LIKE OTHER PUBLIC UTILITIES, HEBER LIGHT AND POWER IS NOT OPPOSED TO OWNING AND OPERATING ITS OWN GENERATION. In fact, Heber Light & Power Co. (HL&P; Heber City, Utah, U.S.) has owned a generating plant since 1984. However, for nearly two decades, the power station was operated infrequently at times of peak demand on the utility grid. These were typically for short periods during the hottest and coldest days of the year. Annual operating hours averaged fewer than 400 hours for gas-fueled units and 200 hours for diesels.

Today, new reciprocating engine-generator technology and innovative power purchasing enable HL&P to deliver reliable, low-cost power to support customers and encourage economic growth in its service area, Utah's Heber Valley, about 45 miles (72 km) east of Salt Lake City.

Founded in 1909, HL&P is an interlocal energy services utility serving an area that includes Heber City, Midway, Charleston and parts of Wasatch County, Utah. Electric power reliability is a key concern for the utility and its 8500 customers because the mountain valley service territory has only a radial feed, a 138-kV transmission line owned by a large investor-owned utility.

STRATEGY CHANGE

When blackouts, rotating brownouts and price spikes hit California in the summers of 2000 and 2001, HL&P saw a need to change its approach. Although the utility did not experience the outages that affected California and neighboring states, it did see unusually high spikes in wholesale prices — up to US$500/MWh. These price spikes put considerable financial pressure on the company.

After that nearly disastrous experience, HL&P knew it had to find better ways to control its own destiny. A first step was to expand the existing power station to insulate the utility from power shortages and market volatility. With the enhanced capacity, HL&P could also be more aggressive in its power-purchasing strategy.

RELIABILITY CONCERN

Management had to contend with growing volatility in natural gas and fuel oil prices, and thus volatility in market prices for intermediate and peak-time purchased power. Now, using a 12.7-MW natural-gas-fueled distributed generation facility, HL&P can better control electricity costs and provide highly reliable service in a potentially volatile power market.

The facility includes 8.25 MW of advanced gas engine-generator sets designed to provide 25% of the needed local power on any given day. This gives HL&P more flexibility in delivering power to its customers.

The in-house generation minimizes exposure to market price spikes, assuring HL&P of a reliable peak-time power supply at a predictable price. To meet local peak load needs, HL&P constantly evaluates the cost of purchased power against the cost of in-house generation and chooses the lower-cost option on an hourly basis.

RELIABILITY AND GROWTH

In 2002, the utility launched a T&D rebuilding project that shored up reliability and capacity on its 12.5-kV system feeder lines. The project included construction of two 46-kV to 12.5-kV substations, a SCADA system to improve monitoring and control, and an around-the-clock dispatch center.

HL&P also developed some load and economic analysis software that enables close examination of past power demand to help predict future needs. After analyzing five years of hourly load data, HL&P found that certain hours in the late afternoon were growing at a rate of 20% per year during the summer. This reflected a trend toward more year-round residents using more air conditioning.

These peak load conditions favored an expansion of in-house generation, primarily as a hedge to ensure supply and price stability for customers. Also, expanding generation capability enables profitable sales to the grid in response to market opportunities. HL&P decided not only to add capacity but to dispatch it more aggressively.

LATEST TECHNOLOGY

Local air-quality regulations, as well as economics, dictated a shift toward generation with natural gas. HL&P chose reciprocating engine-generator sets because of its experience with such units and because of the technology's inherent advantages for the application. Engines offer the benefits of quick starts/stops, cost-effective operation and reliable, efficient operation at any altitude and under variable ambient conditions.

HL&P staff perform the majority of maintenance and service on the generating equipment, including major overhauls. Wheeler Machinery Co. (Salt Lake City, Utah), supplier of the generator sets, provides technical support and assistance with major service projects.

In 2002, HL&P became one of the first public utilities in the world to install Caterpillar's line of advanced gas-fueled engine-generator sets. These are the first commercialized products developed under the U.S. Department of Energy's Advanced Reciprocating Engine Systems (ARES) program (see “Enabling Technology”).

An analysis determined that the highly fuel-efficient, advanced generator sets would yield lower electricity costs per megawatt-hour than would the existing gas- and diesel-fueled units. In July and December of 2002, the utility installed three 20-cylinder Caterpillar G3520C advanced units rated at a combined 5.55 MW. The installation was so successful that, in January 2004, HL&P added two 16-cylinder Caterpillar G3516C advanced units rated at a combined 2.7 MW.

