Last year's Valley power shortage is this year's glut

Max Jarman

The Arizona Republic

May 16, 2002 17:40:00

A year ago, local electric utilities scrambled to get enough megawatts to make it through the summer without California-style rolling blackouts.

This year, they are scrambling to reduce costs in response to a glut of power and tumbling wholesale electricity prices.

At Arizona Public Service Co., last year's conservation mantra, "Enough to use, not enough to waste," has been replaced by a companywide cost cutting initiative and the possibility of layoffs.

APS parent company, Pinnacle West Capital Corp., saw first-quarter net income slide almost 10 percent as a result of the depressed wholesale prices, a trend company Chairman Bill Post sees continuing.

"Our corporation is facing an energy market that is overbuilt," APS said in a recent memo to employees.

For its third quarter ended Jan. 31, Salt River Project had an operating loss of $69.75 million, due largely to a $215 million, or 33 percent, drop in revenue for the period.

Still, Arizona's three largest utilities, APS, SRP and Tucson Electric Power, expect to coast through the hottest days of summer with power to spare. However, they acknowledge that a string of extraordinarily hot days and unexpected or emergency plant outages could still prompt the need for conservation, or even planned outages.

Transmission also is an issue. APS and SRP have made significant improvements to the high-voltage transmission lines that encircle the Valley, but the ability to import electricity from outside the Valley remains constrained.

And the threat of wildfire-related outages remains high because of Arizona's prolonged drought. In 2000, a wildfire in New Mexico produced rolling blackouts in the Tucson area.

The dramatic turnaround in the market is the result of a half dozen new power plants coming on line in Arizona during the past year and the stabilization of volatile energy markets in California.

The new generation added to the state's capacity to handle peak demand, or load. Even more new power is expected to come on line next summer with the completion of another half dozen new plants.

"The generation issues we faced last summer are definitely behind us now," said Dave McGhan, a section leader in APS's customer account management section.

During the past year, APS, SRP and TEP collectively increased their generating capacity by more than 3 percent.

"The situation has vastly improved," said John Coggins, SRP's manager of supply and trading.

Reach the reporter at or (602) 444-7351.