California PUC judge recommends against approval, right now, of Carlsbad power deal

An administrative law judge at the California Public Utilities Commission has recommended against approval, at ths time, of a power purchase tolling agreement between San Diego Gas & Electric and the Carlsbad Energy Center LLC unit of NRG Energy (NYSE: NRG).

“This decision denies San Diego Gas & Electric Company’s application for authority to enter into a purchase power tolling agreement with Carlsbad Energy Center, LLC, without prejudice to a renewed application for its approval in the event that San Diego Gas & Electric Company’s request for offers fails to produce more than the minimum required 200 megawatts of preferred resources and/or energy storage, or for approval of an amended purchase power tolling agreement with Carlsbad Energy Center, LLC, for a smaller project in the event that the request for offers produces more than the minimum 200 megawatts of preferred resources and/or energy storage but less than the entirety of San Diego Gas & Electric Company’s procurement authority,” said the recommended decision. 

This March 6 recommendation may be heard, at the earliest, at the commission’s April 9 business meeting.

The commission had authorized San Diego Gas & Electric (SDG&E) to procure between 500 MW and 800 MW of new resources by 2022 to meet the local capacity reliability (LCR) need caused by the retirement of the San Onofre Nuclear Generating Station. Under the pending application, SDG&E seeks authority to enter into a power purchase tolling agreement (Carlsbad PPTA) with Carlsbad Energy Center LLC to fill 600 MW of its local capacity need.

The Carlsbad PPTA would provide about 600 MW of nominal capacity from a natural gas-fired, simple cycle peaking facility located adjacent to the existing Encina Power Station in Carlsbad, California. The Carlsbad project would consist of six generating units utilizing General Electric LMS 100 technology with each unit capable of multiple starts and stops per day. The Carlsbad project has an expected online date of Nov. 1, 2017, and is expected to provide power for 20 years.

The ALJ’s recommended decision said: “If the need to be met is defined as ‘a 600 MW conventional gas-fired facility in the Carlsbad area on-line by 2018,’ then we would find it reasonable to approve the Carlsbad PPTA as a reasonable means of meeting that defined need. However, D.14-03-004 defines the need to be met as ‘500 MW to 800 MW of new resources, up to 100 percent of which may be from preferred resources or energy storage, in SDG&E’s LCR area on-line by 2022.’ We therefore find it unreasonable to approve the Carlsbad PPTA at this juncture pending a determination that the results of SDG&E’s [request for offers] demonstrate the lack of feasibly available and cost-effective preferred resources or energy storage to meet some or all of SDG&E’s LCR need beyond the 200 MW minimum that must be met by preferred resources or energy storage.”

SDG&E anticipates that it will identify a preliminary short list of offers in response to its RFO mid-May 2015 and file an application for approval of its results in the first quarter of 2016, making it unlikely any such results will match the Carlsbad PPTA’s on-line date, the proposed decision noted.

The California Energy Commission is in the midst of a review of an amendment to its previous approval of the Carlsbad project to account for the switch from a 540-MW combined-cycle plant to a 632-MW simple-cycle peaker.

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.