PacifiCorp bidding slapped

The outcome of an open bid process by PacifiCorp to build a new power plant in Utah is under attack by some who say it was confusing and unfair and could end up costing the state's ratepayers millions of dollars in excess costs.

Last week a utility expert described PacifiCorp's selection process as "seriously flawed" and charged that the Portland-based utility — which operates as Utah Power in Utah — was choosing its own "best interests over the best interests of its customers."

The controversy stems from PacifiCorp choosing itself last November to build a 525-megawatt, natural gas-fired power plant near Mona, Juab County. Under PacifiCorp's proposal, the plant's capital cost is about $343 million.

The power plant still needs regulatory approval from the Utah Public Service Commission. Hearings on the matter begin next week.

PacifiCorp maintains that its self-build option was $320 million less expensive (over the life of the plant) than the next-best cost alternative bid it received.

However, Lincoln Wolverton, an expert in electric-energy economics on behalf of the Utah Association of Energy Users, said in a filing to the Public Service Commission last week that PacifiCorp made several key errors in its comparison of bids.

"My overriding conclusion is that PacifiCorp has not demonstrated that the manner in which it compared bids to its Currant Creek project was fair or reasonable," Wolverton said. "This is hardly surprising, however. It is simply contrary to human nature to expect PacifiCorp simultaneously to be a fierce competitor in its (bid) process and a fair and impartial judge."

Wolverton said those inconsistencies include:

• An inappropriate cost-analysis comparison.

• Improper comparisons of so-called "peaking bids" against "base-load" and peaking operations.

• Unreliable long-term market-price projections.

"We reached basically the same conclusion that the industrial users' expert reached," said Steve Mecham, an attorney representing Spring Canyon Energy LLC, one of the bidders. "What you have is a situation where somebody can come in and offer a lower price to build the plant, and yet the way that it's analyzed it winds up costing more over the life of the plant."

Mecham, a former member of the Utah Public Service Commission for more than 12 years, said PacifiCorp's incentive in choosing itself to build the plant is that it gives the utility a return on the investment to shareholders.