diversification: big word, big results for San Antonio

Jim Pruske, City Public Service of San Antonio

“Diversification” is a big word that wasn’t in the City Public Service (CPS) vocabulary before the 1970s.

CPS, the nation’s largest municipally-owned energy company providing both natural gas and electric service, relied on plentiful, cheap natural gas to generate electricity and keep customers’ bills low.

But, the 1973 Arab oil embargo drastically changed the way CPS produced power to satisfy a growing greater San Antonio and pushed fuels diversification into the forefront. Now, more than three decades later, diversification continues to be a key to the utility’s success and an important part of the CPS strategic energy plan.

When the price of natural gas began to skyrocket in the early 1970s, CPS retrofitted gas-fired units to burn varying grades of fuel oil and built an extensive oil storage complex. Then, in rapid succession, CPS changed the design of a proposed gas-fired generating station to coal, purchased railcars to transport low-sulfur coal from Wyoming to San Antonio and added coal-handling infrastructure at the Calaveras Lake plant site southeast of San Antonio, including a railcar maintenance shop. In 1977, the first of two, 405 MW units of the coal-fired J. T. Deely Power Plant went on-line, and the second followed in 1978.

Meanwhile, to further diversify fuel sources, CPS signed on as a 28 percent participant in the South Texas Project (STP) nuclear power plant, twin 1,250 MW units near Bay City. STP encountered frustrating construction and regulatory problems from the start, but CPS and its partner utilities serving Houston, Corpus Christi and Austin weathered many storms and saw the project’s two units go into commercial operation in 1988 and 1989. More than 600,000 CPS electric customers continue to benefit from STP because nuclear is our cheapest fuel source.

Those were tough times, trying to convince elected officials and customers that huge capital investments for coal and nuclear plants would help stabilize customer electric bills, but after numerous bond issues and base rate increases, customers did indeed see their bills taper off because of lower fuel costs.

Since then, San Antonio-the nation’s ninth largest city-has seen steady to vigorous growth, and to keep pace with demand, CPS added the 585 MW, coal-fired J. K. Spruce Power Plant in 1992; the 481 MW, gas-fired, combined-cycle Arthur von Rosenberg Power Plant in 2000; and four gas-fired, simple-cycle combustion turbines for peaking power in 2004.

Two years ago, CPS became a state leader in renewable energy through acquisition of the entire output of the Desert Sky Wind Farm near Iraan in West Texas. Desert Sky’s 160 MW, equal to approximately four percent of our peak demand, enables CPS to offer customers clean wind energy through the Windtricity program.

At present, our diversified fuels mix looks like this: nuclear, 700 MW; coal, 1,425 MW; natural gas/fuel oil, 2,831 MW; and wind, 160 MW. But, this makeup is about to change.

In June 2003, the CPS board of trustees approved the CPS strategic energy plan that again underscores the importance of fuels diversification. The plan also calls for greater emphasis on conservation, more renewable energy, installation of small, natural-gas-fired peaking units to meet summer demand and construction of an additional coal-fired power plant by 2010.

This past May, the board exercised the utility’s right of first refusal to obtain a minimum 12 percent additional share of the STP, or approximately 300 MW. That would boost our 28 percent ownership of the nuclear plant from 700 MW to 1,000 MW, or 40 percent. This occurred after American Electric Power’s Texas Central Co. (formerly Central Power & Light) received a $333 million offer from a Canadian firm to purchase Texas Central’s 25.2 percent stake in the STP. The other STP owners had the option to match the terms of the proposed sale, and both CPS and Texas Genco have decided to add to their shares of the project.

Diversification, a word rarely heard before 1970, is now very much a part of our vocabulary, but even more important, it’s the foundation for greater San Antonio’s energy future and a proven strategy to ensure reliable service at reasonable cost for CPS customers.

Pruske is vice president, asset management for energy supply at CPS.

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