Reid applauds NV Energy for shelving Ely coal plant

NV Energy on Monday announced that it is postponing development of a $5 billion coal-fired power plant at Ely until technology for capturing and storing carbon dioxide pollution becomes commercially feasible, probably for 10 years or more.

The decision ends a three-year battle with Senate Majority Leader Harry Reid and environmental groups, which complained the coal plant would throw off massive quantities of carbon dioxide leading to global warming.

Reid, D-Nev., and environmental groups welcomed the announcement.

"I applaud NV Energy's decision to speed up the development of an important transmission line and to postpone construction of its Ely Energy Center coal plant," Reid said in a statement.

"We've got the federal government, the state and the largest utility planning all in the same line, which is good for consistent economic development for the state," said Tim Hay, a consultant to the National Resource Defense Council and former state consumer advocate.

"I want to congratulate NV Energy for this decision that is good for the environment, good for ratepayers and good for the state economy," said Charles Benjamin of Nevadans for Clean Affordable Reliable Energy.

Amy Atwood, senior attorney for the Center for Biological Diversity, said in an e-mail that NV Energy seems to recognize that coal power is outdated and new sources of energy are needed. "NV Energy's announcement seems to reflect that this is now as stark a business reality as a scientific one."

Daniel Burns, a spokesman for Gov. Jim Gibbons, didn't return calls for comment.

The decision was not as welcome in White Pine County, where the plant would be built.

"Of course, we're very disappointed that they are postponing it," said Karen Rajala, White Pine County coordinator of community and economic development.

The area's economy is based on operations at the Robinson Copper Mine seven miles west of Ely, and the mine has been reducing jobs as the price of copper declined, she said.

The Ely center was expected to create 1,600 jobs during construction with 200 permanent jobs when the power plant was finished, she said. She took some consolation that the electric company is continuing to seek approval for use of federal land and for an air permit for the plant.

The decision to shelve the project will not affect rates for electric power users short-term, because none of the development costs were included in the pending general rate case, said Chief Executive Officer Michael Yackira.

Long-term, the company decided that delaying the 1,500-megawatt Ely Energy Center is the best way to hold down electric utility rates, he said.

The Public Utilities Commission authorized NV Energy to spend up to $135 million developing the Ely center so far, but Yackira declined to say how much the company has spent. NV Energy has not decided whether it will ask the commission to raise its rates later to compensate it for past expenses on the project, he said.

The utility company said it postponed the project because construction costs are escalating and the costs of complying with expected federal carbon emission regulations remain unknown, Yackira said.

The utility company in 2006 estimated the project, including a transmission line, would cost $3.8 billion, although its estimated cost has since increased to $5 billion.

The company also wants to protect the environment, Yackira said. Scientists say that carbon dioxide leads to global warming, and coal-fired plants throw off twice the amount of carbon dioxide per unit of power that is emitted by plants burning natural gas.

The CEO expects climate change legislation to reach the Senate floor as soon as Memorial Day. Electric utilities increasingly are backing away from coal projects because of uncertainty over the cost of complying with climate change legislation.

Arizona Public Service filed a comprehensive resource plan on Jan. 30 that rejected building new coal-fired power plants.

Instead of developing the Ely coal plant, NV Energy will invest in renewable power projects, energy efficiency programs and power plants that burn natural gas, Yackira said.

Continuing to rely on natural gas means that the customers will see their rates jump and fall when gas prices change, he said. The price of natural gas was running $13 per 1,000 cubic feet in early July but fell to $4.85 early this month, according to WTRG Economics.

"Natural gas even with its volatility costs less than building a coal plant," Yackira said.

LS Power and Sithe Global Power, two independent power producers, continue to pursue plans for coal-fired power plants in Nevada, but Yackira predicted they wouldn't be able to build a coal plant any faster than NV Energy.

NV Energy said it will continue developing a 250-mile transmission line planned as part of the project for an undisclosed cost. It expects to complete the line by 2012.

The power line could give Southern Nevada access to geothermal power in Northern Nevada and enable the company's utilities in Las Vegas and Reno to share power plants, Yackira said.

"Their decision on the coal plant seems to make good sense given the current environment," said state consumer advocate Eric Witkoski. "But it still remains open for study whether this transmission line is the best way to link the two utilities."

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.