CPUC Narrowly Approves Underperforming Geothermal Deal

By Published On: September 28, 2012

Calling it the final change that would be allowed, regulators Sept. 27 voted 3-2 to approve rate recovery of a third price increase for a 10 MW online geothermal deal between Bottle Rock and Pacific Gas & Electric. “This is the last dance,” said Mike Peevey, California Public Utilities Commission president. He said he voted for the controversial 50 percent contract price increase to protect “good jobs” in a community suffering from high unemployment. The price of the deal is confidential. The geothermal baseload agreement, first executed in 2006, has consistently underperformed. Commissioners Catherine Sandoval and Tim Simon approved the revised deal largely because investors plowed $150 million into the geothermal plant near the Geysers along the Lake and Sonoma County border and plan to invest another $100 million to expand the steam field. “I remain concerned that we’re sending the wrong signal to the market when we allow one developer multiple opportunities and price increases to make a project work when other [geothermal developers] are banging on the door trying to get in,” said commissioner Mike Florio. He and commissioner Mark Ferron objected to allowing a 50 percent price increase in the deal, extending the contract term from 15 to 20 years, plus waiving penalties on Bottle Rock for underperformance. The agreement “compares poorly in price and value compared to other geothermal deals,” noted Ferron. He added that poorly performing projects crowd out bona fide ones. The three regulators who voted for the deal pointed out that the project is connected to the grid and provides local power around the clock. Under the revised deal, which includes a hoped-for project expansion to at least 15 MW, PG&E can cancel the contract in 2018 if the capacity falls below 15 MW. The geothermal facility was first developed by the state Department of Water Resources in 1985 but it was suspended in 1990. In 2006, US Renewables Group purchased the project and then sold a 50 percent interest to Riverside Holdings.

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