Troutdale gas plant proposal raises questions

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The Troutdale Reynolds Industrial Park at the mouth of the Columbia River Gorge is the site proposed for a natural gas plant to serve Portland General Electric Customers. (Photo courtesy of the Port of Portland.)

A private equity-backed New York firm is taking on Portland General Electric Co. in what amounts to a beauty contest to determine where Portland gets its power in the future.

Development Partners Group LLC proposes to build a two-plant, $850 million facility at the former Reynolds Aluminum site in Troutdale to generate power for Portland General Electric Inc.

In doing so, Development Partners casts itself as a rival to PGE, an investor-owned utility, which has its own plans to meet demand for roughly 650 megawatts with new plants in Clatskanie and Boardman.

PGE set off the competition when it requested proposals for new or existing plants to add generating capacity to its 2,800-megawatt system.

The tension is deliberate and the outcome will determine power rates for Oregonians for decades.

Oregon law demands a competitive process for new plants to keep rates low for customers of the state’s regulated utilities, which means PGE can make its own plans but they have to be more efficient than anything else offered in the market. Development Partners is the first in what will likely be a sizable pool of contestants who hope to meet the challenge. No other proposals have surfaced, but it’s still early.

“An RFP is a pretty wide net,” said Steve Corson, PGE spokesman.

The competitive approach is designed to keep power rates low for PGE’s 820,266 customers in 52 Portland-area cities.

Oregon’s Public Utility Commission will select an independent evaluator to weigh all proposals.

Whether PGE prevails or the winner ends up being Development Partners or some unknown entity, ratepayers win, said Bob Jenks, director of the Citizens Utility Board of Oregon, which advocates for ratepayers and functions as a utility watchdog.

“This is good that there is a serious bid going in,” he said. “There’s two ways to get better deals. One is to get a better offer and the other is the utility working harder to be competitive.”

Development Partners is backed by Energy Investment Funds, a private equity group formed to invest in major power development projects. Its other partners include Kiewit Power Constructors Co., CH2M Hill Co. and law firm Stoel Rives LP.

Development Partners’ 3,000-plus megawatt portfolio includes a plant in Idaho that sells its output to Avista Energy and one north of Seattle that sells to Puget Sound Energy.

Bob Howard, a principal with Development Partners, said the firm intends to take all the risk associated with constructing the facility and it will be a long-term owner, a stance that aims to reassure those who remember when Enron Corp. aimed to sell PGE to Texas Pacific Group in a highly-leveraged deal that critics say buried ratepayers in debt.

The sale failed and PGE instead became a public company.

“They are not a short-term build-operate-transfer type of operation,” he said.

Development Partners proposes to build two plants in Troutdale. The first is a 200-megawatt facility to meet peak demand during the summer air conditioning season and the winter heating season. The peaking plant would use either a General Electric or Siemens generator and would cost about $220 million to construct.

The other would be a 450-megawatt “baseload” plant to meet ongoing demand. It would use Mitsubishi equipment and would cost about $630 million.

In true beauty contest fashion, Development Partners is touting its plan as a prettier alternative to PGE’s, which calls for long-distance transmission lines and new corridors to carry natural gas pipelines.

In contrast, the Reynolds site in Troutdale is close to PGE’s 4,000-square-mile service territory, has access to a natural gas line and is close to existing transmission lines. That translates to lower costs and more reliable power, Howard said.

The property is owned by the Port of Portland, which confirmed it is in preliminary discussions with Development Partners.

“It appears to be a good fit,” said Josh Thomas, a Port of Portland spokesman.

PGE’s plans for Clatskanie and Boardman require extensive new transmission lines to carry power to Portland and gas lines to feed the plants. Both have the advantage of being existing power sites that enjoy local support.

It is unclear if Troutdale will be a good fit from a political, environmental or land use point of view.

From a wind perspective, Troutdale sits at the entrance of the Columbia River Gorge.

Whatever comes out of the smokestack at Troutdale will blow through the gorge toward eastern Oregon. That concerns business officials in Boardman.

“Any large permitted emissions will have an impact more than the coal plant has, even with the latest pollution control equipment,” said Gary Neal, director of the Port of Morrow, who wonders if those who criticize the coal plant in Boardman will question a natural gas one in Troutdale. “Will the same critics be there on this project?”

One real estate broker wonders if the cost-benefit favors a power plant in Troutdale. Steven Klein, an industrial broker with Kidder Mathews, said low-cost power would be a blessing to industry. But he wonders if a power plant with 25 to 35 workers is the best use for one of the metro area’s rare industrial sites.

“Should they take hard-to-find, really good industrial land out of the close-in market?” he asked.

Howard, of Development Partners, acknowledged the politics of the situation. He said the team is prepared to go above its legal obligation to assess the impact of the plant on the Columbia River Gorge.

“We’re coming into this thing with our eyes wide open. By avoiding significant transmission upgrades and reusing a brownfield site, we’re doing our best.”