La Paloma says its 965-MW California plant may shut without help

The Federal Energy Regulatory Commission will post a notice in the June 28 Federal Register about a June 17 complaint from La Paloma Generating Co. LLC against the California Independent System Operator (CAISO).

In its complaint, La Paloma requests that the commission issue an order requiring CAISO to grant a Reliability Must Run (RMR) designation effective as of July 1, 2016, for Units 1, 3, and 4, or otherwise provide a mechanism for cost recovery to allow La Paloma to continue operation of those units. FERC is taking comment on this complaint until July 7. CAISO has not yet responded to it.

La Paloma is requesting fast track processing of this complaint since it says time is of the essence. CAISO had recently disapproved outage requests submitted for three units at the four-unit La Paloma facility, and then disapproved a previously-approved maintenance outage request of a fourth unit. At the same time, La Paloma claims that CAISO has failed to provide the units with a means of appropriate cost recovery for maintaining their operations, such as a RMR designation. “A regulatory taking would be effectuated were the Commission to permit this situation to persist,” said the complaint.

In light of the urgency of this situation, fast track processing with comments due by June 30 and an order from the commission by July 29 requiring CAISO to grant La Paloma an annual RMR designation for the uncommitted capacity from the facility effective as of July 1 or otherwise provide a mechanism for appropriate cost recovery on an expedited basis are appropriate and necessary for La Paloma to continue operations in consideration of the denial of its outage requests, the company told FERC.

La Paloma owns a 965.4-MW (summer rating) four-unit combined-cycle natural gas-fired facility located in McKittrick, California. The La Paloma Facility achieved commercial operation in 2003. It receives gas directly from the Kern River Gas Transmission System pipeline and the Mojave pipeline.

La Paloma is directly interconnected to Pacific Gas & Electric’s (PG&E) Midway Substation. The Midway Substation is the northern entry point to Path 26, which forms the interface between northern California and southern California. This path connects the PG&E and Southern California Edison territories. Midway Area generation resides right between Path 15 and Path 26 and enables high flows on Path 26.

The La Paloma Facility employs a turbine technology that allows it to have a very favorable heat rate and low carbon intensity, said the company. In addition, the La Paloma Facility can be modified to reduce its Pmin heat rate with minor modification that can be accomplished during a short outage. This feature is relatively unique to this facility and can offer important benefits in the face of growing renewable generation and the need for flexible turndown, the company added. This additional turndown translates into reduced fuel consumption, lower greenhouse gas emissions, and dramatically lower water consumption.

The company said combination of the location of the La Paloma Facility, and the technology it employs, offers unique benefits to CAISO.

The commission and CAISO representatives alike have recognized in various contexts that insufficient price support is being provided by the CAISO markets for certain new and existing units, said La Paloma. When generation facilities are old, expensive, inefficient, and unnecessary, market signals that precipitate retirement are the product of a well-functioning market. “This, however, is not La Paloma’s story,” said the company in the June 17 complaint. “La Paloma is a highly-efficient, recent vintage facility, with desirable environmental characteristics that is optimally located at a substation where it can assist with maximizing power flows over a key path connecting northern and southern California. While highly dispatched for energy in the past, in the wake of the limited operability of the Aliso Canyon [gas] storage facility, and CAISO’s needs to support the path to which La Paloma is connected, La Paloma’s ability to improve reliability has only increased. La Paloma sees CAISO’s disapproval today of a previously approved maintenance outage at unit 2, as well as CAISO’s disapproval last week of the other three units’ outage requests, as emblematic of CAISO’s reliance on the La Paloma units. Importantly, the facility is not dependent on gas supply from the Aliso Canyon facility.

“While La Paloma understands that RMR designations must be granted judiciously, the RMR designation exists precisely so that it can be employed in appropriate circumstances. La Paloma respectfully asserts that this is such a case.

“La Paloma has discussed its struggles with state and federal regulators in advance of filing this Complaint, and has shared its third party assessment of the CAISO’s need for the facility in those discussions. While those conversations have been ongoing, its financial distress has increased. La Paloma believes, and has been advised by independent third party experts, that its facility is an important contributor to the reliability of the CAISO market and is one the CAISO would be well-served to keep in operation both today and in coming years. However, because market compensation has been, and is contemplated to continue in the near term to be, insufficient to justify those continued operations, La Paloma recently was placed in the regrettable position of determining that submitting short term outage tickets for three of its units was an appropriate step to stem the tide of financial losses it is experiencing. CAISO disapproved those outage tickets. It also disapproved an earlier approved maintenance outage for a fourth unit. By this Complaint, La Paloma asks the Commission to approve a solution that will allow the facility to maintain reliable operations while obtaining just and reasonable compensation sufficient to support the units subject to this Complaint through an annual RMR designation or similar contract.

“Despite being regularly dispatched by the CAISO for energy, La Paloma has seen a substantial decline in its merchant market revenues and minimal sales of resource adequacy (‘RA’). Absent some change in compensation, La Paloma has determined that continued economic operation of its units is not justified, at least in the short to medium term, given the non-compensatory market revenues the plant has received and expects to receive during this time frame. Representatives of La Paloma have been discussing these market signals and their likely effect on continued operations of the facility absent contractual or other relief with representatives of the CAISO and other California state agencies on various occasions since 2014.”

A La Paloma contact is: James Maiz, Rockland Capital, Vice President, 24 Waterway Avenue, Suite 800, The Woodlands, TX 77380, Tel: (281) 863-9006,

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.