On the agenda for the July 14 meeting of the California Public Utilities Commission is a resolution that would allow a Calpine Corp. (NYSE: CPN) subsidiary to put in cold layup a 525-MW (net) combined-cycle plant.
Calpine’s CCFC Sutter Energy LLC proposes to suspend operation of its Sutter Energy Center and place it in a cold layup status. The PUC requires power plant operators to notify the commission and the California Independent System Operator (CAISO) at least 90 days in advance before changing the long-term status of a power plant. The draft resolution affirms that CCFC has complied with the applicable standards and authorizes it to suspend operation of Sutter and place it in cold layup for at least 2016.
Sutter, located in Yuba City, Sutter County, consists of two gas-fired combustion turbine units and one steam turbine unit. Calpine owns and operates the plant through its subsidiary CCFC Sutter Energy. The plant began commercial operation in July 2001.
Sutter was originally connected to the Western Area Power Administration (WAPA) transmission system that was under CAISO’s operational control. In January 2005, WAPA withdrew from CAISO’s control, which “crippled” Sutter’s ability to dispatch into the market, said the resolution.
In December 2005, the Federal Energy Regulatory Commission approved Sutter’s pseudo-tie agreement with CAISO and allowed it to re-enter the market. The agreement, however, imposes upon Sutter a WAPA transmission charge that Sutter, otherwise, would not have incurred if WAPA remained under CAISO’s control. This situation created market challenges for Sutter.
Sutter, alternatively, tried to procure Resource Adequacy (RA) contracts. While it successfully secured a number of contracts between 2005 and 2011, those contracts failed to provide the revenue needed to support Sutter’s long-term viability. As a result, in November 2011, Calpine notified the commission that it would retire Sutter in 2012. In response, the commission ordered investor-owned utilities (IOUs) to negotiate a short-term contract with Calpine. Sutter, ultimately, negotiated a limited term RA capacity contract with the IOUs. Those contracts ended on Dec. 31, 2012.
Currently, Sutter does not have a contract and sells power to CAISO by virtue of the pseudo-tie agreement. Calpine is not seeking a Capacity Procurement Mechanism (CPM) designation from CAISO as CAISO has determined that Sutter will not be needed for grid reliability through at least 2016. Calpine also anticipates that Sutter will not be needed in 2017. Therefore, Calpine proposes to suspend operation of Sutter and place it in cold layup.