The winner of a long-term energy contract from Delmarva Power could have a significant effect on Sussex County’s economy, environment and health. An in-depth look at each of the proposals concludes this week with Conectiv’s combined-cycle proposal.

Delmarva Power last week recommended rejecting all three proposals it received as it was required to seek in-state suppliers for as much as 400 megawatts of power.

But that’s not the end of the story. The final say on the project rests with the state, not Delmarva Power.

According to a consulting team hired by the state, a proposed natural gas plant by Conectiv Energy is the best among three bids to provide homegrown power to meet the state’s long-term energy needs, using criteria that weight price and stability above environmental impact.

In rejecting the plan, Delmarva Power recommended using conservation and purchasing supplemental supplies. It estimated that NRG’s proposal of a “clean-coal” plant would cost residential and small business customers up to $5.2 billion more by 2038 than the cost of buying extra needed electricity from the power grid. Bluewater’s plan of a wind farm, by the same date, would add up to $2.2 billion in expenses compared with buying electricity.

It estimates Conectiv’s plan would cost $100 million. “The Conectiv bid had the most favorable economics and is the most ‘likely to succeed’ in terms of project viability,” the state consultants wrote in their report.

So what’s the plan?

Conectiv’s proposed combined-cycle plant would keep energy prices stable despite volatility in the natural gas market, a spokesman for the company said.

“We’re looking at long-term contracts,” said Bill Yingling, a spokesman for Conectiv. “It’s those long-term strategies that help minimize for the consumer the volatility in the market. It takes out the peaks and valleys when prices spike.”

Conectiv is proposing a 180-megawatt combined-cycle plant, which would be fueled by natural gas. It also could use a light distillate fuel as a back up, Yingling said.

That’s the company’s base offer to Delmarva Power. It is also proposing an alternate offer for 360 MW, wherein the company would buy additional power on the open market.

Conectiv’s proposed combined cycle plant is similar to NRG’s proposed plant, except that Conectiv would start with a gas instead of gasifying coal. The combustion turbine, fueled by natural gas, “is like a large jet engine, and it drives an electricity generator,” Yingling said. The hot exhaust gas that comes out of the turbine is captured in a steam generator. The steam is used to drive a second electricity generator.

“They burn less fuel, they burn cleaner fuel, and as a result they produce cleaner energy than traditional fossil fuels,” Yingling said.

But while many on the Lower Shore have been discussing NRG and Bluewater Wind’s proposals, Conectiv is not without controversy. Many Bluewater Wind supporters say the combined cycle plant, like NRG’s “clean coal” plant, would emit pollutants and carbon dioxide.

Conectiv has also been criticized by environmental groups recently as it seeks to renew its permit to take water out of the Delaware River. The Delaware Riverkeeper Network claims the water intake kills millions of fish and causes millions of dollars in financial losses each year.

The plant would be located at Conectiv’s existing Hay Road site, where the natural gas pipelines, transmission lines and other infrastructure already exist. The site is a brown field industrial site.

“There would be minimal impact on the community and the environment,” Yingling said.

Under the proposal, Delmarva Power would decide when to run the plant. “They’ll have power when they need it,” Yingling said. “(The turbines) start up quickly, and they can be shut down very quickly as well.”

Other plants, like coal and nuclear plants, can take a long time to start up, and as a result they tend to run around the clock, Yingling said.

The combined-cycle plant would produce 180 MW of electricity, and that is the base offer Conectiv has proposed. The alternate offer includes an additional 180 MW of electricity that Conectiv would buy on the energy market.

Conectiv is not worried about the volatility of natural gas and other fuels.

“Natural gas, like all fuels, has been volatile,” Yingling said. “But we can offer stable pricing because of the market expertise that we have.”

“Our team is experienced in fuel purchasing, plant operations and open market activity,” he continued. “And as a result, because we have experience in forecasting and fuel hedging, we can bring more stability to the process.”

Conectiv ensures price stability by securing long-term contracts, storing fuel and hedging, which involves using futures and options to lock in long-term processes, Yingling said.

“We use a portfolio approach to buying fuels and fueling our plants,” he said. “And what that does is it minimizes the impact of the shifts in the price.”

Environment

Plants run on natural gas tend to be cleaner than other fossil-fuel based energy. And Conectiv’s plant would take additional steps to reduce pollution, Yingling said. The plan for the plant includes a unique burner design and a process called selective catalytic reduction.

“It’s one of the more advanced technologies today for emissions control, and our plants are equipped with that,” he said. “It reduces the amount of nitrogen oxide, which is a precursor to smog.

“But because it is a cleaner burning fuel, there would indeed be less production of carbon dioxide.”

With recent reports on the dangers of global warming, the idea of limiting or taxing carbon dioxide emissions is gaining popularity. While NRG has stated that a carbon tax would be passed to consumers, Conectiv said such information is confidential.

“The specific elements of our pricing proposal represent competitive information, and as a result they’re confidential,” Yingling said.

But lower carbon dioxide emissions is not the only environmentally friendly aspect of the proposal, he said. The plant would not produce any solid waste, and it would produce “minimal emissions” of sulfur oxides, Yingling said. Sulfur oxides would only be produced when the plant was running on its back-up fuel of oil.

But many environmental groups have already put their weight behind Bluewater Wind’s wind plant proposal.

Citizens for Clean Power back offshore wind based largely on the health and environmental costs associated with each of the three bids. In a letter to the Public Service Commission, John Austin, a retired Environmental Protection Agency employee and a member of Citizens for Clean Power, analyzed the “hidden” health and environmental costs associated with each bid. According to that letter, Conectiv’s combined cycle proposal costs 1.31 cents per kilowatt hour, NRG’s “clean coal” facility costs 3.2 to 3.9 cents per kilowatt hour and Bluewater Wind’s off-shore wind facility costs .16 cents per kilowatt hour.

Prior problems

Conectiv has been criticized for years over its water intake systems. The company’s Edge Moor plant uses an once-through water cooling system. The plant takes water from the Delaware River, cools the equipment and discharges the water back into the river.

But Edge Moor’s equipment is older and causes the death of millions of fish each year, said the Delaware Riverkeeper Network.

“These facilities have been getting away with murder, literally, for decades,” said Maya van Rossum, of Delaware Riverkeeper. Conectiv is in the process of renewing its permit with the EPA, and the Riverkeeper Network is encouraging Conectiv to put in a state-of-the-art closed cooling technology that would minimize fish kills by 95 to 99 percent, van Rossum said.

Conectiv’s proposed plant would be equipped with a cooling tower to recycle water. In fact, the water that would be used for cooling the proposed plant would come from the Edge Moor plant.

“This (proposed) plant would take water that’s already been used, and would recycle that water and use that water, so you’re not taking any additional water out of the river,” Yingling said.
Delmarva Power connection

Conectiv and Delmarva Power are both subsidiaries of the same company — Pepco Holdings, Inc. Delmarva Power is a delivery company, while Conectiv is an energy company.

Both Conectiv and Delmarva Power, during interviews in December 2006, said the connection is not a conflict of interest in the bidding process.

“We are affiliates, but we are separate companies,” Yingling said. “We operate separately under rules” established by the federal government, he said.

Merrie Street, a spokeswoman for Delmarva Power, said the Conectiv connection won’t affect the process of choosing the winning bid.

“It doesn’t matter who makes the proposals,” Street said. “They are going to be evaluated on a specific process that has been adopted by the Public Service Commission.”