Click image for enlargement. Graphic by Mike Johnson. The White Pine Energy Station could ease financial struggles for White Pine County, where Ely, above, is. County officials last year declared a financial emergency and discussed seeking bankruptcy protection. Photo by K.M. Cannon. White Pine County Commission Chairman John Cachas said he'd welcome the jobs and economic boost the proposed coal-fired power plant would bring to Ely. Photo by K.M. Cannon.

Sierra Pacific Resources could make up to an extra $90 million in profit in the first year if regulators approve its plans for a coal-fired plant near Ely.

But some analysts are not yet convinced Sierra's proposed Ely Energy Project, a $3 billion, 1,500-megawatt coal plant and a possible $2 billion additional plant using coal-gasification technology, is the best project for the utility company to develop.

State Consumer Advocate Eric Witkoski said he has not decided whether to support the project.

"For this to work, the economics have to work," Witkoski said.

The utilities analyzed the advantages and disadvantages of coal-fired power generation when they filed a 100-page-plus study with the Public Utilities Commission. But the commission allowed the utilities to keep the study confidential, because no one challenged the utilities' arguments that the study contained commercially sensitive material, commission spokeswoman Kristy Wahl said.

Analysts generally seem sure that a coal-fired plant is the lowest-cost alternative for generating power, given coal's low cost relative to cleaner but increasingly expensive natural gas.

Based on today's fuel and construction costs, electricity from a coal-fired plant would cost 2 cents to 3 cents less per kilowatt hour than a gas-fired power plant, Sierra Pacific Resources Chief Financial Officer Michael Yackira said. That's a significant savings given the 9.5 cents customers pay per kilowatt hour for electricity, but Yackira noted that only some of the utilities' power would come from the proposed coal plant.

However, even if the new plant is constructed, consumers shouldn't expect to see lower rates for a few years.

The first 750-megawatt unit at the Ely area power plant is scheduled to come on line in 2011.

That plant should help keep rates lower than they otherwise would be in 2011, Yackira said.

That prediction will hold even if Sierra Pacific Resources' two subsidiaries, Nevada Power Co. of Las Vegas and Sierra Pacific Power Co. of Reno, have started spending money on a second 750-megawatt unit at Ely and started recovering some of their costs for the second unit, Yackira said.

The utilities said they would build two 500-megawatt coal-gasification plants at the Ely site after completing the two conventional coal-fired units if coal-gasification technology proves to be commercially viable.

The gasification units would cost another $2 billion, which would raise the project's total cost to $5 billion. That money would represent a huge commitment for Sierra Pacific Resources, which has $8 billion in total assets today.

If the Public Utilities Commission determines the Ely plant is a critical facility, the three-member commission could allow the utilities to earn as much as 5 percent more return on equity (a measure of profits) on the Ely project than their current maximum return on equity. The PUC set a 10.25 percent return on equity as the maximum for Nevada Power.

And if granted the maximum 5 percent "kicker" on the Ely project, the two utilities would be allowed to earn an extra $90 million in profit in the first year, reports the Bureau of Consumer Protection, which Witkoski oversees. The extra profit would slowly decline over the possibly 35-year useful life of the plants.

Nevada Power's revenues and customer rates would increase 4 percent, based on today's rates, if the 5 percent kicker were approved, the bureau said.

Witkoski opposes critical facility designation for the Ely Energy Project. He said allowing the utilities to earn higher-than-normal profits on the Ely project affects the proposed plant's financial feasibility.

"We think (the utilities are) getting a fair return on what the commission granted them in the general rate case, and that should be adequate," Witkoski said.

Yackira said the utilities have not decided whether to ask state regulators to treat the Ely center as a critical facility with potential financial incentives.

Nevada Power and Sierra Pacific Power did obtain commission approval of the financial incentive on their last two power plant projects. The commission authorized Nevada Power to earn a 3 percent addition to its return on equity on the 1,200-megawatt Chuck Lenzie Generating Station and Sierra Pacific Power to earn a 1.5 percent addition to return on equity for the 514-megawatt, gas-fired Tracy Generating Station addition.

If the utilities were allowed a 3 percent kicker on the Ely project, they would be allowed to earn an extra $54 million in profit in the first year, declining to lower amounts over the life of the project, the bureau said.

The utilities could get one of these so-called equity kickers for the 250-mile, single-circuit transmission line that it proposes to build to carry electricity from Ely to interconnections with Nevada Power and Sierra Pacific Power.

Utility executives say the transmission line would allow Nevada Power and Sierra Pacific Power to rely on each other for generation backup in case of an outage. The transmission line also could be used to carry power from nearby wind farms, which otherwise would have no way to deliver electricity to Reno and Las Vegas.

The lines would let Nevada Power import renewable energy from geothermal power plants in Northern Nevada, giving the state a further measure of energy independence, Sierra Pacific Resources Senior Vice President Roberto Denis said.

Yackira estimates the transmission line would cost $300 million to $350 million of the $3 billion power project.

Sithe Global, a New York-based company, earlier announced plans for a similar coal-fired power plant near Mesquite for far less than half the price of Ely Energy Center.

Sithe said it would build the Mesquite plant for $1.1 billion to $1.2 billion, at least 20 percent less costly on a megawatt for megawatt basis than the utility project estimate. Sithe proposed to tie into existing transmission lines to carry electricity to Las Vegas, holding down its costs.

And LS Power Associates was pursuing a coal-fired power project similar to the utilities' proposal.

LS Power has a head start on the Nevada utilities in obtaining needed water, right of way and environmental approvals, Crawford said.

LS Power has been working with the White Pine County Commission to develop a 1,600-megawatt, coal-fired plant near the site that the utilities picked for their project.

LS Power intended to rely on local government to renovate an old railway line that could be used to carry coal to Ely from the Powder River Basin of Wyoming and Montana. Nevada Power and Sierra Pacific Power plan to use the same railway and also buy coal in the Powder River Basin.

LS Power also proposed to build a 250-mile transmission line to deliver power from its White Pine Energy Station to Nevada Power and Sierra Pacific Power.

While the Nevada utilities could obtain rights of way from the federal government for a similar transmission line, LS Power has an exclusive option to buy previously designated rights of way from Idaho Power for its transmission line, Crawford said.

LS Power has an exclusive agreement with White Pine to lease water rights needed for its power plant, Crawford said. He expects the Bureau of Land Management to release an environmental impact statement for the LS Power plant site later this year. And LS Power filed an application with the Nevada Department of Environmental Protection for an air permit needed for the power plant in December after compiling almost a year of data.

Crawford declined to estimate how long it might take Nevada Power and Sierra to complete similar environmental, right-of-way and water rights processes. He wouldn't say whether his company might sell the right of way option, water rights and environment review to the Nevada utilities.

"Our company does have a track record on projects where we have partnered with other power users," he said.

LS Power and Sithe both say they will continue to develop their plants.

The project could also benefit financially struggling White Pine County, where Ely is.

County Commission Chairman John Chachas last week said he'd welcome the jobs, tax revenues and economic development that would accompany the project.

White Pine County officials last year declared a severe financial emergency and havediscussed filing for Chapter 9 bankruptcy protection.

The county's economy has recovered some since Quadra Mining Ltd. of Vancouver, British Columbia, reopened the Robinson mine near Ely in April 2004.

However, many business storefronts remain shuttered in Ely.