Nevada's investor-owned electric utilities are proceeding with steps to develop a $3.7 billion coal-fired power plant near Ely and a related transmission line following state regulatory approval last week for the first $300 million in development expenses.

Nevada Power Co. and Sierra Pacific Power Co. plan to apply for an air permit with the Nevada Division of Environmental Protection today, said David Sims, development director for the two subsidiaries of Sierra Pacific Resources.

The utilities already have applied for water permits and applied to buy federal land for the plant site and transmission line. They signed an agreement with LS Power and Ely to upgrade the historic Northern Nevada Railway, which will be used to deliver coal to the plant.

The Ely Energy Center will be the state's largest power plant with a generating capacity of 1,500 megawatts when the second of its two units is completed in 2013. The plant will generate enough energy to power 900,000 homes. Utility company executives say they need the plant to keep up with explosive population growth, particularly in Southern Nevada.

"We have a growing demand, and, absent any additional construction, we have a growing deficit (in company owned generation)," said Roberto Denis, senior vice president at Sierra Pacific Resources, the parent for Nevada Power and Sierra Pacific Power.

Analysts who participated in hearings before the Public Utilities Commission agreed that more power generation capacity is needed because of a looming shortfall in electricity in 2010, he said. The first 750-megawatt unit at Ely is slated to start operations by December 2011.

The utilities want to limit their exposure to skyrocketing wholesale power prices like those encountered during the Western energy crisis of 2000 and 2001, Denis said.

Some environmentalists object to coal-fired power plants, even more than natural gas-fired power plants.

"We're very concerned about the impact a coal plant will have on Nevada's air, land and water," said John Nielsen, energy project director at Western Resource Advocates, one of the groups that participated in hearings before the utilities commission.

The two units at the Ely plant will use 5 billion gallons of water yearly for cooling, and it will release thousands of pounds of air pollutants and 10 million tons of carbon dioxide, which leads to global warming, Nielsen said.

The company says there are few alternatives to burning coal and claims it will use the best technology for cutting air pollution.

Nielsen said the utilities did not fully investigate the possibility of developing more wind, solar and geothermal power. Also, Nevada could meet some of its power needs by using efficient gas-fired power plants at hotel-casinos, and by efficiently using excess heat from power generation for heating water and running air conditioning systems, Nielsen said.

The utility company does not have the resources to develop a nuclear power plant even if nuclear power were not politically undesirable to many in Nevada, he said.

Building another natural-gas fired power plant would increase the state's reliance on gas, an often pricey fuel. Coal-fired plants diversify the portfolio of fuel used to make electricity, Denis said.

Building an integrated gasification combined-cycle plant would convert the coal to gas, but it would not reduce pollution significantly, Denis said. To do that would require capturing the carbon in carbon dioxide, rather than releasing it into the atmosphere. It might be easier to capture carbon from an integrated gasification plant, Denis said.