Tuesday, July 10, 2007

Chesapeake to Court: Stop Plant Hearings

An attorney for Chesapeake Energy Corp. said Tuesday the Oklahoma Corporation Commission is using judicial powers it does not have to hold hearings on a proposed coal-fired power plant the natural gas producer opposes.

Chesapeake, the third largest independent gas producer in the U.S., took its case to a state Supreme Court referee in an attempt to stop hearings that began on Monday before the commission on whether the proposed 950-megawatt, $1.8 billion generating unit is needed.

Oklahoma City-based Chesapeake has questioned plans to build coal-fired generating facilities in Oklahoma and Texas. Natural gas competes with coal as a fuel for power plants.

Chesapeake attorney Robert A. Nance told referee Daniel Karim the commission does not have legal authority to pre-approve power plants and that the hearings are an "unauthorized use of judicial power."

"The Corporation Commission is a tribunal of limited jurisdiction," Nance said. "They're exercising judicial force without authority."

Attorneys for the state and a coalition of power producers that proposed the plant said it is a legislative - not judicial - function of the commission to hold hearings on the need for the proposed plant and other public utility projects.

A determination that the plant is needed will allow power producers to recover construction costs as the plant is built by adding them to customer rate bases. Utility officials have said the proposed plant's high cost will prevent them from building it unless it is preapproved by the commission.

"We'd like to know what the rules are ahead of time," said David A. Kutik, an attorney for Oklahoma Gas & Electric Company, which proposed the Red Rock generating unit with Public Service Company of Oklahoma and the Oklahoma Municipal Power Authority.

The proposed plant will be built in Noble County about 80 miles north of Oklahoma City. PSO will own 50 percent, OG&E will operate the facility and own 42 percent and the Oklahoma Municipal Power Authority, which provides electric power to about 20 communities in the state, will own 8 percent.

Red Rock would be located next to OG&E's Sooner Power Plant facilities.

Assistant Attorney General Bill Humes said recent changes in state law authorized the commission to review utility projects in advance rather than in hindsight. The commission can bar utilities from recovering construction costs of plants already built if it finds the costs were not reasonable.

Utility officials have said the proposed Red Rock plant will help the utilities keep up with growing consumer demand for electricity and keep costs down by using low-cost coal as a fuel instead of natural gas. Coal costs 85 percent less than natural gas, which has increased in price 117 percent over the last five years.

PSO's generating plants are primarily fueled by natural gas but the company also uses wind power and other fuels. If the company had relied solely on natural gas as a fuel over the last five years, its customers would have paid $1.7 billion more in fuel costs, according to company officials.

Opponents, including environmental groups, say natural gas burns much cleaner than coal and causes fewer environmental problems.

Karim said he will make a recommendation to the Supreme Court in about a week.
Source: www.forbes.com
By TIM TALLEY 07.10.07, 6:06 PM ET


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