California PUC to decide whether to shelve power contract for Carlsbad project

The California Public Utilities Commission will be considering at its May 21 meeting a resolution that would reject, for now, a San Diego Gas & Electric deal to take power from the Carlsbad Energy Center LLC repowering project, so that a request for offers (RFO) process that may turn up alternatives can run its course.

Said the May 7 resolution to be considered by the commission: “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.”

Under the pending application, SDG&E is seeking authority to enter into a power purchase tolling agreement (Carlsbad PPTA) with Carlsbad Energy Center to fill 600 MW of its local capacity need as identified in a prior case. The Carlsbad PPTA would provide approximately 600 MW of nominal capacity from a natural gas-fired, simple cycle peaking facility (Carlsbad project) 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 resolution noted: “On balance, the public interest in awaiting the results of SDG&E’s RFO for purposes of ascertaining the availability of feasibly available and cost-effective preferred resources and/or energy storage in excess of the minimum required 200 MW outweighs the risk of a reliability gap/and or delay in the Encina OTC retirement (and its potential ratepayer costs). The Carlsbad PPTA is a reasonable means of meeting SDG&E’s [local capacity reliability] need in the event that the RFO fails to produce more than the minimum required 200 MW of feasibly available and cost-effective preferred resource and energy storage.”

The existing Encina plant needs to be retired in the future due to California’s once-through cooling (OTC) phase-out program. Carlsbad Energy Center is a unit of NRG Energy (NYSE: NRG).

The resolution also said: “Whether or not it is reasonable to deviate from the default RFO process largely depends upon the definition of the need that SDG&E’s authorized procurement is intended to meet. 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, [a prior proceeding] 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 RFO 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.”

Another possibility that has recently been floated is to reduce the size of the PPTA to 500 MW, which means NRG would jettison one of the planned combustion turbines. NRG has told the commission this alternative would not raise major issues for its project.

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.