Generating cost comparison.

Caterpillar generator set model	Output (after derate for altitude)	Heat rate BTu/kWh at HHV	Fuel	Cost per megawatt-hour
G3520C	1850 kW	10,089	Natural gas	$66.19
G3516C	1350 kW	10,018	Natural gas	$66.19
G3516	750 kW	11,100	Natural gas	$72.02
G399	650 kW	11,915	Natural gas	$78.13
3516	1500 kW	10,343	Diesel	$122.24
Note: All costs include a US$14/MWh variable operation and maintenance charge and a $4.08/MWh major overhaul accrual. The gas-generator set costs were calculated with a gas price of $5/mm BTU. The diesel-generator set costs were calculated using a diesel fuel price of $1.25/gallon.

The cost of fuel played a key role in determining the best economic option for HL&P's situation. With the long-term cost of gas not expected to exceed $9/thousand cubic feet (mcf) for any great period of time, and with limited annual gen set run hours, the economics favored the higher-power-density 1800-rpm generator set configuration.

The advanced engine generators have low nitrous oxide emission levels, meeting nitrous oxide regulations in Heber Valley. To meet stringent limits on carbon monoxide and unburned hydrocarbons, HL&P decided to fit each new and existing gas-fueled unit with an oxidation catalyst. The utility's older diesel units were relocated to a new facility, where they provide emergency black-start capability and standby service.

The gas-fueled generator sets are designed to support the top 25% of the load curve (Fig. 1). In a typical year, they supply an average of about 0.5 MW of capacity through the “shoulder” months from February through May and up to 8.25 MW from September through December.

During the peak-demand months at the height of winter and summer, all gas units may operate for significant periods each day, including occasional continuous operation for which the units are designed. Yearly operation on each unit has approached 3000 hours since the advanced gas units were installed.

PURCHASING AND FORECASTING

HL&P dispatchers monitor the wholesale delivery system around the clock, comparing available supplies from outside generating sources against internal resources and system demand. Decisions on dispatch of the generator sets are made each hour with the lowest-cost units dispatched first.

Reciprocating engines are well suited to following peak loads, as they perform efficiently in intermittent as well as continuous-duty applications and respond quickly to load changes. Properly maintained units can be started and fully loaded on-line within 60 seconds, and they readily tolerate multiple stops and starts. The variations in generator set capacities enable HL&P personnel to dispatch units on schedules that closely match actual demand. This helps conserve fuel and minimize emissions.

Innovative electrical-energy-buying practices help HL&P sustain low power prices despite significant market disruptions. The foundation of the utility's purchasing is a load forecasting program that looks at the coming month hour by hour, based on historic patterns and recent trends.

As management implements its power-purchasing strategy, the in-house generation provides a foundation of price stability. It essentially frees HL&P from playing the often-volatile spot market for on-peak energy. For any given hour, utility staff can weigh the cost of in-house generation, based on prevailing fuel prices, against various outside-purchase options.

HL&P benefits from abundant natural gas supplies found in the region. Local gas prices can rise or fall several dollars per thousand cubic feet month to month. HL&P typically locks in favorable gas prices to meet monthly forecast needs, but will purchase spot-market gas when pricing is advantageous.

PEAK-HOUR FLEXIBILITY

HL&P charts a load duration curve (Fig. 2) that stacks its available resources from least to most expensive per megawatt-hour. Base load (about 35% of total demand) is fulfilled mainly from coal and hydroelectric resources. Intermediate power (the next 40% of demand) comes mostly from third-party, market-priced, firm-delivery contracts based on coal, hydroelectric, wind and gas-fueled generation. Peak-time power (the top 25% of the load curve) comes from a variety of sources based on market conditions.

HL&P avoids using long-duration 24-hour block contracts to address peak-time needs. Such purchases come at low prices per megawatt-hour but are costly in the end if much of the energy goes unused and must be sold back to the market at a loss. HL&P calculates that the effective cost of a block contract exceeds the cost of its own generation if the purchased power is used for less than 75% of the annual hours (Fig. 3).

Utility staff monitors the price of shaped purchases that fit its actual on-peak hourly demand and compares their costs with that of in-house generation. Purchases are made unit contingent; that is, if the unit producing the energy goes off-line, the supplying party is not obligated to replace it. The availability of in-house generation enables HL&P to purchase lower-priced unit-contingent power without putting its supply and its customers at risk. HL&P generates its own on-peak power if it can do so for a price lower than that of purchased power. The power station provides price stability in case of severe market upsets, along with the opportunity for off-system sales.

