On the agenda for the Dec. 1 meeting of the California Public Utilities Commission is a resolution to approve a Southern California Edison request for approval of a power purchase agreement with Tesoro Refining & Marketing Co. LLC for procurement of combined heat and power energy and capacity.
This resolution recommends approval of a materially-modified Combined Heat and Power Request for Offers (CHP RFO) Pro Forma Power Purchase Agreement (PPA) that Southern California Edison (SCE) executed with Tesoro Refining for energy and capacity from its cogeneration facility on Dec. 30, 2015. This offer was bilaterally negotiated. The start date for the agreement is Jan. 1, 2017, for a period of one or four years. After one year, Tesoro will re-evaluate whether it wants to continue with the contract for another three years.
The Wilmington CHP Facility is owned by Tesoro, which purchased it from British Petroleum in 2013. Tesoro also acquired the Carson oil refinery as part of the transaction and is seeking to consolidate it with the Wilmington refinery, which Tesoro had previously owned, in the Los Angeles Refinery Integration and Compliance (LARIC) project. While they are both named Wilmington, the CHP facility is on land that is located several miles from the Wilmington refinery and therefore, will not be affected by the refinery consolidation. The facility features the Wilmington Calciner, which uses petroleum coke and natural gas to produce calcined coke used in the manufacturing of aluminum. The waste heat from this Calciner powers the cogeneration facility.
The facility operates through bottoming cycle cogeneration which produces zero emissions because it uses waste heat from the Calciner to make electricity. The waste heat generates 35 MW of power. Only 4 MW of this power is used by the facility, and the rest is sold into the California Independent System Operator grid.
Under a CHP Agreement, SCE launched a third RFO in November 2014, and was unable to meet its CHP MW requirement due to a counterparty default, leaving SCE short of its 1,402 MW target. After initiating the RFO, SCE used Tesoro’s offer, submitted in response to the RFO, to begin bilateral negotiations with Tesoro for adding the Wilmington facility to its list of CHP resources. SCE’s intent was to use the Tesoro PPA to meet its CHP MW procurement target. Negotiations were completed Dec. 30, 2015, and an Advice Letter asking the California PUC to approve this PPA was sent to the commission on Feb. 29, 2016.
While negotiating this agreement with Tesoro, SCE did not need the Tesoro-Wilmington PPA to meet its CHP MW target because it planned to use a PPA with Coalinga Cogeneration Facility to count towards the target. However, the PPA with Coalinga was not executed. In its Advice Letter, SCE asked that if the Coalinga PPA fell through, the commission count the Tesoro-Wilmington PPA toward SCE’s CHP MW Target. Therefore, this PPA will now contribute 34 MW toward meeting SCE’s CHP MW target of 1,402, thereby increasing SCE’s total procured CHP MWs to 1,409 MWs.
SCE claims the Tesoro facility will provide critical resource adequacy because it is located in the Los Angeles basin where there is high demand for electricity.