"I think there's some real challenges on the financing side because there's so much uncertainty out there in the power market now," added Pat Scherzinger, an energy industry consultant in Portland, Oregon.

National Energy Systems Co. of Kirkland, Washington plans to build a 660-megawatt generating station in Sumas, Washington, less than a kilometre south of the Canada-U.S. border near Abbotsford.

Local residents have lobbied hard against the controversial project, arguing it will spew hundreds of tonnes of pollutants each year into the air while generating few benefits for residents on the Canadian side of the border.

Two weeks ago, the project gained key approval from Washington state's Energy Facility Site Evaluation Council, or EFSEC. The council will now recommend Washington Governor Gary Locke give the plant the go-ahead.

The plan is that the company will build a transmission line from the new generating station to a B.C. Hydro substation in Abbotsford and from there, the power will be sent back to the U.S. market.

But some argue securing financing for the project will require long-term contracts with major customers.

In this market, and with several plants already under construction, that could be a tough go, said Kunz. "It's a risky venture if you were to start from ground zero."

Power prices spiked last year and companies made a killing supplying states such as California, where demand surged. Since then, they have softened, pushed down by an economic downturn in the U.S.

While the economy is picking up, Kunz said about six large-scale projects currently under construction and expected to add a combined total of about 3,000 megawatts of new generation by the end of this year will be more than enough to feed demand. Mirant has two projects under way, he said, one in Washington and one in Oregon.

He pointed to a federal study in the U.S. which five years ago pegged the power shortage in the Pacific Northwest -- if no new generation was added -- at about 3,000 megawatts.

"Supply and demand is moving back into balance," he said, adding that market prices are currently below the generation costs.

Scherzinger said vocal community opposition, weak demand and a changing regulatory environment facing the sector are working against Sumas II.

But Chuck Martin, CEO of the company planning to build the plant, said demand for power is on the rise and the company's latest siting approval paves the way for plant's construction.

"These things are never certain until the turbine spins, but it is definite that we are going ahead with the permitting process and intending and believing we have a project that will go ahead," said Martin.

It still needs a final permit from the National Energy Board, which Martin said is expected this fall.

"Then we could get very serious about entering into contracts and financing this project," Martin said, adding that if contracts were sealed by late this year, construction could begin in early 2003.

Martin said there's no question there will be enough demand to support the plant.

"Right now we're getting by on the fact we've had an economic recession, aluminum companies are off-line and we had a wet winter," he said. "When those things turn around, we'll be back where we were."

He said the U.S. is lacking the extensive hydro system in Canada, and there are old plants that must be replaced, two factors that support demand.

He said the company had to withdraw from its place in line with the major transmission suppliers, B.C. Hydro and Bonneville Power, because permits were not in place to begin negotiations.

http://www.biv.com/article1.html#storytwo

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