JUICE: Sugar Daddies

The controversy over the 20-year utility contract for the coastal Puente power plant near Ventura is the tip of California’s excess gas power plant iceberg.

Take a look at the California Energy Commission’s recent analysis highlighting how infrequently the power plants along the coast have been used. Last year, several facilities seldom ran.

California’s overloaded and costly electricity supply cushion reminds me of a pal who orders the most expensive entrée when someone else picks up the tab.

While the low usage of these seawater-cooled generation facilities is good for the aquatic environment, it’s not good for utility customers.

Utility ratepayers are paying wads of cash for most of these coastal plants, divested by the private utilities as part of the state’s deregulation scheme, to largely sit around.

Just how much ratepayer sugar daddies and mommies are paying for these facilities to be on standby mode is a black box. That is because the costs of the resource adequacy agreements between private utilities and merchant generators approved by the California Public Utilities Commission are kept secret.

Making the state’s excess supply picture more opaque is that the California Independent System Operator recently removed from its daily outlook the line showing available resources. Now it only shows demand for power, not the available supply of power as it did traditionally (see story below).

A further strain on ratepayer pocketbooks is that the California Energy Commission was directed a number of years ago to no longer consider whether a plant is needed during its construction licensing proceedings. The agency is currently reviewing whether to certify construction of the 262 MW Puente project, but cannot consider whether it is needed for reliability.

That’s a big deal because the California Public Utilities Commission, which approved a 20-year power purchase agreement for the proposed plant between Southern California Edison and NRG last year, has been blasted for relying on an outdated needs assessment in approving it.

According to the Energy Commission’s March 16 once-through cooled plant analysis, the Mandalay plant, slated to be replaced by the controversial 262 MW Puente Plant, ran 3.8 percent during the first nine months of 2016. The nearby Ormond Beach facility near Ventura operated a mere 1 percent of the time.

Highlighting the redundancy of the Mandalay plant, the CPUC rejected Edison’s proposed four-year resource adequacy agreement for 130 MW from the Mandalay facility until its replacement plant can be permitted and built. It’s “not needed to meet local reliability needs in 2016 and 2017, and there is no evidence that it is needed for local reliability in 2018 and beyond,” states the Energy Division’s adopted resolution from last May.

It begs the question of why during the same meeting the commission approved a long-term agreement for Mandalay’s replacement, the Puente project.

The story looks much the same in other areas. The amount of time three of the other seven merchant plants along the coast in Southern California operated was in the single digits. Those three plants—Alamitos, Redondo and Encina—have approved resource adequacy agreements. The first two have contracts that extend from 2016 to May 2020.

Encina is under a deal for 858.5 MW of capacity for this year. The timing coincides with the deadline to close or replace it with a project that does not suck in ocean water for cooling. However, the State Water Resources Control Board may extend the end-of-the-year seawater cooling phase out deadline for Encina, according to a discussion at the grid operator’s board meeting last week.

The Huntington Beach and Moss Landing facilities operated more often, nearly 15 percent and 12 percent of the time through September of last year respectively. The air-cooled Huntington replacement project is under an approved long-term agreement with Edison.

Moss Landing is slated for closure.

In the San Francisco Bay area the Pittsburg Power facility ran just 1.5 percent of the time last year through September.

These numbers indicate that continued investments in natural gas-fired plants to supposedly assure reliability probably constitutes an expensive policy blunder, particularly given the state’s clean energy laws and the billions of dollars of ratepayer investments in energy efficiency, renewables, and demand response, as well as the growing number of consumers gaining more control over their energy use.

As Jim Caldwell, an opponent to Puente, stated of that project, “The search for cheaper and cleaner alternatives needs to start–not after spending hundreds of millions of dollars on a solution that is obsolete before starting.” — Elizabeth McCarthy

Operating Coastal Natural Gas Plants & Replacement Projects

Existing Coastal Plant Capacity

(MW)

2016 Capacity Utilization Thru 3 rd Quarter

(%)

Replacement Status Capacity

(MW)

AES Alamitos Units 1-6 1,970

5.3

Alamitos: In construction licensing process at CEC; CPUC-approved power purchase agreements with SCE and SDG&E in place. 1,040

NRG Encina Units 1-5 951

3.4

Carlsbad : Licensed; Power purchase agreement with SDG&E approved by CPUC, but is under court challenge. 558

AES Huntington Beach Units 1 & 2 430

14.7

Huntington Beach: CEC has proposed approving a construction license; CPUC-approved power purchase agreement with Edison for 644 MW, with another 200 MW of additional capacity under discussion. 844

NRG Mandalay Units 1 & 2 436

3.8

Puente : In construction licensing process at CEC; Power purchase agreement with SCE approved by CPUC. 262

Dynegy Moss Landing Units 1, 2, 6, & 7 2,484

12.3

None planned -

NRG Ormond Beach Units 1 & 2 1,612

1.0

None planned -

AES Redondo Beach Units 5-8 1,355

3.6

Redondo: Construction license permit process suspended at CEC. 496

LADWP Harbor 5 75

4.0

LADWP plans to repower plant by 2026. -

LADWP Haynes Unit 1, 2, & 8 724

23.9

LADWP plans to repower units 1 and 2 by 2023 and unit 8 by 2029. -

LADWP Scattergood Units 1 & 2 326

14.4

LADWP plans to repower by 2020 -

Source: California Energy Commission

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JUICE: Sugar Daddies

William J. Kelly

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