Potomac Electric Power Co., which is seeking approval to build its first major new power plant in 17 years, has two more big generating facilities on the drawing board that could cost $1 billion each.
Pepco's long-range plans call for building not one but two $1 billion power plants at Dickerson, Md., according to documents the utility has turned over to regulators in Maryland and the District.
In addition, a third facility will need to be built elsewhere before the end of the century, Pepco disclosed in response to requests from the D.C. Office of Peoples Counsel. Peoples Counsel lawyers estimate that the third plant -- though smaller than those planned at Dickerson -- could also cost $1 billion.
Peoples Counsel is challenging Pepco's proposal to build a 375-megawatt power plant at Dickerson, arguing that it would be cheaper to pay consumers to conserve energy than to build more plants.
The utility's 610,000 customers in Maryland and the District could see their electric rates double starting in the 1990s to pay for the new plants, said Michael Beasley, a private attorney who has worked on behalf of Peoples Counsel for the last 10 years. Customers would begin paying for the plants in 1994, and the plants would be fully operational by 2001.
Pepco and other utilities finance new plants by issuing bonds, then paying off the bonds with the money they collect from their customers' monthly bills over many years.
Pepco has told the utility regulators that the three new plants will be needed by 2001 to meet rising local demand for electricity.
Demand for Pepco's power has shot up in recent years. On July 21, Pepco hit a new peak of 5,153 megawatts, 9.6 percent greater than its previous record. Pepco had expected peak-period demand for electricity to grow at about a 2 percent annual rate, but in the last three years demand has grown 4 to 5 percent a year. In 1986 the pace remained constant, but demand shot up this year at triple the utility's expectations.
Maryland regulators say new capacity is critical to the mid-Atlantic area. Last Monday, heavy use of electricity caused by the heat prompted 11 mid-Atlantic utilities, including Pepco, to reduce voltage 5 percent from 1:26 p.m. to 6:02 p.m. Such partial "brownouts" could become common if new capacity is not added by the turn of the century, say Maryland regulators.
"If no new plants are produced and no new transmission lines are built to bring in more power, and growth continues like it is, there will be brownouts" in the relatively near future, said James Teitt, the project manager overseeing Pepco's Dickerson plans at the Maryland Power Plant Research Program, a division of the Maryland Department of Natural Resources that makes recommendations on plant licensing to the PSC.
Pepco has never mentioned in its annual reports to shareholders the need for doubling the proposed addition to Dickerson or adding the third plant. However, the two additional plants are included in long-range plans that Pepco has given regulators as part of its applications to build the first new plant at Dickerson, along the Potomac River in upper Montgomery County. Pepco already has three coal-burning plants at Dickerson.
The D.C. Public Service Commission does not authorize Pepco to build new plants, but can refuse to let the company charge District customers for new plants if it decides they are not needed or are too costly.
The utility first indicated to Maryland regulators at the beginning of 1986 that it would need to build more than just one 375-megawatt plant at Dickerson by the turn of the century. Firming up plans this spring, Pepco asked Maryland regulators to approve the Dickerson site for 750 megawatts of new generating capacity. Pepco owns 1,000 acres at Dickerson but needs a state license for each additional plant it wants to build on the site.
"The licensing is what drove us. We said, 'By God if we think we're going to need this, let's do it,'" said John M. Derrick Jr., vice president of customer service at Pepco. "What drives this whole thing is the need to add generation at some point."
Licensing a new power plant can take up to five years and requires state certificates of convenience and necessity, as well as environmental clearances. Construction of the first Dickerson plant would begin in 1992, with part of it operational in 1994.
The company would install the two new plants at Dickerson in stages. Two combustion turbines that burn oil or natural gas would be installed first, then a heat-recovery unit would be added that would produce steam to run a steam generator. The procedure would be duplicated to add another 375 megawatts of capacity. If oil and gas prices shoot up, the utility could add two coal gasifiers that use new "clean-burning" technology.