TAKING A GLOBAL VIEW

Utility management also believes in distributed generation and will consider locating future units at remote sites, in part to reduce the capital cost of reconductoring lines as load grows in various sectors. HL&P is also evaluating the purchase of a portion of an industrial scale coal gasification facility to take advantage of both the stable pricing of coal and the flexibility provided by natural gas.

The power station, combined with recent upgrades in transmission, distribution and customer service, gives HL&P a strong financial foundation, significant leverage in power markets and a platform for delivering reliable power at low, stable prices to its customers far into the future.

Distributed generation with advanced natural-gas-fueled engines has helped HL&P move from a position of substantial supply and price risk to a position of financial strength and market advantage. By ensuring a future of reliable power at affordable prices, the utility stands as an engine for quality of life and economic growth in the Heber Valley.

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Dr. Lynn Adams is a full-time professor of business at Utah Valley State College and recently served as chairman of the board at Heber Light & Power Co., and as mayor of Heber City, Utah. adamsly@uvsc.edu

HL&P'S POWER RESOURCES

Heber Light & Power Co. (HL&P) is a member of the Utah Associated Municipal Power Systems (UAMPS), a consortium of 45 community-owned utilities in the western and southwestern United States. UAMPS facilitates the administration and delivery of power to its members from various generation sources.

Among its power resources, HL&P has an allocation of hydroelectric power from the Colorado River Storage Project and owns shares in two coal-fired power plants in Utah: Intermountain near Delta, and Hunter II at Huntington. HL&P contracts for a fixed portion of this generation to make up its base load portfolio. Two small hydroelectric plants in the Heber Valley are owned and operated by HL&P to deliver an additional 2 MW of capacity. Other resources include wind and bilateral contracts. The utility is participating in the construction of a new 12-MW hydro resource.

Demand for power is growing rapidly in the Heber Valley, a popular golf and outdoor recreation destination gaining favor as a place to live year-round. HL&P has grown by about 50% in the past six years to its current customer base of 9000. The utility's service area is home to 15,000 permanent residents. Winter demand currently peaks at 24 MW and summer demand at 18 MW; typical daily peak demand ranges from 12 MW to 14 MW.

ENABLING TECHNOLOGY

Heber Light & Power Co.'s (HL&P) generation facility dates back to 1984, when the utility installed four Cat D399 diesel reciprocating generator sets, each rated at 650 kW. In the mid-1990s, those units were converted to natural gas. HL&P also added two Cat G3516 gas-fired reciprocating units rated at 750 kW each and two Cat 3516 diesel units rated at 1500 kW each. (All capacities include derating for altitude; Heber City lies at an elevation of 5632 ft [1717 m].)

Today, the 12.7-MW power station, now built around advanced gas-fueled engine-generator sets, helps HL&P deliver reliable, low-cost electricity to its customers. The generating facility provides economical, flexible peak-time load year-round. In an emergency, it could carry a substantial share of the utility's base load.

Since July 2002, HL&P has installed 8.25 MW of Cat G3500C Series advanced generator sets in its power station. With high power density, high efficiency and the ability to generate power at an extremely competitive cost, the new units are critical to the success of HL&P's distributed generation program and its power-purchasing strategy. The engines that drive the generators were developed under the U.S. Department of Energy's Advanced Reciprocating Engine Systems (ARES) program.

ARES, a multiyear effort involving the Department of Energy, leading engine manufacturers, national research laboratories and universities, aims to develop a new generation of high-efficiency, low-emission gas engines specifically for distributed generation. The ultimate goal is to produce gas engines with:

• 50% thermal efficiency
• 95% reduction of nitrous oxide emissions
• Much longer service intervals, thus lower maintenance cost per kilowatt-hour than previous engines.

The G3500C generator sets can be run in island-mode or grid-parallel operations. They have 43.5% mechanical efficiency versus the 32% to 37% efficiency available for gas-fired engines just two or three years ago.

A digital microprocessor control regulates engine governing, air-fuel ratio and ignition, optimizing fuel economy while stringently controlling nitrous oxide emissions. The SCADA-compatible control enables the units to respond to block loading and unloading without significant changes in speed, thus minimizing frequency and voltage fluctuation.