The credit crisis has prompted some U.S. utilities to temporarily freeze plans to build new generation, transmission and distribution facilities. But most say they still plan to move forward with almost $1 trillion in electric infrastructure investments planned over the next two decades. Plans for new multibillion-dollar nuclear plants are so far unaffected by the crisis because construction on those plants is years away.

The Salt River Project Salt River Project in Arizona may slow powerplant work.

“The natural move today is to press the pause button and take a wait-and-see approach,” says John Gilbertson, a managing director at investment bank Goldman Sachs. “It’s too early to say what exactly you’re going to do about something that’s going to break ground in a year.” But if Wall Street problems persist for more than a few weeks, Gilbertson says it will be difficult to raise capital for new projects.

Black & Veatch has had many of its utility clients halt plans on projects that aren’t critical for capacity or reliability, says Richard Rudden, a senior vice president for the Overland Park, Kan.-based engineer. Credit market issues are further slowing development of new coal plants, many of which are already politically problematic. Municipal utilities are especially affected because there is no money available for municipal bonds, he says.

Arizona utility Salt River Project (SRP) is proceeding with plans to build two natural gas-fired powerplants totaling 2,000 MW near Phoenix, but the publicly owned entity now says it will do so in phases. A year or two ago, when demand in the Phoenix area was soaring, SRP probably would have built the plants one after the other, the spokesman notes.

Typically, SRP installs 30,000 to 40,000 new meters a year, he says. But since May, new customers have slowed to a trickle. Optimistic that there will be an eventual rebound in growth, SRP estimates it will need about 2,500 MW of new generating capacity by 2022 to meet customer demand, but the slowdown has pushed back need for new capacity by one or two years.

SRP has already taken steps to address its anticipated shortfall. In May, it agreed to buy output from a 575-MW, $500-million peaking powerplant to be built by 2011 by Calgary-based TransCanada. It will sell the output via a 20-year power purchase agreement. SRP has an option to extend that by 10 years.

SRP also plans to build an 850-MW simple-cycle peaking powerplant in Florence, Ariz., in stages, beginning as early as 2012, with full operating capacity available in 2016. The utility plans to ask state regulators for permission to build the plant by early 2009, the spokesman says.

It also will seek permission to build a combined-cycle intermediate powerplant of up to 1,150 MW, also in stages, to be placed in service as needed between 2014 and 2022. Besides building two plants, SRP is considering power-purchase agreements and ownership interests in existing or new generation facilities.

SRP is following the turmoil in financial markets but believes it can move ahead with the projects, the utility spokesman says. According to SRP, the utility has an Aa1 rating from Moody’s Investors Service and an AA rating from Standard & Poor’s, which, like ENR, is a unit of The McGraw-Hill Cos.

Rudden anticipates projects around the country will be reviewed again in 30 to 90 days for possible inclusion in 2009 capital budgets. “Investments will still have to be made,” he says. Representatives of Pacific Gas and Electric, San Francisco, Atlanta-based Southern Cos., New Orleans-based Entergy, and Columbus, Ohio-based American Electric Power say they are moving ahead with new infrastructure plans. Southern still plans to spend $13.6 billion in system improvements over the next three years, says a spokeswoman. She says regulated utilities, like Southern, are somewhat isolated from the credit crisis because they can recover costs.

Rudden cautions that public service commissions that regulate utilities may lose their appetite for capital-intensive projects if it means an extraordinary burden on ratepayers, who will already be facing pressures on their pocketbooks. “Under the best of circumstances, utilities would be raising rates,” he says. “It’s going to be a very, very politically difficult thing for regulators to do.”

The Edison Electric Institute has forecast the industry will spend $900 billion on generation, transmission and distribution over the next 15 years to replace an aging grid and meet growing demand for power. But Gilbertson says a recession could impact that. “You’ve got all of this projected load growth, a lot of it industrial, and a lot of that is going to slow down,” he says.