the two power markets. However, the project sponsors believe that structural differences
between the two markets and the lack of synchronous interconnection should minimise price
correlation between the markets caused by most short-term disturbances and, to a lesser
extent, by longer-term trends. For instance, in general only one of the market areas at a time
experiences price spikes caused by localised or short-term effects, such as severe weather or
generating or fuel supply outages; seasonal effects, such as drought, affecting hydrologic con-
ditions; or seasonal weather extremes, causing increased load and/or local or regional gener-
ating fuel supply shortages. In the sponsors’ view, longer-term trends, such as expected
construction cycles for generation capacity additions, electric transmission system expansion,
timing of wholesale and retail deregulation, fuel supply exploration and development, or fuel
storage and transport system expansions, are likely to occur at different times and proceed at
different paces in the two regions.
Power plant technology
Both projects use advanced models of the General Electric (GE) 7FA turbine technology,
which is the fourth operating and technology improvement in the Frame 7F series. With guar-
anteed heat rates of 7,064 and 7,060 Btu/kWh respectively, the Union and Gila River projects
are expected to enjoy a 30 per cent efficiency advantage over the average price-setting plants
in their market areas. Total capital costs of US$534 per KWh for Union and US$619 per KWh
for Gila River compare favourably with the capital costs of other new generating facilities in
the two regions.
Multiple independent generating systems
Each project contains four separate power blocks with the capability of operating complete-
ly independently of each other. This structure has two advantages:
- each project is able to serve different geographical markets at the same time; and
- generation redundancy expands the array of electricity products and pricing premiums
that the projects can provide.
Natural gas supply and transportation
Each project is located in a region with abundant and diverse natural gas supplies. The Union
Power project is in the South Central gas market, which has the largest base of natural gas
reserves, and the most extensive production and gas pipeline infrastructure, in any region in
North America. It is interconnected to the pipelines of two transportation systems, which are
operated by the Texas Gas Transmission Company and the Gulf States Pipeline Corporation.
The Gila River project is in the liquid Southwestern gas market, with redundant connections
to the El Paso Natural Gas Company’s pipeline system, and access to the Permian, San Juan,
Mid-Continent, Rockies, and western Canadian supply basins at competitive market prices.
Water supply
The Union project satisfies its water supply requirement, averaging 15 million gallons per day
PANDA ENERGY–TECO POWER JOINT VENTURE, UNITED STATES