California PUC judge approves San Diego deal for Pio Pico gas plant

An administrative law judge at the California Public Utilities Commission, over the objections of the Sierra Club, has advised that the commission should approve a power contract between San Diego Gas & Electric and the developer of the 305-MW Pio Pico gas plant.

“This decision grants San Diego Gas & Electric Company authority to enter into a purchase power tolling agreement with Pio Pico Energy Center, LLC and to recover the costs of the agreement, subject to a cost cap, through its local generation charge on an equal per kilowatt-hour basis by customer class,” said the Jan. 3 decision from Judge Hallie Yacknin, which is still subject to commission approval.

San Diego Gas & Electric (SDG&E) is part of Sempra Energy (NYSE:SRE).

SDG&E originally sought authority to enter into a power purchase tolling agreement (PPTA) with the Pio Pico Energy Center, a 305-MW facility, for a 20-year term starting in May 2014. But, the commission identified a remaining need for up to 298 MW beginning in 2018 to meet SDG&E’s local capacity requirement, and denied SDG&E authority to enter into the Pio Pico PPTA without prejudice to a new application if it reflected the timing of the identified need.

Under a renewed application, SDG&E made various amendments, including:

  • The amended PPTA has a start date of June 1, 2017, instead of May 27, 2014.
  • The term of the PPTA is 25 years, instead of the original 20 years.
  • The amended PPTA requires Pio Pico to become operational by Sept. 1, 2015. SDG&E and Pio Pico intend to enter into a resource adequacy contract for deliveries starting in 2016 until commencement of the PPTA start date. SDG&E will separately seek commission approval for the resource adequacy contract.

Environmental groups raise issues of need for this project

The Sierra Club and California Environmental Justice Alliance (CEJA) have been arguing that the PPTA is not reasonable because some or all of the identified need could be met with demand response or energy storage resources.

Sierra Club and CEJA also pointed out that several recent events might affect the assessment of local area need, including the closure of the San Onofre Nuclear Generating Station (SONGS), the latest California Energy Commission (CEC) forecast of behind-the-meter rooftop solar, and the issuance of a utilities commission order setting a 165-MW energy storage procurement target for SDG&E for 2020. Sierra Club and CEJA also point out that, although there was an assumption that the Cabrillo II combustion turbines would be retired in 2013, SDG&E has since negotiated an agreement to allow them to remain in service for a limited period.

The Utility Consumers Action Network (UCAN) argued that there is no need for the commission to act on this application at this time because Pio Pico does not yet have a permit from the U.S. Environmental Protection Agency to start construction. Sierra Club, CEJA and UCAN therefore recommend that the commission postpone acting on this application until it updates its determination of need for new resources to meet SDG&E’s local capacity requirement in “Track 4” of Rulemaking (R.) 12-03-014, the LTPP for the 2012 procurement planning cycle and, presumably, approve or deny this application based on that updated need determination.

It is not evident that these recent events eliminate or reduce the need for the Pio Pico project, the administrative judge decided. “While Sierra Club and CEJA contend that future Commission action in response to the SONGS closure may eliminate Pio Pico as a reasonable or necessary solution for meeting the Local Capacity Requirements (LCR) need, it is at least equally possible that the SONGS closure creates an additional need for Pio Pico,” the judge wrote in the Jan. 3 ruling. “As for the limited continued operation of the Cabrillo II combustion turbines, the fact that they will remain in service for a limited period does not meaningfully inform the issue of whether there is a need for additional local capacity beginning in 2018.”

Pio Pico’s air permit has been the subject of appeal

The U.S. Environmental Appeals Board in August 2013 remanded part of an air permit for this project to the U.S. Environmental Protection Agency for further work. Helping Hand Tools, the Sierra Club and an individual, Rob Simpson, had petitioned the board to review a prevention of significant deterioration (PSD) permit that EPA Region 9 issued to Pio Pico Energy Center. The permit authorizes Pio Pico to construct and operate this natural gas-fired peaking and/or intermediate load-shaping power plant in Otay Mesa, Calif.

The board in its August 2013 decision remanded the permit in part and directed the Region to prepare a revised partitculate matter (PM) best available control technology (BACT) analysis and reopen the public comment period to provide the public with an opportunity to comment on it. The board denied review of all other challenges.

EPA said in a November 2013 notice about a revised permit that it was taking public comment on until Dec. 17, 2013: “In response to the EAB’s remand decision, Region 9 has prepared a revised particulate matter BACT analysis and BACT determination for the combustion turbines in accordance with the Board’s order. Region 9 is also proposing to issue the permit with revisions to the PSD permit’s particulate matter conditions for the combustion turbines related to the revised BACT analysis and determination. Region 9 has supplemented the administrative record for the PSD permit decision for the Project with these and related materials.”

The proposed plant will consist of three 100-MW General Electric LMS100 simple cycle natural gas-fired turbines. The plant will support SDG&E’s wind and solar power generation assets. This requires Pio Pico to use quick-starting, simple cycle turbines that can rapidly scale through loads to produce power that will supplement intermittent generation gaps from wind and solar units.

The project is being developed by Apex Power Group LLC.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.