Entergy Louisiana LLC filed Jan. 25 testimony with the Louisiana Public Service Commission opposing Occidental Chemical Corp.’s (Oxy) motion to dismiss an application to approve Entergy’s 980-MW St. Charles power project, or in the alternative, to allow displacement of that project as future power suppy an existing Qualifying Facility (QF) owned by Oxy.
“Oxy’s motion disregards ELL’s well-documented need for incremental capacity set forth in the 2014 Amite South Request for Proposals (‘RFP’)—which was conducted under the supervision of the Louisiana Public Service Commission‘s (‘Commission’ or ‘LPSC’) Staff (‘Staff’) and an Independent Monitor ‘”IM’), and was subject to stakeholder review and comment—asking this Tribunal to summarily set aside that procurement process and require ELL to instead purchase capacity from Oxy’s Taft Facility that would not provide a single megawatt (‘MW’) of needed incremental load-serving capability in Amite South,” said the Entergy brief.
“To be clear, ELL’s position is not, and has never been that Oxy’s Taft capacity is not needed or wanted; but rather, that the Taft capacity cannot meet ELL’s identified need and accordingly cannot displace or avoid the need to construct St. Charles Power Station (‘SCPS’). It is also clear that under applicable Commission Orders, ELL had a right to craft the RFP requirements in such a manner that encouraged proposals that met its planning objectives and provided comparable alternatives to its self-build option.
“Moreover, as discussed more fully below, it appears that Oxy‘s Motion centrally relies on displacement rights claimed under the Public Utility Regulatory Policies Act of 1978 (‘PURPA’). On January 21, 2016, however, the Federal Energy Regulatory Commission (‘FERC’) ruled that, effective October 23, 2015, ELL no longer has an obligation under PURPA to enter into new obligations or contracts with a Qualifying Facility (‘QF’) that has net capacity in excess of 20 MW. Thus, it appears that much of Oxy‘s motion, which is premised on PURPA, has been rendered moot. However, because there could be requests for rehearing or appeals of that FERC Order, the Company provides additional reasons herein why Oxy‘s PURPA arguments are without merit.
“Specifically. the Company points out that QFs have never possessed an unfettered right under PURPA to sell capacity to a utility, to restrict the utility‘s ability to prepare and carry out resource plans that are necessary to reliably serve customers at the lowest reasonable cost, or to ignore state rules regarding resource procurements and purchase power agreements (‘PPA’) with QFs. To date, Oxy has had ample opportunities to sell capacity from its Taft facility to ELL, including a pending procurement process in which ELL has identified a need for existing capacity in Midcontinent lndependent System Operator, Inc. (‘MlSO’) South. But, regardless of whether Oxy sells that existing capacity to ELL when it becomes available, the need for incremental capacity in Amite South remains. It is clear that the Taft Facility cannot meet this need and cannot displace the need to construct SCPS.”
Entergy argued that Oxy filed its motion to “disrupt and evade” commission-mandated RFP procedures, as well as various commission orders that include protections against such eleventh-hour efforts that would jeopardize the orderly and rational evaluation of resources to serve customers.
Oxy operates a cogeneration plant at its Taft Facility. which is located in Amite South. Under a long-term PPA approved by the commission, ELL purchases nearly all of the facility‘s capacity that is not needed by Oxy to serve its host load. The PPA with Oxy expires in 2018. ELL, through long-term planning, has identified a locational capacity need in Amite South to address projected load growth and potential unit deactivations starting in the 2020 timeframe. To that end, Entergy Services, on behalf of ELL and Entergy New Orleans, developed the 2014 Amite South RFP. seeking 650 MW to 1,000 MW of capacity and energy from a new, single integrated generation resource located in Amite South.
ELL has, subject to regulatory approval, proposed to construct SCPS, a nominal 980 MW 2×1 combined cycle gas turbine (CCGT) selected from the 2014 Amite South RFP. That competitive power supply RFP that attracted ten conforming proposals from four qualified bidders, said Entergy. All bidders proposed to construct CCGT generation utilizing advanced gas turbine technology and source their proposals from those new units. Three of the proposals proposed acquisitions. Three proposals proposed 20 year tolls. Four proposals proposed combining 20 year tolls with acquisitions.
The primary allegation underpinning Oxy‘s motion is that an existing resource (whether it be a QF or otherwise) can meet ELL’s need for additional capacity in Amite South, Entergy said. Oxy’s arguments rely on the proposition that if the commission approves the construction of the SCPS. a renewal of its PPA with ELL for 500 MW from its Taft Facility will not be needed. Without any evidence, Oxy asks that the parties assume that Oxy‘s existing resource in Amite South is comparable to a new-build resource that will increase Amite South load serving capability by nearly 1,000 MW—but it will not, Entergy said.
Oxy argues that St. Charles project is the wrong reponse to changing needs
Oxy on Jan. 21 filed testimony with the commission written on its behalf by Jeffry Pollock, an energy advisor and President of J. Pollock Inc. He said the commission should reject the application for certification of the SCPS because the RFP upon which it is premised did not meet the requirements as stated by the commission. Specifically, Pollock said the RFP limited eligible capacity to:
- Combined Cycle Gas Turbine (CCGT) technology;
- Developmental (i.e., new-build) resources providing at least 650 MW with allowable heat rate of 7,000 Btu/kWh; and
- Sites physically located in the Amite South load pocket.
