving reports from Fluor Enterprises -- the general contractor on the project -- assessing the state of the plant, and so far no major issues have been uncovered.
"We are only part of the way through this process, but our current best estimate is that this plant will come in under budget," he said.
In addition to more than $360 million that will be spent to complete the construction of the plant, Nevada Power bought the partially completed portion of the plant from Duke Energy for about $180 million.
The Duke plant replaced in Nevada Power's resource plan a previously approved $410 million, 500-megawatt power plant. Michael Yackira, chief financial officer for Sierra Pacific Resources, Nevada Power's parent company, said that the larger plant size and favorable financing will create significant savings for consumers.
Through 2009, the interest expenses related to financing of the Lenzie plant's construction will be $99 million lower than the original projections for the once-planned 500-megawatt plant.
In addition, the company-controlled power generation means that less power will need to be purchased on the open market, utility executives and regulators agreed. Excessive exposure to the price fluctuations on the open market ultimately damaged the company's credit during the Western energy crisis of 2000-01. The new plant also will be more efficient, using less natural gas which has experienced a price surge in recent years.
"It's definitely in everyone's best interest," said PUC Chairman Don Soderberg.
In addition to long-term savings for customers, Yackira said that the ability to get the plant completed bolster's the utility's position with regulators and the financial markets that will eventually be called on to finance additional plants.
"It's important that we are able to do what we had said we are going to do assuring that we are going to do what we materially agreed on," he said following the presentation.
In other PUC moves, the commission approved temporary regulations that will allow electric utilities to make rate-adjustment requests based on future projections for fuel and purchased power costs.
Until now, regulations allowed rates to be set based only on a historical test year, but rapidly rising natural gas costs have caused recent rate adjustments to come in too low, PUC staff and utility officials have said.
If not enough is collected from customers through the "base tariff energy rate" unrecovered balances build up that the utility recovers later, with interest.
The temporary regulations also would allow utilities to make interim filings if the deferred balance begins to grow between annual filings.
"Sometimes we have a BTER in place that just doesn't make any sense and we know that halfway through the period," said Commissioner Carl Linvill. "I think this is a good regulation."
Soderberg agreed.
"This is something that's long overdue," he said.
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