The members of the California Public Utilities Commission are due at their Feb. 25 meeting to review a proposed decision from a commission administrative law judge that would approve most winning bids from a Southern California Edison request for offers, but defer a decision on a power contract with NRG Energy‘s (NYSE: NRG) 262-MW Puente gas-fired project.
Said the proposed decision: “Rather than approve the Puente Project today, we will complete our review of the Puente Project after the environmental review by the California Energy Commission. Additionally, we deny, without prejudice, the Ellwood contract, which was presented in this proceeding for approval although the contract was not part of the need determination in [this docket].”
Ellwood is a 54-MW, gas-fired project also backed by NRG. And, because a 0.5-MW battery project would be part of the Ellwood development, the battery project would also be rejected, for now.
With these exceptions, Southern California Edison (SCE) has reasonably complied with a commission requirement to hold a request for offers (RFO) for the Moorpark sub-area, said the proposed decision. This proceeding would remain open for further consideration of procurement in the Moorpark sub-area, including the Puente Project.
The commission in 2013 ordered SCE to procure, via the RFO, a minimum of 215 MW and a maximum of 290 MW of electrical capacity in the Moorpark sub-area of the Big Creek/Ventura local reliability area to meet identified long-term local capacity requirements (LCR) by 2021. The commission found this LCR need existed, in large part, due to the expected retirement of the Ormond Beach and Mandalay once-through-cooling (OTC) generation facilities, which are both located in Oxnard, California.
For projects to be considered for this particular RFO, the projects had to meet certain minimum characteristics, including that the projects be incremental, i.e., new capacity. Other minimum requirements included that the projects qualify as Full Capacity Deliverability Status and delivery had to include the entire calendar year 2021. This decision did not specify that SCE procure any specific resources types.
SCE launched this RFO in September 2013. In November 2014, SCE filed this application for approval of the results of its 2013 LCR RFO for the Moorpark sub-area seeking approval of contracts.
A brief review of the 11 contracts is:
- One of the contracts is a 20-year deal for gas-fired generation (totaling 262 MW of capacity). This contract is a resource adequacy (RA) purchase agreement with NRG Energy Center Oxnard LLC for a new simple cycle peaking facility known as the Puente Power Project.
- Another contract, which is also for gas-fired generation (totaling 54 MW of capacity), does not count toward SCE’s incremental procurement requirements for the Moorpark sub-area under this docket. This contract is a 10-year agreement with NRG California South LP for the existing 54-MW Ellwood Generating Station, which NRG California South will refurbish (without any change in size or capacity) to provide a remaining 30-year design life. Ellwood was included as an existing resource in the California ISO study that served as the foundation of this docket and, in that study, it was assumed to continue operating in the need assessment. Therefore, the Ellwood contract is not an incremental resource and does not count toward SCE’s procurement requirements for the Moorpark sub-area.1
- SCE also seeks approval of an energy storage contract with NRG California South. This project is located on the site of Ellwood. The NRG Energy Storage contract is a tolling agreement for a 0.5 MW storage facility.
- The remaining contracts include six contracts for energy efficiency (totaling 6 MW of capacity) and two contracts for renewable distributed generation (totaling 5.66 MW of capacity).
This means that under the ALJ’s proposed decision, almost no generating capacity would be approved, since the Puente and two Ellwood projects would be excluded.
The proposed decision noted that while the PUC is not required to hold this proceeding until CEC review is complete for the Puente project, it has the authority to do so. In this instance, the CEC’s review may enhance the commission’s independent determination of critical safety issues and environmental justice matters and also clarify reliability risks posed by locating the new electric infrastructure on the beach in the City of Oxnard.
Under this project, SCE seeks commission approval of a 20-year contract with NRG Energy Center Oxnard for 262 MW of gas-fired generation from a new General Electric 7HA.01 gas-fired turbine with a contract start date of June 1, 2020, to be located at 393 North Harbor Boulevard, Oxnard, California.
The Ellwood Project includes the refurbishment of the Ellwood plant, an existing gas-fired generation peaker plant in Goleta, Santa Barbara County. Ellwood is a combustion turbine generating unit built in 1974. Historically, Ellwood has not been a reliable resource. The tentative decision said SCE may resubmit the project for commission approval should the circumstances be appropriate. On the plus side for the project, NRG and SCE seek to justify this contract based on the concerns about the challenges of maintaining system reliability in the Goleta area. In addition, while SCE and NRG acknowledge that the contract falls outside of the parameters of the RFO, SCE and NRG urge the commission to evaluate and approve of a power purchase agreement for Ellwood in this proceeding because, by acting now, the commission might be able to obtain a more favorable outcome in terms of lower costs to ratepayers and increased reliability. They said that if SCE waits for NRG to retire Ellwood, the commission might have to reassess the need in that area and for Ellwood and then order SCE to fulfill that need, very likely at a cost much greater than the proposed Ellwood refurbishment.
“Initially, these arguments in favor of approval of Ellwood appear persuasive,” said the proposed decision. “None of the assertions regarding reliability or costs, however, have been vetted. Ellwood was not, for example, part of the bidding process for the RFO. No independent need determination has occurred. Moreover, approval of the project implicates a number of larger concerns, such as reliance on fossil fuel. And, while it is possible that the Goleta area would benefit from additional capacity or even a plant with the exact characteristics of Ellwood, we cannot determine whether Ellwood or another similar project is the best choice to meet the need without, at a minimum, a need determination or even a competitive bid process.
“The energy storage contract for 0.5 MW at the Ellwood site that NRG presented together with (and as a package deal with) Ellwood would potentially be a good fit for this RFO. However, this energy storage contract does not present significant enough benefits in terms of capacity to cause the Commission to approve, at least in this proceeding, the much larger and problematic Ellwood project. Accordingly, and for all these reasons, the Ellwood contract is rejected. Today’s decision does not prejudice SCE’s ability to seek Commission approval of a contract involving Ellwood’s refurbishment at another time, if appropriate.”
As NRG points out, approval of the Ellwood contract is required to facilitate the addition of the new 0.5 MW energy storage facility at the Ellwood site, as the two contracts were linked together by NRG as a mutually exclusive offer. “Because the Ellwood contract is not approved today, we necessarily reject the 0.5 MW energy storage project located at the Ellwood site,” said the proposed order.