The California Public Utilities Commission (CPUC) has approved a resolution for a trio of investor-owned utilities to negotiate a contract with a financially-struggling 578-MW gas-fired power plant owned by Calpine (NYSE: CPN).
The independent power producer’s plant has been called important to reliability by California grid operators.
The resolution, passed March 22, directed Pacific Gas and Electric (NYSE: PCG), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E) 30 days to negotiate the power contract with Calpine.
SCE is part of Edison International (NYSE: EIX). SDG&E is part of Sempra Energy (NYSE: SRE).
The contract deal would ensure that the 10-year-old natural gas plant remains in operation while the CPUC finalizes changes to its resource adequacy program, CPUC said in a March 22 news release.
Calpine told the CPUC in November 2011 that it was planning to retire the plant in 2012 due to a lack of a resource adequacy contract. If retired, the plant would not be available for commercial operations in 2013 and later years. The California Independent System Operator (ISO) has predicted that the Sutter plant will be needed to help integrate renewable resources and phase out older, dirtier plants by 2017.
“Our decision today includes maximum ratepayer protection,” said CPUC President Michael Peevey. “First, the maximum contract price was lowered from $29 million to $17 million. Second, an independent evaluator will oversee the negotiations and review Sutter’s confidential financial information. These measures together will ensure that we do not pay Sutter more than is necessary to keep the plant running this year while we work on fixing our capacity markets,” Peevey concluded.