The city of Morro Bay, a grassroots group, and the city and county of San Francisco objected to Pacific Gas & Electric and Duke Energy?s contract for 625 MW from the merchant generator?s aging Morro Bay power plant, opponents announced March 22. The deal was signed in late February, and PG&E subsequently filed an advice letter seeking California Public Utilities Commission approval (<i>Circuit<\/i>, Feb. 25, 2005). The city of Morro Bay asked the CPUC to reject PG&E?s request to get the deal authorized behind closed doors. The generator ?failed to provide the city with any opportunity to review the terms of the agreement? although the plant?s operation affects the city and its residents, according to Robert Schultz, city attorney. Morro Bay and Duke have been unable for months to agree on a price for a lease for the facility?s outfall pipe. In the last go-around, Duke offered to pay approximately $350,000 a year for the next three years. The city countered that the lease was worth at least $1 million based on comparative contracts. ?Duke has no authority to operate the ocean outfall for the power plant,? stated Schultz. San Francisco did not take issue with the specifics of the deal. Instead, it focused on the possible impact on the city?s community aggregation plans. It also is concerned that the agreement could result in stranded costs. The local opponents, the Coastal Alliance on Plant Expansion, also took issue with the deal?s confidentiality and reiterated its objections to the water-cooled facility?s environmental impacts. PG&E responded that Duke remains responsible for the operation and maintenance of the plant. The contract allows Duke to sell the output to PG&E rather than into the spot market. ?The agreement does not affect any such issues that existed between Morro Bay and Duke up to now, and as such any outstanding matters do not justify delay in approving this tolling arrangement,? stated Brian Cherry, PG&E director of regulatory relations, in a March 22 letter to the commission. Cherry also said San Francisco?s aggregation concerns were ?premature.? He added that the utility?s ?short- and medium-term contracts such as this tolling agreement balance the need to avoid stranded costs with the need to ensure reliable supplies for customers.? The California Energy Commission has not factored the contracted power into its 2005 summer forecast because the deal has not been approved.