Southern California Ed up for approval on power buy from Tesoro

On the agenda for the Nov. 10 meeting of the California Public Utilities Commission is a resolution that would, if approved, allow Southern California Edison to enter into a power purchase agreement with Tesoro Refining & Marketing Co. LLC for procurement of combined heat and power energy and capacity.

This resolution also approves 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.

In December 2010, the commission adopted the Qualifying Facility and Combined Heat and Power Program Settlement Agreement. It resolved a number of longstanding issues regarding the contractual obligations and procurement options for facilities operating under legacy and qualifying facility contracts. The settlement establishes MW procurement targets and GHG Emissions Reduction Targets the investor-owned utilities (IOUs) are required to meet by entering into contracts with eligible CHP Facilities, like Tesoro. The three large electric IOUs must procure a minimum of 3,000 MW of CHP and reduce GHG emissions consistent with the California Air Resources Board (CARB) Scoping Plan, currently set at 4.8 million metric tonnes (MMT) by the end of 2020.

Tesoro’s Wilmington CHP Facility was purchased from British Petroleum in 2013. Tesoro also acquired the Carson and Wilmington oil refineries as part of the transaction and is seeking to consolidate the two refineries in the Los Angeles Refinery Integration and Compliance (LARIC) project. While they are both named Wilmington, the CHP facility is on land that is 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 to the California Independent System Operator (CAISO) power grid.

Under the CHP Agreement, SCE launched a third RFO on Nov. 13, 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 CPUC 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.

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.