Geneva Steel's dream of constructing a mini-mill on the site of its idled Vineyard plant has moved closer to reality with the Public Service Commission clearing the way for Utah Power to build a new substation to serve the new facility.
The steel maker, currently operating under Chapter 11 bankruptcy, wants to install an electric arc furnace at its plant so it can melt steel scrap rather than produce metal from iron ore and coke.
Geneva describes the substation as a critical component in its future. However, the existing electrical system in the area of its plant cannot yet handle the huge amounts of power that eventually will be needed to run an arc furnace.
"The PSC's decision is good news for us," Geneva Steel chairman Joe Cannon said. "And regardless of the outcome, they did a great job getting this case handled in such a short time frame."
Normally, state utility regulators never consider whether Utah Power can build substations, said Stephen Mecham, PSC chairman.
Such a decision is typically handled by the power company. The cost of substations are then included in the company's rate base that the PSC uses to determine how much consumers should pay for electrical service every month.
"This time was a little different though," Mecham said.
Utah Power was concerned if it built the substation for Geneva, a company operating under bankruptcy court protection, the utility's decision to proceed might be questioned, thus imperiling efforts to later recapture the cost of the project from ratepayers.
Geneva handled those concerns by successfully lobbying the state Legislature earlier this year to pass the Industrial Electrical Infrastructure Act. The statute is designed to ease Utah Power concerns about building the substation well ahead of when it would normally be needed to serve area residential customers.
Roger Ball, administrative secretary for the Committee of Consumer Services, said the PSC's decision appears to be a huge win for Geneva, but a mixed bag for consumers.
Geneva will be required to bear the carrying costs, or interest expense, on its $8 million portion of the substation during construction. However ratepayers will be required to pay the cost of building the $21 million substation ahead of schedule.
That amount could be around $580,000 if substation construction is advanced by four months, as Utah Power maintained, or millions of dollars if it is constructed years ahead of time, Ball said.
"We still do not have any proof of when that substation would have been needed," Ball said.
He added that, "I only wish that Geneva's refinancing and new business plan will be at least as successful for them as the outcome they received in this case." Salt Lake City (Utah) Tribune