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[whitespace] Calpine Plant
Photograph by George Sakkestad

Grid Expectations: In north San Jose, a Calpine power plant abuts a Cisco Systems facility. Cisco is trying to block plans for the two to be neighbors in Coyote Valley.

Power Play

How special interests and big money will control the fate of San Jose's next power plant

By Will Harper

ON VALENTINE'S DAY of this year, lobbyist Jerry Strangis was driving in the direction of San Jose City Hall, running errands. Making his way north on Guadalupe Parkway, Strangis' cell phone rang.

It was Steve Speno of Gibson Speno. Speno, a developer and Coyote Valley landowner, and Strangis, a local land-use lobbyist, knew each other well. They had graduated from Willow Glen High School together in 1971.

Right now, however, the two school chums were working on opposite sides for two of San Jose's most successful publicly traded companies.

Speno had cut a deal to sell nearly 700 acres of land in the north end of Coyote Valley to Internet behemoth Cisco Systems. Silicon Valley's highest valued company planned to build a $1.3 billion worldwide headquarters housing 20,000 employees.

Strangis was working for Calpine Corp., which, along with Bechtel Enterprises, wanted to build a 600-megawatt (one megawatt powers 1,000 homes), natural gas power plant right next to Cisco's planned new headquarters. And Cisco executives were decidedly unhappy about it.

They knew from experience that their employees didn't relish the idea of coming to work every day with a power plant next door. Cisco cubicle-dwellers already lived an uneasy coexistence with Calpine at the computer company's North San Jose campus near Agnews State Hospital, where Calpine runs a small 30-megawatt power plant. In fact, Building 15 on the Cisco campus is within 50 yards of the plant.

In 1999, after its employees voiced concerns about potential safety hazards posed by the neighboring power plant, Cisco hired Environmental and Occupational Risk Management from Sunnyvale to measure electromagnetic fields emanating from the power plant. The results? It turned out that the Cisco employees were more likely to be exposed to electromagnetic fields (which have been linked to brain cancer and leukemia) from their computers and microwave ovens than from the plant, says Calpine plant manager Bob McCaffery.

Strangis knew Cisco and its partners had reservations about being neighbors with a power plant--again. But he thought he had actually been making some progress with Speno and Cisco, alleviating some of their concerns over safety and aesthetics. For instance, just so Cisco employees wouldn't have to endure the sight of exhaust stacks outside, Calpine agreed to disguise its plant--dubbed the Metcalf Energy Center--as an office building with faux tinted windows.

But Speno wasn't calling to thank Strangis or wish him a happy Valentine's Day. He had bad news: Cisco and its partners had just sent a letter to the mayor and City Council announcing their firm opposition to Calpine's proposed power plant. Speno was giving his high-school classmate a heads up. Strangis was dumbfounded.

"I call it the Valentine's Day massacre," Strangis now says.

A Calpine-project supporter recalls the Valentine's Day announcement, saying, "They [Cisco] didn't give Calpine a kiss, they gave it a kiss-off."


Power Struggle: What's being said in the Calpine/Cisco debate.

Cisco City: The marriage of Silicon Valley's biggest city and its richest company is about to give birth to a new metropolis.


Dog Pile

CISCO'S LETTER to the mayor and council was simple. It read, "We find the power plant to be inconsistent and incompatible with the Campus Industrial uses planned for North Coyote Valley." A Cisco real estate executive later told reporters the company worried that emissions from the plant could harm Cisco employees.

Caught by surprise, Calpine officials stumbled to pen a timely reply to Cisco's valentine. A spokesperson groused that Cisco's decision to oppose the plant was premature. Strangis and others suspected Cisco had a more political motive--to appease nearby residents in the Santa Teresa neighborhood who had been actively opposing the Calpine plant, fearing it would cause health problems and sink property values. And, if they made friends with the neighbors, they wouldn't oppose the Cisco plant. (Indeed, the Santa Teresa Citizen Action Group, a coalition of 5,000 neighborhood residents, endorsed the Cisco project after the company came out against Calpine.)

The Valentine's Day surprise was Calpine's first major setback. Four months later, Mayor Ron Gonzales, an unabashed Cisco-phile, announced his opposition to the plant at a June 12 press conference.

At this point, it seemed as though it would take an act of God for Calpine to win any support.

Two days later, that's what happened.

Heat Wave

ON JUNE 14, 2000, soaring three-digit temperatures broke records for that date throughout cities in the Bay Area. San Jose endured a high of 100 degrees, breaking a 1966 record by two degrees.

As might be expected, people cranked up their air conditioners to combat the merciless heat. Then, in the afternoon, the blackouts started, causing tech companies all over the valley to lose millions of dollars. Michelle Montague-Bruno, a spokeswoman for the Silicon Valley Manufacturing Group, says one of the group's member companies--she wouldn't say which one--nearly went bankrupt.

The blackouts got techies talking about the need for local power generators--like Calpine's proposed plant.

According to the Manufacturing Group, the valley imports 83 percent of its electricity from the state's power grid, which comes in via transmission lines. On peak usage days, those lines simply can't meet the demand of energy-sucking tech companies here, says Montague-Bruno.

Silicon Valley, after all, has a voracious appetite for electricity. According to the California Energy Commission, demand has been increasing at a rate of up to 5.5 percent per year, more than double the rate statewide.

Shortly after the blackouts, the Silicon Valley Manufacturing Group formed a task force of 30 of its member companies--including Cisco--to study the need for additional power generation in the valley. The task force is
expected to make a recommendation this week as to whether to endorse Calpine's Metcalf Energy Center--the only power plant located in the valley currently in the state's licensing pipeline--or give it the thumbs-down. A Manufacturing Group source says he expects the task force will give the power plant its blessing. Except for Cisco, the source says, "I haven't heard one company who's opposed to it."

