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Sunday, March 9, 2003 - Page updated at 12:00 AM

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Powering up South Lake Union: City Light plans $200 million in upgrades

Seattle Times staff reporters

Seattle City Light could spend as much as $200 million to build a new power station and improve distribution in South Lake Union, in large part to meet the growing electrical appetite of the burgeoning biotech-research hub.

To keep pace with an expected fourteenfold increase in power consumption over the next two decades, City Light is planning to add a $100 million substation in South Lake Union.

But that might not be enough to meet the electrical demands of the high-tech labs, offices and residential developments that Paul Allen's company, Vulcan, and other landowners have planned for the area.

In addition, the city is looking at supplying the area with power from its Broad Street and its University substations, which would require extending distribution lines across Lake Union, according to City Light's preliminary plan. A new substation at Interbay would also be needed to make that happen.

Mayor Greg Nickels has made South Lake Union development a top priority for City Light and other departments. Nickels supports the upgrades as a way to cultivate up to 20,000 jobs in the area, with many of those jobs aimed at curing diseases.

Nickels is scheduled to tout the city's plans for the neighborhood in a speech tomorrow morning to a biotech-industry conference in Seattle. The mayor is highlighting several big-ticket projects that have been in the works for South Lake Union. They include a $75 million traffic fix for the Mercer Street "mess," building a new $45 million streetcar line, and designing improvements for the neighborhood's waterfront park.

"You're talking about a very modest investment for huge potential return," Nickels said.

The University of Washington unveiled plans last week to build a six-building biotech campus on Vulcan property in the South Lake Union area, bringing the mayor's vision — and the need for added electricity — a step closer to reality. Vulcan also is building new research labs for pharmaceutical giant Merck and Seattle Biomedical Research Institute in the area.

Paying for the South Lake Union improvements could generate some controversy.

City Light officials say citywide electricity rates don't necessarily have to be raised for the South Lake Union upgrades. The improvements could come from the existing City Light budget for capital projects — but that would mean postponing other projects.

Or, new power systems could be financed by borrowing money. City Light officials maintain that the increased revenue they would get from new customers such as Vulcan would eventually pay for capital improvements in the area.

"Right now we're looking at getting 50 percent from borrowing and 50 percent from the existing budget," said City Light spokesman Bob Royer, who stressed that the utility was in the early stages of its planning for South Lake Union.

There are other options. Some upfront costs for distribution upgrades could be borne by property owners such as Vulcan, which is the largest landholder in the area with roughly 50 acres. Other major property owners include Pemco, The Seattle Times and Fred Hutchinson Cancer Research Center.

Or the costs could be financed through a rate increase — or some combination of those two options.

"We're having that conversation internally, how much to put on property owners and how much on rates," Nickels said. "It's a new question. We haven't built this scale of substation for many, many years.

"There's going to need to be a partnership," the mayor said. "It will have to be fair to all parties and sufficient to get the job done."

Nickels said he hasn't discussed specifics with Vulcan yet. The mayor said he spoke with Allen, Microsoft's co-founder, recently at a screening of "How the West Was Won" at the Cinerama Theatre, which Allen bought and restored.

"I had a very brief conversation with him," Nickels said. "We didn't get into details. He indicated he was very excited about progress being made at South Lake Union. He didn't get into it any further than that."

Jim Mueller, Vulcan's director of real-estate development, insisted the company does not want to pay any more "than a ratepayer normally would."

Historically, Mueller noted, costs for growth-driven upgrades have been spread among all city ratepayers. Then, new customers pay for future improvements elsewhere through their rates.

But the scale of growth projected for South Lake Union may call for a change in that equation, said Walt Drabinski, an energy consultant who has worked for the City Council.

"What is equitable? Should developers pay a premium," Drabinski asked, "or put money up front for a new station? How do you weigh that against the overall economic benefit to the city of new jobs and taxes? The situation warrants a thorough investigation of the numbers."

City Light's plans are being driven, in part, by a Vulcan study that says 11 million square feet of new commercial development could occur in South Lake Union in the next 18 years.

That's roughly equivalent to seven 76-story Bank of America Towers moving to the area.

All told, that would increase the area's electrical appetite from its current load of 20 megawatts to a projected load of 277 megawatts by the year 2020.

The city is now reconfiguring feeder lines to add 14 megawatts to South Lake Union. That will cost between $5 million and $10 million, which is already in City Light's budget, Royer said.

The municipal utility intends to hire a consultant to check its projections and Vulcan's. Later this year, City Light intends to take a plan for citywide distribution upgrades — including those for South Lake Union — to the City Council.

"We're positioning ourselves to say to elected officials, if you believe the projections, here's what we need to do," said Jesse Krail, City Light deputy superintendent.

Royer said it's possible City Light could put much of the new load into its existing system, but that would tax the grid more than the utility would like and risk more power outages.

Some industries, such as biotechnology, need extremely reliable power because of their round-the-clock operations and sophisticated equipment. Customers in the city's downtown core pay a 15 percent premium for a system that has safeguards to provide such reliability.

The average City Light customer can expect about 60 minutes of power outages a year, Royer said, while in the downtown core, outages average about eight seconds a year.

For City Light, the challenge is to synchronize distribution upgrades with growth in South Lake Union, so that the utility does not end up spending on big power projects for development that does not materialize. "Our interest is in avoiding stranded investments," Royer said.

Nickels said he expected the City Council to approve the new substation for South Lake Union. "I am confident they will embrace this vision," Nickels said.

Deputy Mayor Tim Ceis suggested it was an offer too good to refuse. "Who's going to turn down 20,000 jobs, a new economy and the tax base that comes with it?"

Bob Young: 206-464-2174 or byoung@seattletimes.com

J. Martin McOmber: 206-464-2022 or mmcomber@seattletimes.com

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