Derrick said the advantage of Pepco's plans is that the utility can add capacity in increments of 125 megawatts to accurately match growth in demand and can stop construction if growth slackens. "Flexibility is the key in our generation policy," said Derrick.
Pepco could also eliminate the need for the third plant -- a 250-megawatt facility -- in its long-range plan if electrical consumption can be reduced through additional energy-use management programs or by buying the power from independent producers or other utilities, he said.
Pepco's projections for meeting future power needs also include refurbishing old plants and eliminating the anticipated need for 440 megawatts of new capacity by the mid-1990s through a variety of consumer programs, including rates that penalize customers when they use electricity at times of heaviest demand. But the utility says it will still need new capacity to meet rapidly growing demand for electricity in the Washington area even if conservation avoids the need for some new plants.
Pepco's plans for energy-use management programs are "a little bit optimistic," said Maryland regulator Teitt. Whether conservation programs will reduce the need for new plants over the long range is uncertain, and power purchased from other systems carries transmission risks.
"Delmarva Power & Light lost a large transmission line across the Delaware River because some captain fell asleep at the wheel and his boat crashed into the line," said Teitt. "If something like that happened on the Allegheny Power System feed, then Pepco would be without 400 megawatts" of capacity it has contracted to buy from Ohio Edison, he said.
Consumer advocates who represent District ratepayers say they agree that new generating capacity will be needed, but they claim Pepco has not thoroughly evaluated all options. The Office of Peoples Counsel has submitted to the District Public Service Commission a set of energy conservation proposals, including a controversial idea that Pepco pay customers rebates to install a wide range of energy-efficient equipment.
"We don't believe that adequate analysis and review of Pepco's planning process has occurred," said Beasley. "Specifically, whether the plants are the right type for the future, and the impact of measures that can be implemented at the consumer's side of the meter if vigorously pursued by the company."
Howard Geller, a consultant working for Peoples Counsel, estimates that the need for one of the two new plants at Dickerson could be eliminated by 1995 for about $200 million -- no more than 20 percent of the cost of a 375-megawatt plant -- if the utility introduces incentives to reduce electrical consumption in commercial buildings.
Pepco is considering new energy conservation programs, such as offering rebates on residential central air conditioners and commercial thermal storage units, but has discounted many Peoples Counsel proposals. Consumer advocates disagree with Pepco's calculations because Pepco counts any loss of revenue as an expense to the company.
Beasley said the utility's planning process is "seriously flawed" because it concentrates on adding new capacity without taking into account consumer consumption patterns.
"Pepco appears to be making these decisions without adequate consideration of the impact on ratepayers," said Beasley. "It just highlights the need for the urgency of refinement of the planning process."
The D.C. Public Service Commission and Peoples Counsel are currently examining Pepco's plans and whether extensive energy conservation programs can offset or defer the need for some new capacity.
"What we want to avoid is a fait accompli occurring again like the Chalk Point or Ohio Edison phenomenon, where the plant is completed and the money invested and you can't do anything about it," Beasley said.
In 1981, Pepco brought on a peak-demand generating unit at Chalk Point that burns expensive residual fuel oil after abandoning construction plans for a coal unit at Dickerson that would have served customers round the clock. Oil has proven so expensive that the utility has used the plant only one-tenth of the time during periods of heaviest demand, said Beasley.
Because it elected not to build coal-burning facilities at Dickerson, the company recently agreed to buy up to 450 megawatts of excess capacity from Ohio Edison to meet demand, he said. Beasley said that the purchase could end up costing customers another $3 billion through the year 2005 -- the length of the contract -- but that it is now necessary to fill "an energy gap."
Pepco officials say the Ohio Edison purchase is still far cheaper than building a plant. They say they have tried hard not to overbuild, at the insistence of consumer advocates that now criticize them. In the 1970s, the utility cancelled plans for $2 billion worth of generating facilities, including a nuclear plant.
"I challenge the Office of the Peoples Counsel," said Pepco spokeswoman Nancy Moses. "Their mantra was Pepco was overbuilt -- you can't have it both ways, folks."