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SoCal Edison Cuts Arizona From Transmission Plans

May 15, 2008 - Cassandra Sweet - Wall Street Journal (wsj.com)

SAN FRANCISCO (Dow Jones) - Edison International (EIX) unit Southern California Edison said Friday it's scrapping plans to build a high-voltage transmission line to Arizona, while keeping plans to build a new line in California.

SoCal Edison, of Rosemead, Calif., pursued the Arizona transmission line, called Devers-Palo Verde 2, for several years as a way to bring more low-cost electricity into southern California. But things have changed over the years, making the $1.7 billion, 270-mile line less attractive, the company said.

Instead, Edison plans to build a $723 million 500-kilovolt line that would stretch 170 miles between the sun-scorched desert near Blythe, Calif., near the Arizona state line, to Riverside County, southeast of Los Angeles.

"A lot has changed," Pedro Pizzaro, SoCal Edison's executive vice president of power operations, said in an interview.

Several thousand megawatts of renewable and natural gas-fired power generation is under development in California. That wasn't the case in 2005, when Edison proposed building the Arizona line. And wholesale power prices in Arizona have risen closer to California levels over the years, making power from that region less of a bargain, Pizzaro said.

In addition, the economic slowdown and advances in energy efficiency have cut electricity demand growth in California, making large volumes of new supply less urgent, he said.

After completing an up-to-date economic analysis of the Arizona project, Edison concluded that the original economic benefits had evaporated, Pizzaro said.

"The costs to California customers of building and paying for this line to Arizona are greater than the benefits would be," he said.

With cheap out-of-state power growing more elusive and faced with increasingly stringent renewable energy requirements, Edison and other California utilities are focused on buying renewable and natural gas-fired generation closer to home. State law requires California utilities to use renewables for a fifth of their retail power by 2013, with the requirement seen expanding to one-third renewables by 2020, under pending legislation and the state's climate change law.

The aggressive requirements have created something of a renewable energy Gold Rush, attracting developers of various types of wind, solar and geothermal projects, among other technologies.

Pizzaro wouldn't name any specific generation facilities that would interconnect with Edison's 500-kV California line, citing confidentiality.

Despite its focus on California, the company hasn't completely written off the Arizona project. If a critical mass of Arizona power developers ask California's grid operator for permission to interconnect to the state's grid, Edison would revisit the idea of building an Arizona line, Pizzaro said.

"It would be based on the need for generators to interconnect to (California's) system," he said.

Edison co-owns with the city of Los Angeles an existing transmission line between Devers, in the California desert, and the giant Palo Verde nuclear power plant outside Phoenix.

California regulators approved the project in 2007 and are considering the modified, California-only portion. Arizona regulators have opposed the project, although their consent isn't needed for Edison to proceed. Edison has asked federal regulators to stop their review of the Arizona project.

Edison shares closed 3.3% lower at $28.36.

-By Cassandra Sweet, Dow Jones Newswires; 415-439-6468; cassandra.sweet@dowjones.com