Mirant Files to Close Power Plants

By Published On: May 5, 2006

Mirant will close its Pittsburg unit 7 and Contra Costa unit 6, according to documents filed with state regulators and the grid operator May 4. The units were high on the California Energy Commission’s list of expected retirements released more than two years ago (Circuit, Aug. 6, 2004). Operating the plants is “uneconomical,” Mirant stated. The company has been unable to negotiate reliability-must-run contracts with the California Independent System Operator, which would provide a steady income stream. Mirant attempted without success to set up a tolling arrangement for the Pittsburg unit, with a capacity of 682 MW, and the Contra Costa unit, at 337 MW, last September. The Pittsburg unit lost its reliability-must-run contract with the grid operator in 2004, and the Contra Costa unit’s reliability-must-run contract expired in 2003, according to CAISO spokesperson Gregg Fishman. He added that the grid operator is not in negotiations to renew the contracts – which provide a capacity payment in case the units are needed – because the units lost their reliability-must-run designation. “If they’re not designated as RMR, then there’s no negotiations,” he explained. “Mirant will continue to work with all parties in an attempt to reach agreements that will allow us to continue operating,” Rob Hayes, Mirant president, stated. If not, the plants will be shut down in three months. A settlement currently pending at the Federal Energy Regulatory Commission might offer some capacity payments. The settlement is an attempt to get rid of the federal must-offer obligation – the rule that if a power plant is called upon to produce energy by the grid operator, it is required to do so. If approved, it could offer an alternative to RMR payments (Circuit, April 28, 2006). Mirant bought the plants from Pacific Gas & Electric during deregulation in the 1990s. They have been saddled with expensive pollution-control requirements. That, in addition to postcrisis market conditions, led to Mirant’s economic tailspin, which led to bankruptcy protection. The company emerged from Chapter 11 early this year

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