PG&E Contracts for Major New Plants; Air Permit Questions Remain

By Published On: April 7, 2006

Pacific Gas & Electric announced it contracted for 1,180 MW of new gas-fired power plants and will buy a 600 MW turnkey gas power plant. However, for at least two of the four plants in the mix, it is unclear whether the necessary pollution credits will be lined up to allow them to operate. Under the contracts, PG&E is relying on its contractors to acquire the requisite credits. “I’d rather not discuss” pollution credit availability, said Ron Watkins, Calpeak Power president. Calpeak and financier Starwood Power are set to build a 120 MW simple-cycle plant in Firebaugh, about 15 miles northwest of Fresno. The facility would have a 15-year contract with PG&E. Watkins said the company already has a plant at the same site and is familiar with the air pollution credit process. The new facility will consist of four jet engines with two generators. It will not use cooling water. Firebaugh is in the San Joaquin Valley Unified Air Pollution Control District. Even though the district allows more pollution than the Los Angeles basin, air pollution credits are in short supply-particularly for nitrous oxides and particulate matter (PM 10, Circuit, Feb. 11, 2006). PG&E also contracted for a second power plant in Firebaugh-this one a 400 MW simple-cycle plant developed by Energy Investors Fund. Energy Investors spokesperson Laura Hynes Keller said the developers have no comment on either technology or air pollution credit questions. According to PG&E, this development will also not use cooling water. “The developer is responsible for delivering a project,” said Jon Tremayne, PG&E spokesperson. He added that the utility brought in an expert to look at the air pollution credit issue. “Those should be available,” he added. According to the San Joaquin air pollution district permits manager, Dave Warner, the agency has no knowledge of the two proposed Firebaugh plants. “They will require applications for permits and the company will have to demonstrate to us they have sufficient offsets,” said the district’s spokesperson Sherry Bohigian. A third power plant under contract with PG&E is slated for Hayward, to be built and owned by Calpine. The 600 MW Russell City plant will be located near the San Francisco Bay. Calpine spokesperson Kent Robertson stated that the company has had the pollution permit offsets since 2002 from the Bay Area Air Quality Management District. This facility will be water cooled but will use treated wastewater from the nearby sewage treatment plant, he explained. Russell City has “conditional authority to construct,” according to Bay Area Air Quality Management spokesperson Linda Salaver. She said the plant has nearly completed the permitting process, but has to meet one more requirement. Because of its site near the Bay, it has to go through a biological assessment from the U.S. Environmental Protection Agency and Fish & Wildlife. A fourth plant, a 660 MW facility located in Colusa County, remains somewhat of a mystery-at least to PG&E officials, who could not pinpoint where this power plant is supposed to be built. E&L Westcoast, a part of Competitive Power Ventures, however, confirmed that it would be built next to a site where Reliant planned to build a power plant several years ago. Reliant’s project was slated for a spot 15 miles northwest of Williams, but plans were withdrawn in 2002. Competitive Power Ventures vice president Andy Welch said that no permits for air pollution credits have been sought because the company is just forming the teams to make site-related applications to government agencies. The project would consist of two turbines from partner GE and a steam turbine. The plant will be adjacent to a major PG&E gas pipeline facility. Welch said he did not know whether the plant would use water or be dry-cooled. After building the plant, PG&E will take over its ownership. The quartet of new power plants are part of more than $1.5 billion in new infrastructure investments by the utility, according to Tom King, PG&E president and chief executive officer. PG&E may soon announce two more contracts. They would provide smaller sums of energy, and the facilities would not be owned by the utility. Although King said PG&E is “trying to follow? the California Public Utilities Commission’s mandate that fossil-fuel power plants are contracted as a last resort, the 50 bidders for PG&E?s contracts were all natural gas-fired plants. King said the utility was looking for peaking power and other requirements that could be met only by fossil-fueled power plants.

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