San Diego Gas & Electric defended its proposed contract with Calpine for the 573 MW Otay Mesa power project, insisting in recent hearings that the California Public Utilities Commission approve the deal. Contrary to claims by the Office of Ratepayer Advocates and the Utility Consumers' Action Network, SDG&E asserts that it needs the power from the facility, expected to come on line in 2008, and that ratepayers would reap financial and reliability benefits. Utility representatives specifically contend that the deal is needed to help meet the CPUC's 15-17 percent electric capacity operating reserve requirement under its resource-adequacy rules. In addition, SDG&E sees a void left by the expiration of 2,000 MW of Department of Water Resources contracts between 2010 and 2012. The utility argues the project would provide significant transmission benefits - contrary to the claims of ORA and UCAN, which assert that the costs of Otay Mesa and needed transmission upgrades far exceed their benefits (Circuit, Oct. 21, 2005). SDG&E also rejects ORA's assertion that the project should be postponed, noting that it has a deal in hand now. Calpine, the developer, is currently in economic straits, trying to pay off a huge debt. With its fate less than secure, putting off the project could undermine reliability, argues the utility. Although regulators approved the closed-door contract last July, it is being reconsidered at the urging of consumer advocates, but on a limited basis. That decision held that the reasonableness of the contract should be judged within the parameters of a bilateral contract and not reviewed as a request for proposal. Hearings on the appeal are expected to continue to the end of November.