Redwood City software giant Oracle is one of those tech companies backing Calpine. "We don't have any other options on the table right now," reasons Jeff Byron, Oracle's energy director. "Metcalf is the only generation project that begins to meet [the area's need for more power]."

The California Manufacturing and Technology Association, which boasts member companies like Intel, Apple, IBM, Oracle and Advanced Micro Devices, has also come out in support of the Metcalf plant.

Meanwhile, Cisco--which lost millions during the June 14 blackouts, according to a wire report--remains unmoved despite the countervailing sentiment among its tech brethren. Cisco plans to get electricity for its proposed headquarters, which will require an estimated 60 megawatts of juice, from the state's power grid--the same grid that failed valley companies during the blackouts.

Byron of Oracle isn't unsympathetic to Cisco's position, even though he disagrees with it. "It's easy for me, 30 miles away [in Redwood City], to say we need to build a power plant [in south San Jose]," Byron acknowledges.

Some state lawmakers aren't nearly as polite.

No Power, No Peace

ONE MONTH AGO, the state Assembly and Senate energy committees held a joint hearing to ponder how to deal with the state's power shortage.

State Sen. Steve Peace (D-San Diego), who was in attendance that day, had his own ideas about how to solve the crisis.

Peace, who produced the cult film Attack of the Killer Tomatoes, is widely considered the legislative architect of energy deregulation. Peace and his ilk argued that deregulation would result in cheaper electricity. Instead, energy customers in San Diego--the first big California city to actually switch to unregulated pricing--were seeing their electric bills skyrocket. The price hike didn't bode well for his capturing a statewide office in the near future, which many in the capital believed he planned to do.

In the wake of the blackouts and price increases, Peace set out on a mission to get more power plants built in the state.

On the day of the hearing, the California Independent System Operator, which oversees 75 percent of the state's power grid, issued a report that described Metcalf Energy Center as one of two currently proposed plants the state needs to get online in the next two years. An ISO official even went so far as to suggest that Calpine's plant could have helped prevent the rolling blackouts of June 14.

Peace took the opportunity to lambaste Cisco for opposing the Calpine plants. He derided the Internet company for not taking a lead in finding a new source of energy generation. He accused Cisco of corporate NIMBYism.

"Those folks have a need for more energy," says Dan Howle, Peace's chief of staff, "and here you have Cisco, one of the leaders in the industry, opposing a new power plant.

"I have not heard a detailed explanation from Cisco why that power plant shouldn't be built. ... The perception in the capital is that [Cisco CEO John] Chambers opposes the plant because it would ruin his view."

Cisco spokesman Steve Langdon says the company most definitely does have sound, detailed reasons for opposing Calpine.

For one thing, he says, North Coyote Valley has been zoned for nearly 20 years to accommodate high-tech research campuses like the one Cisco is proposing--not a 600-megawatt power plant. In May, a preliminary report by the California Energy Commission even said sites in North San Jose or Fremont would be preferable to the Coyote Valley. (Calpine insists those other sites are "infeasible.")

Langdon says the company also worries about potential safety and health hazards posed by the plant to future employees and nearby residents. He adds that the Calpine plant will not use state-of-the-art technology to keep toxic emissions at a minimum.

"We are as interested as anyone in having a sufficient power supply," Langdon argues, "and there's a shortage right now. But what we need is a responsible solution, one that's environmentally sound, respects the community and addresses the immediate need. This plant is not that solution."

Dim Prospects

DESPITE GROWING SUPPORT from tech companies not named Cisco and from politicians in Sacramento, Calpine still faces major political obstacles.

Although Calpine has assembled a dream team of local consultants with close ties to the mayor (like attorney Ash Pirayou, the mayor's campaign treasurer, and PR whiz Peter Carter, who raised thousands of dollars for the mayor during the 1998 campaign), the hired guns have been firing blanks.

The Calpine team always knew that persuading Gonzales to cross a corporate cash cow--Cisco--was a tall order (one Calpine consultant privately refers to Gonzales as "the Cisco kid"). In his first State of the City speech in April 1999, Gonzales pledged to make San Jose the Internet capital of the world. Getting Cisco--the Internet's backbone--to build its 20,000-employee, worldwide headquarters here would go a long way toward keeping that pledge (and sound good on a campaign brochure).

Calpine needs six votes on the 11-member San Jose City Council, which is expected to consider the energy company's general plan amendment sometime this fall. If that doesn't sound too difficult, consider this: In June, a popular proposal to provide health care for uninsured children in the city--which had editorial support from the Mercury News--couldn't even get six votes because the mayor opposed it.

Calpine's best chance might be at the state level, where the California Energy Commission could, in theory, override local opposition by the City Council. But the commission has never done so for any power plant in its history, though the current power panic has created a more hospitable political climate for an override.

Calpine officials are still hopeful they can get the City Council to see the light. "Our principal focus," says Curt Hildebrand of Calpine, "is to earn the support of San Jose."

As for Cisco and Calpine--well, the relationship remains icy. Hildebrand, the general manager for the project, says he hasn't spoken with anyone from Cisco for five or six months.

Believe it or not, in spite of all the bad blood between the two companies, Calpine is on record as supporting Cisco's planned campus. Still, Cisco CEO John Chambers shouldn't expect a valentine from his prospective neighbors come next February.

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From the September 7-13, 2000 issue of Metro, Silicon Valley's Weekly Newspaper.

Copyright © 2000 Metro Publishing Inc. Metroactive is affiliated with the Boulevards Network.

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