PG&E Pans SDG&E?s Contract Transfer Plan

Calling it a ?backdoor process? and an unneeded expense, Pacific Gas & Electric this week blasted San Diego Gas & Electric?s proposal to unload one of its long-term Department of Water Resources power contracts on the San Francisco utility. SDG&E has hinged a deal to purchase power from the Otay Mesa plant being built by Calpine on the transfer of the 560 MW Sunrise contract. This proposal in turn is part of SDG&E?s long-term resource plan filed this month with the California Public Utilities Commission. ?A lot is at stake,? according to Scott Logan, analyst for the commission?s Office of Ratepayer Advocates. Each utility wants to have the lowest amount of DWR power possible because of the relatively high price of the contracts, he observed. The DWR contracts are a relic of the energy crisis and have been blasted by politicians for being hastily contrived with a long-term legacy of high costs. Still, those contracts supply a significant amount of power for utilities. Logan said the consumer division would be scrutinizing costs of a potential contract transfer over the next couple of months. Although the Sunrise contract was renegotiated, it is probably still above market costs, though not as pricey as some DWR contracts, calculated Bill Marcus, an economist who often represents The Utility Reform Network. The average cost of Sunrise power is $50/MWh, plus annual capacity payments of $95 million, confirmed Oscar Hidalgo, DWR spokesperson. But PG&E said if saddled with Sunrise it could face an extra cost of $400 million when deliveries start from Otay Mesa in 2007 and 2012. Relitigating a DWR contract through review of SDG&E?s bid-solicitation process makes for poor public policy and adds uncertainty to procurement planning, charged the utility. ?Nothing precludes SDG&E from executing an agreement for Otay Mesa independent of the allocation of the Sunrise contract,? said PG&E. ?As the only major California investor-owned utility with an investment-grade rating today, SDG&E is well positioned to remarket any surplus from the DWR contract?assuming that there is any after the completion of the Otay Mesa plant and/or Palomar.? Further, PG&E said Sunrise?s point of delivery, at the southern border of its service area, already has more resources than load. The transfer, according to PG&E, could create potential for transmission congestion, because SDG&E lacks firm transmission rights in the area. Located in Bakersfield, California, the Sunrise plant is a joint venture of Edison Mission International, Edison Mission Energy, and ChevronTexaco. According to SDG&E, the contract transfer amounts to a ?swap-out? of power. PG&E would get needed net short, and the switch allows SDG&E ?to take locally produced generation under our dispatch and a CPUC rate structure when we would need it,? said SDG&E spokesperson Stephanie Donovan. A Halloween meeting is slated at the CPUC to consider SDG&E?s contract plans, including its proposal to switch the Sunset proposal to PG&E.

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PG&E Pans SDG&E?s Contract Transfer Plan

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