CPUC approves NRG Energy peaking facility for SCE, defers action on Ellwood contract

The California Public Utilities Commission (CPUC) on June 1 issued an order approving NRG Energy’s (NYSE:NRG) 262-MW Puente natural gas-fired peak generation facility for Southern California Edison (SCE) to address grid reliability concerns in the Moorpark sub-area near Los Angeles.

SCE is a subsidiary of Edison International (NYSE:EIX).

The planned addition of the fast-ramping combustion turbine facility would “provide important grid support services,” the CPUC said, noting that its approval came before the California Energy Commission (CEC) has completed an environmental review of the project.

At the May 26 CPUC meeting, different versions of proposed orders for the Puente project were considered, including one that would have denied SCE’s contract with NRG Energy Center Oxnard LLC for the project because of the pending CEC review under the California Environmental Quality Act (CEQA).

But the order that was approved said there is no requirement for the CPUC to wait until CEQA reviews are completed before addressing utility contracts.

“Rather, we use our best judgement in each case to determine the optimal timing of our contract review and disposition,” the CPUC said in the order. “In this case, we find that contract approval now, prior to approval of the CEC’s CEQA review, is reasonable.”

The contract for the Puente project stemmed from a request for offers (RFO) from SCE to meet its obligation to procure between 215 MW and 290 MW in the Moorpark sub-area of the Big Creek/Ventura local reliability area to meet local capacity requirements by 2021 due to the expected retirement of the Ormond Beach and Mandalay generation facilities in Oxnard, Calif., because they use once-through-cooling technologies, the CPUC said.

The Puente project, planned to be built in Oxnard with a contract start date of June 1, 2020, will utilize a GE 7HA.01 combustion turbine that will have better operating characteristics than the retiring units, with the ability to ramp up and down quickly for grid reliability support, according to the order. The facility could start and be at full capacity in 10 minutes, with the ability to ramp up and down at a rate of 40 MW per minute, the CPUC said.

The commission said that the results of the RFO are consistent with the California ISO’s planning assumptions in the 2014-2015 transmission plan and that the RFO elicited a robust response from the market.

“We find the contract process to have been reasonable and in compliance” with CPUC requirements, and that the Puente project “is expected to provide necessary grid reliability benefits at a reasonable cost to ratepayers,” the CPUC said.

The 20-year contract for the Puente project was approved in the order, along with load reduction contracts through energy efficiency – for 6 MW – and solar distributed generation projects, for 5.66 MW.

A decision was not reached on a 10-year contract for 54 MW of capacity with NRG California South LP to refurbish the existing Ellwood Generating Station and a related 0.5 MW energy storage contract, also with NRG California South. The contract does not count toward SCE’s incremental procurement requirements for the Moorpark sub-area, the order noted.

The Ellwood facility is a peaking unit in Goleta, Calif., with a gas-fired combustion turbine built in 1974 that historically has not been a reliable resource for SCE, the CPUC said. NRG California South and SCE sought to justify the contract based on concerns about maintaining system reliability in the Goleta area, but the CPUC said it would examine if the plant refurbishment and associated storage contract are the best way to meet reliability needs in the area.

The CPUC said it will consider the Ellwood contract and the storage contract in a separate decision in the same docket.