OxyChem: Entergy set up its own project as the winner in an RFP process

Occidental Chemical Corp. (OxyChem) told the Louisiana Public Service Commission that it should reject an application from affiliates of Entergy Corp. (ETR) for approval of the St. Charles power plant project because a request for proposals (RFP) that Entergy conducted for this capacity illegally excluded existing power plants like OxyChem’s Taft facility.

The Aug. 25 application for PSC approval is from Entergy Louisiana LLC, Entergy Gulf States Louisiana LLC and Entergy Louisiana Power LLC. They are seeking approval on the St. Charles Power Station (SCPS), which is a combined cycle gas turbine (CCGT) resource with a nominal capacity of 980 MW. The project is designed with two Mitsubishi Hitachi Power Systems (MHPS) 501 GAC combustion turbines, two Nooter Eriksen heat recovery steam generators (HRSGS) with duct firing, one Toshiba steam turbine generator in a 2×1 CCGT configuration, and other balance of plant equipment, including a cooling tower for closed-cycle cooling operations.

OxyChem said in a Dec. 2 brief that Entergy violated commission rules, the Public Utility Regulatory Policies Act of 1978 (PURPA) and the Federal Energy Regulatory Commission’s (FERC) regulations implementing PURPA because it:

  • deliberately excluded participation by qualifying facilities (QFs) and other potential resources that could provide capacity at lower cost to Entergy’s customers by bracketing the RFP to “new” build resources and imposing other unnecessary restrictions, such as a minimum of 650 MW of capacity and a guaranteed heat rate of 7,000 btu/kWh;
  • was designed so that Entergy’s self-build option would be all-but-guaranteed to be selected; and
  • purposefully excluded existing QFs from participating in the RFP in an attempt to keep them from exercising their right to displace some or all of the capacity to be added through the St. Charles Power Station (SCPS) project. 

“There is no legitimate reason why a ‘new’ resource is required if existing resources are cost-competitive, can meet Entergy’s capacity needs, and are not subject to a [power purchase agreement] with Entergy for the relevant time period,” said OxyChem. “Existing QFs or other resources located in Amite South would be just as capable of providing base load power as a new resource. Entergy’s customers and the Commission are entitled to know whether these options could meet future capacity needs at a lower cost than the SCPS project.

“As an example, OxyChem’s existing Taft facility could potentially have provided 500 MW of base load capacity in Amite South if OxyChem had been allowed to offer this resource in the RFP process. Similarly, existing resources that previously provided unsolicited offers to Entergy for long-term purchased power agreements could potentially have filled this need more cost-effectively than new build. Without allowing these resources to participate in the bidding process, Entergy cannot demonstrate that the SCPS self-build option represents the lowest cost resource for customers. Entergy’s application should therefore be dismissed and Entergy should be required to reissue its RFP with this discriminatory parameter removed.”

For one thing, said Entergy, the RFP limits participation to units with a heat rate of 7,000 Btu/kWh or less. This heat rate limitation is arbitrary and contrary to the best interests of the ratepayers because units with a higher heat rate may still provide a lower-cost resource overall, it said. For example, a unit may have a lower capital requirement and a slightly higher heat rate, and might therefore be willing to offer its output to Entergy at a lower $/MWh price (or a lower combined capacity and energy price).

It noted that its Taft facility is one of the few resources capable of providing 500 MW of base load capacity in Amite South, but that it was excluded from the RFP process because of: the “new” build requirement; the 650 MW minimum capacity requirement (the Taft facility has 500 MW to sell); and the 7,000 Btu/kWh heat rate requirement (the Taft cogeneration facility has a slightly higher heat rate). 

Alternatively, if the Louisiana commission declines to dismiss this proceeding, OxyChem said the commission should permit OxyChem to displace 500 MW of the capacity Entergy seeks to add through construction of SCPS with the Taft cogeneration facility, pursuant to existing LPSC orders, rules and regulations.

Said the OxyChem website about this plant: “The Taft Cogeneration facility is a natural-gas-fired cogeneration power plant with the capacity to produce approximately 800 MW of electricity. The facility provides all of the electricity and steam for Occidental’s adjacent Taft chemical complex.”

Entergy has said the commission monitored the RFP process

Phillip R. May, President and Chief Executive Officer of Entergy Louisiana and Entergy Gulf States Louisiana, said in supporting Aug. 25 testimony that the Entergy companies have a specific need for new generation in the supply-constrained Amite South region to maintain and improve reliability in the region as the existing generation fleet ages and unit deactivations become more probable. SCPS was competitively selected in a commission- and independently-monitored RFP process that addressed the supply needs of Amite South, and SCPS had the lowest acquisition cost of all the proposals submitted in the RFP, May wrote.

If the companies receive the approvals requested from the Louisiana PSC, and there are no unanticipated project delays related to the procurement of all of the necessary permits, materials, and supplies, the project is expected to enter service in the first half of 2019.

Amite South refers to a portion of Southeast Louisiana that is south of the Amite Substation and runs generally from east of the Baton Rouge, Louisiana, metropolitan area to the Mississippi state line and south to the Gulf of Mexico. The Amite South region contains concentrated loads represented by the greater New Orleans area and the petrochemical industry located along the Mississippi River. The unique geographical position of Amite South makes this region heavily dependent on both the transmission tie lines from the northwest (the Baton Rouge area) and from the north (the area north of Lake Pontchartrain) as well as generation facilities in Amite South, some of which have long start-up times, to serve the electrical load located in Amite South.

Said a Dec. 9 status report from the commission administrative law judge (ALJ) handling this case, following a status conference between the parties on the same day: “OxyChem led a Motion to Dismiss or, in the Alternative, Motion to Allow Displacement by a Qualifying Facility on December 2, 2015. As a result of the filing, the tribunal issued a Notice of Status Conference, directing the parties to appear at the status conference, to discuss OxyChem’s motion. After a brief discussion of the motion, the parties agreed to limited procedural schedule to accommodate the filing of responsive pleadings to the motion and an oral argument. The procedural schedule established at the October 6, 2015 status conference was not modified and remains in place.”

The ALJ gave parties until Jan. 25 to respond to the OxyChem motion, a deadline of Feb. 15 for OxyChem to respond to any such responses, and established a Feb. 19 hearing for oral arguments.

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.