The state’s power crisis is bringing a jolt of new business to local engineering and construction contractors, as they mobilize to cash in on the pressing need for new generating plants.

Two major local design and construction firms in particular Pasadena-based Parsons Corp. and Los Angeles-based Daniel, Mann, Johnson & Mendenhall are eagerly awaiting additional power plant work. Their hopes were raised further this month when Gov. Gray Davis issued a series of executive orders designed to speed up the permitting and construction of new power plants. “We’re already working on two projects in California and are looking at bidding on two more that are right now working their way through the approvals process,” said Rod Ragan, senior vice president of business development for Parsons. “We certainly hope and believe the Governor’s orders will speed those approvals along, and also open up new projects for us that we hadn’t considered.”

Parsons is in the business of designing and building major power plants that cost hundreds of millions of dollars and generate hundreds of megawatts. Currently, about 8 percent of Parsons’ $1.7 billion in annual revenue comes from power projects around the nation. Two of those projects are in Southern California and are in the design phase, Ragan said.

Some of the additional work coming from expedited approvals is expected to filter through to L.A.-area subcontractors, although most of it will go to subcontractors in the immediate area where the plants are located. Most of the sites are north of L.A., especially in neighboring Kern County.

Meanwhile, officials at Daniel, Mann, Johnson & Mendenhall, or DMJM, are also anticipating power plant work, although on a lesser scale than Parsons. DMJM normally tackles smaller power projects, like the so-called peaker power plants that generate 5 or 10 megawatts.

“We will certainly be eyeing projects that receive these expedited approvals,” said Craig Smith, president of DMJM’s Holmes & Narver division. “Power is now about 5 percent of our work and we hope that the Governor’s executive orders will help grow that.” (DMJM’s parent company, AECOM Technology Corp., reported $1.8 billion in revenues in 2000, most of that from architecture and engineering work.)

Executive orders

On Feb. 8, Davis issued a series of executive orders designed to increase the state’s generating capacity, which has been falling short of demand. In fact, the state has long had to import up to one-fourth of its total power supply. That has grown increasingly difficult to do as power supplies have been drawn down in neighboring Western states.

California has not completed a major power plant in 11 years, although nine plants are now under construction and are due to come on line in the next 18 months. Another 14 are in various stages of the approval process.

The orders include state bonuses for contractors that finish power plants ahead of schedule, and provide a compressed timeline for permit approvals. Typically, it takes about two years to secure a permit for a major power plant and six months for a peaker plant; Davis wants to cut that time down to four months and 21 days, respectively. To accomplish that, he has asked state agencies particularly the California Environmental Protection Agency to cut red tape.

The overall aim of these orders is to bring 5,000 megawatts of additional power online by July and a total of 20,000 more megawatts by July 2004.

In that time frame, almost all of the new power plant construction activity is taking place outside of L.A. County, chiefly in places like Kern County and Pittsburg, northeast of Oakland.

Despite the announced fast-tracking, DMJM’s Smith said that he doubts the state will be able to stick to the compressed schedule.

“We tend to be skeptical of these rosy goals,” Smith said. “After the 1992 riots, the city of L.A. said it would expedite the building permit process for riot-impacted businesses. There was some improvement, but not nearly enough to match what was promised.”

Indeed, other energy industry watchers echoed that view.

“There will be some speeding up of approvals and construction, but overall, these goals are way overstated,” said Arthur O’Donnell, editor and associate publisher of the Bay Area-based California Energy Markets newsletter. “Under the best of circumstances, peakers take six months to get approved. How they intend to do that in 21 days and still meet even some of the environmental and siting requirements is a mystery.

“And, as for major power plants, there is nothing in the Governor’s proposal that allows power plant developers and government officials to override neighborhood concerns,” O’Donnell said.

That neighborhood opposition is evident with Sunlaw Energy Co.’s 550-megawatt plant proposed for a diesel truck depot in the city of South Gate.

Suits threatened

Both the cities of South Gate and Downey have threatened to sue Sunlaw and the state to block construction of the plant on grounds that it would pose health risks to neighboring residents and bring down property values. If that project does proceed, it would be the largest power plant construction project on tap for L.A. County, generating hundreds of jobs among local engineering and construction contractors and subcontractors.

Smaller projects are in the pipeline at the Los Angeles Department of Water & Power, which is now upgrading a major power plant in the San Fernando Valley and adding small generating plants throughout its system in the L.A. area.

“Expedited approvals would help us to some extent,” said DWP spokesman Eric Tharp. “But mostly, this has been our response to the developing energy crisis. We had initially planned to decommission the old Valley plant; the crisis prompted us to consider upgrading it.”

The main contractor on the DWP’s Valley plant is The Industrial Co. of Steamboat Springs, Colo. Tharp said that some subcontracts have been let to L.A.-area firms, but did not have specifics.

The DWP is also planning to upgrade two other plants in coming years: its Haynes Unit in Long Beach and its Scattergood Unit in Playa del Rey. But work on those projects is not expected to begin for at least another three or four years.

While they are eagerly anticipating new work, the plant-building companies are confronted with another problem: a critical shortage of equipment and personnel.

“Materials costs are going way up because of the shortage, and it’s taking a lot longer for orders to come in,” said Parsons’ Ragan. “It’s also getting harder to find quality workers.”

All of this could slow down construction on power plants, even as the state has authorized bonuses for companies that finish ahead of schedule.