February 8, 2012 / 7:35 PM / 6 years ago

LS Power breaks ground on N.J. natgas power plant-sources

* Project to create 650 construction jobs

* LS Power building plant without power purchase contract

* Plant to enter service in 2014

By Scott DiSavino

Feb 8 (Reuters) - LS Power, a New York-based private power generator, broke ground on the 738-megawatt West Deptford natural gas-fired power plant in New Jersey, groups that support the project said Wednesday.

The West Deptford project will provide about 650 jobs over the course of construction and generate over $100 million in taxes, the New Jersey Energy Coalition said in a release.

Officials at LS Power were not immediately available for comment.

The plant will produce enough electricity to power more than 700,000 New Jersey homes.

LS Power has said it expects the combined cycle plant, which does not have a power purchase contract, will begin commercial operation in 2014.

New Jersey, which wants more construction jobs, lower power prices and new cleaner plants to replace its aging generating fleet, in March 2011, offered long term capacity contracts to three other energy companies to build new natural gas fired power plants.

The contracts for those plants, which were proposed by units of New York oil company Hess Corp in Newark, New Jersey energy company NRG Energy in Old Bridge and Maryland private power generator Competitive Power Ventures (CPV) in Woodbridge, are however the subject of numerous federal regulatory disputes and a few state and federal lawsuits.

The problem with the capacity contracts, in part, is whether the state can subsidize the new plants with long-term contracts even though New Jersey is part of a competitive power market run by PJM, the regional grid operator, and overseen by the U.S. Federal Energy Regulatory Commission (FERC).

PJM operates the power grid in 13 Mid-Atlantic and Midwest states including New Jersey.

LS Power participated in the New Jersey capacity contract process but was not awarded a contract.

Energy experts note, despite LS Power moving forward with the West Deptford project, it is difficult to build a power plant without a long-term contract. If federal regulators or the courts determine New Jersey cannot subsidize the other plants, they may not be built, energy experts have said.

As a private company, LS Power has not said how much it will cost to build the West Deptford plant.

The overnight capital cost to build a combined-cycle plant costs about $1,000 per kilowatt, so a plant the size of West Deptford could cost about $738 million, according to U.S. government data.

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