Other RFP provisions effectively limited participation from existing QFs, Pollock added. By imposing these limitations, Entergy diminished its market for eligible bidders which limited potentially lower cost resources from participating in the RFP, he said. Further, Entergy did not analyze potential transmission investments that could allow capacity to be supplied to Amite South in lieu of SCPS except under the extreme circumstance that all of Entergy’s Voltage and Local Reliability (VLR) resources are shut down.
Many things have changed even since Entergy’s August 2015 application for approval of the St. Charles project, Pollock said. For one thing, Entergy’s load forecast—a key component of its future capacity needs—has materially gone down. Also, Entergy has changed the planning assumptions for several of its owned capacity resources. Specifically, Little Gypsy Unit 1 (LG1) was retired and Entergy is now proposing to deactivate Ninemile Unit 3 (NM3) and Willow Glen Units 2 and 4 (WG 2&4). These resources represent 991 MW of installed capacity. Retiring/deactivating 991 MW of installed capacity materially affects ELP’s purported need for additional capacity. However, retiring/deactivating these plants is subject to further commission review, including a determination that it will not adversely affect reliability and will be more cost-effective for customers. Because Entergy has not obtained such findings, assuming that these plants will be retired/deactivated is, at best, premature, said Pollock.
Another point is that Entergy is assuming that neither the Taft Cogeneration facility nor Carville, which currently provide redacted levels of MWs of firm capacity to Entergy under separate long-term PPAs, will be available beyond the current expiration dates of their respective contracts. The Taft deal expires in 2018 while the Carville contract expires in 2022. However, both Taft Cogeneration and Carville are essentially identical in type and vintage as Union Power Station (UPS) in Arkansas, the partial acquisition of which was recently approved by the commission as serving the public interest. Entergy has no indication that this capacity will be unavailable following the termination of the two PPAs, Pollock argued. Thus, it is unreasonable to assume for planning purposes that neither Taft Cogeneration nor Carville will be available to serve load for the foreseeable future.
The primary reasons for Entergy’s projected capacity deficit are its assumptions about load growth, questionable changes in available capacity resources, and the inappropriate use of non-coincident (rather than coincident) peak demand to determine its capacity needs, Pollock wrote.
A significant driver of Entergy’s projected capacity needs is the termination of the Jurisdictional Separation Plan (JSP) purchases in 2018. The JSP purchases were long-term PPAs executed as part of the jurisdictional separation of Entergy Gulf States into separate operating companies for Texas and Louisiana. These PPAs currently provide 752 MW of capacity from resources owned by Entergy Texas. With such a huge reduction in capacity resources on the immediate horizon, there is very little Entergy in Louisiana can do to avoid a short-term capacity deficits, Pollock reasoned. However, a short-term capacity deficit does not mean that Entergy cannot reliably serve retail load, nor does it justify building a new plant that will be included in customers’ rates for many decades, he said.
Taft Cogeneration is located in Amite South and has been operational since 2002. Further, Carville has been operational since 2003. It is located near Willow Glen, said Pollock. Both Taft Cogeneration and Carville are combined cycle resources like UPS. The UPS power blocks were placed in service in 2002, and Entergy just acquired two of those blocks in a recent commission proceeding. Given the similarities between Taft Cogeneration, Carville and UPS, it is unlikely that Taft Cogeneration and Carville will be deactivating or retiring anytime soon, he said.
Louisiana PSC staff also opposes Oxy’s request
Louisiana PSC staff on Jan. 25 filed its opposition to the Oxy request. It noted that on Jan. 21, 2016, FERC issued an order ruling that as of Oct. 23, 2015, Entergy has no mandatory obligation under PURPA to enter into new obligations or contracts to purchase electric energy or capacity from QFs with capacity in excess of 20 MW. “This ruling applies to Occidental’s Taft facility,” said the staff memo. “Thus, the entire premise for Occidental’s claim that it was denied any QF rights in this proceeding has been eliminated. In addition, contrary to Occidental’s claims, Entergy has properly complied with all of the requirements established in the Commission’s Market Based Mechanisms Order (‘MBM Order’), and the allegedly discriminatory parameters required in the 2014 Amite South RFP are appropriately included in a Request for Proposals.
“Further, Occidental’s claims are a collateral attack on the RFP process, which has been completed. Its claims are unsupported by any evidence, and Occidental’s claim that Entergy has violated or is in violation of Commission orders is not properly before the presiding Administrative Law Judge. There are no grounds to dismiss Entergy’s request in this docket based on an unsupported motion. Finally, due to its failure to submit a bid in the RFP process, and due to its failure to comply with other requirements of LPSC orders, Occidental is precluded from displacing and does not qualify to displace the capacity which Entergy seeks to add through the SCPS self-build project. Accordingly, Occidental’s motion should be dismissed.”
One interesting argument the staff makes is that even though the RFP specifically precluded bids from existing plants, and thus Occidental didn’t offer a bid out of Taft, it could have and given the circumtances should have offered a bid anyway.
“Contrary to Occidental’s claims that Entergy’s parameters prevented it from submitting a bid, Entergy’s RFP documents reveal that no party was ever precluded from submitting a non-confornling bid in order to preserve its right to attempt to displace capacity from Entergy’s potential self-build project,” said the staff memo. “In fact, Entergy expressly stated in its responses to an RFP Q&A, that ‘[a] proposal that is non-conforming is [only] subject to potential elimination from the RFP.’ Thus, Occidental’s argument that it was precluded from submitting an RFP bid has no merit, and its failure to submit a bid in the Amite South RFP is fatal to its alternative request.”
The message here seems to be whenever there is an RFP like this one, a party should submit a bid, whether it’s conforming or not.