We Energies rethinks plans for Oak Creek power plant

Daily Reporter (Milwaukee), Oct 6, 2003 by Jeremy Harrell

We Energies last week acknowledged the shortcomings of a key component of its Power the Future plan and asked state regulators to hold off on fully approving the third piece of its three-unit proposal for Oak Creek.

In a brief filed with the Public Service Commission, the Milwaukee- based utility agreed with the findings of the state's final environmental impact statement, which concluded that the third plant is not cost effective. The proposed plant would use an emerging internal gasification combined cycle coal technology that We Energies said holds great promise but is still years away from maturity, according to the brief.

The PSC is scheduled in November to rule on the Oak Creek project, the most substantial part of We Energies' $9 billion Power the Future plan, which also includes two gas-fired facilities now under construction in Port Washington.

The brief is one of We Energies' last statements to the PSC, and it functions essentially as a guide to how the utility would like regulators to decide the case.

In the environmental impact statement, a joint product of the PSC and the state Department of Natural Resources, the state's skepticism of the IGCC portion of the Oak Creek project came across in several ways. The most telling was the state's decision, after declaring the IGCC to be too expensive, to evaluate the project without taking the IGCC into consideration.

In its brief, We Energies agreed with that approach, but it noted that the IGCC would be the last of the three units to go into service, in 2011. The first two units rely on an advanced, yet more conventional, coal-burning technology, and those are scheduled to go online in 2008 and 2009.

It's possible that in eight years, the IGCC technology, which is based on several existing plants in the country, will have come down in price and would be more feasible, according to utility spokesman Thad Nation.

That's why we made it our third unit, he said.

Brief remarks

Nation added that We Energies' position on the IGCC facility is not inconsistent with previous statements the utility has made. What the company is asking, he said, is for the PSC to withhold voting on a straightforward construction permit for the IGCC but still allow the utility to conduct research on the technology.

The hope is that the PSC would approve the IGCC in concept and permit We Energies to build it later when the IGCC technology becomes cheaper and more practical. Nation said the PSC took a similar view of the second Port Washington facility.

We are encouraging the commissioners to go ahead and give approval of the third unit even if they have to put those conditions on it, he said.

In addition to its statement on the IGCC unit, We Energies' brief took swipes at Calpine Corp., the California-based energy company that has offered a competing proposal to Power the Future. The brief repeated earlier allegations that Calpine lacks the financial wherewithal to guarantee expansion of two already approved gas-fired plants, projects that the state suggested would work well in concert with We Energies' coal proposals for Oak Creek.

But John Flumerfelt, Calpine's government and public affairs director, noted that his company secured $4 billion in financing earlier this year. And, rebutting another We Energies charge that recently fluctuating natural gas prices make Calpine's proposal economically shaky, Flumerfelt said the PSC's model showing a lower cost for Calpine's plan is based on gas prices substantially higher than the historic average.

We think gas is going to be relatively stable, he said. You can't make long-term decisions on short-term market trends.