Columbia Electric Corp. said yesterday that it plans to build a natural gas-fired power plant on 70 acres in Charles County to take advantage of both the deregulation of the electric industry and increased consumer demand for energy.
The plant is to produce about 550 megawatts of energy, the company said, enough to service about 550,000 homes.
Columbia Electric -- a subsidiary of Herndon, Va.-based Columbia Energy Group -- would not disclose the cost of building the plant, but said similar facilities cost about $300 million.
Pending approval from state and local agencies, including the Maryland Public Service Commission, construction of what is being called the Kelson Ridge Project is set to begin in 2001 and would last two years, the company said.
The plant will sell power on the wholesale level through existing utilities and marketers, not directly to users on the retail level, the company said.
"The proposed Charles County power plant would meet many of the region's energy and economic needs," Michael Gluckman, Columbia Electric's president and chief executive, said in a written statement.
"The project also fits in well with Columbia Electric's growth strategy and is positioned nicely to benefit from Columbia Energy Group assets," he said.
Columbia Energy -- which rejected a $6.1 billion buyout offer on Sunday from NiSource Inc., owner of Indiana's largest utility -- owns an interstate gas pipeline system and a liquefied natural gas (LNG) terminal. The company sells gas in five states, including Maryland.
As of yesterday, Columbia Electric had not submitted an application to the PSC for approval of the proposed plant, commission officials said.
The application process will include commission hearings to determine if the power plant "is in the public interest," said Joseph Walter, the PSC's chief engineer.
There are about 22 power plants in Maryland, he said. Nine are owned by the Baltimore Gas and Electric Co., which serves 1.1 million customers in the region.
The need for the new plant became evident during the summer, when the heat wave drove peak energy demand in a region from Virginia to New Jersey to 51,000 megawatts, Gluckman said.
With the region's total capacity at 58,000 megawatts, the area's reserve margin was at its lowest ever, he said. "That causes concern about [electric] reliability, and that is an indication of the need for new capacity in the region," said Gluckman.
Columbia Electric owns two operating power plants in New Jersey, and one in Maine. A plant is being built in Texas, and plants are under development in Pennsylvania and New York.
The company's portfolio totals about 3,500 megawatts, with plans to grow by 500 to 1,000 megawatts a year, Gluckman said.
Columbia Electric's strategy makes sense, said Jay Yannello, an analyst with PaineWebber in New York.
"Regions of the country remain short [of power] in the peak months," he said. "That was clearly evident with the rolling blackouts and brownouts this summer.
"It makes a great deal of sense for a company that has access to natural gas supplies to seek opportunities to convert those gas supplies into power, and take advantage of the market opportunity," Yannello said.
Deregulation has also spurred more power plant construction, said M. Carol Coale, an analyst with Prudential Securities in Houston.
"It's a necessity as electric utilities are forced to sell off generation assets for competitive reasons," she said. "That gives their competitors the opportunity to buy plants or build new ones."
Gluckman said while energy consumption has grown in the last decade, there's been very little power plant construction until last year.
"But it takes a number of years for plants to be licensed and built," Gluckman said. "There are a lot of plans, but not a whole lot are being built."