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CPUC delays SDG&E-Carlsbad hearing

Division within the California Public Utilities Commission has delayed the hearing for whether a proposed power plant in Carlsbad should be allowed to enter a power-purchase agreement with San Diego Gas & Electric.

The CPUC was scheduled to hear SDG&E's case Thursday to enter an agreement with Carlsbad Energy Center LLC, which has proposed building a 600-megawatt natural gas-fired peaking energy generating facility next to the existing Encina Power Station in Carlsbad.

But Wednesday, the CPUC released its list of Thursday's agenda items to be held over; the SDG&E item made the list.

A new hearing has been set for May 7.

According to the CPUC hold list, the reason for the delay has to do with Public Utilities Code 311(e), which states that "any item appearing on the commission's public agenda as an alternate item to a proposed decision ... shall be served upon all parties to the proceeding without undue delay and shall be subject to public review and comment before it may be voted upon."

Early last month, an administrative law judge recommended the commissioners deny the proposed agreement. But Monday brought an alternative point of view — from Commissioner Michael Picker, CPUC's president.

Last year, SDG&E was able to successfully remake the case for the Pio Pico Energy Center, another planned natural gas-fired peaker plant, after San Onofre Nuclear Generating Station's shutdown.

But CPUC administrative law Judge Hallie Yacknin couldn't recommend going ahead with the Carlsbad Energy Center agreement, stating the utility needs to consider renewable energy, demand response and energy efficiency.

In contrast, Picker recommends approving the agreement with a couple of conditions. Chief among them is changing the capacity of 600 megawatts to 500 megawatts.

"The second condition is that all of the 100 MWs in residual procurement authority resulting from the amendment of the purchase power tolling agreement must consist of preferred resources or energy storage," Picker wrote in his recommendation.

A 500-megawatt project would address reliability concerns while meeting the state’s policies and satisfying much of the need for preferred resources and energy storage, he said.

"[San Onofre Nuclear Generating Station] has already shut down and Encina is scheduled to shut down at the end of 2017, so it is reasonable that some intermediate need will exist," before 2022, Picker said.

While SDG&E relied on replacement energy generation and grid stability to get the CPUC to approve its agreement with Pio Pico last year, such reasoning alone did not sway Yacknin on the Carlsbad project.

The proposed Carlsbad agreement fails to produce more than the minimum required 200 megawatts of preferred resources as outlined in SDG&E's CPUC-approved long-term procurement planning proceeding, she said, which authorized the utility to procure between 500 and 800 megawatts of new resources by 2022 to meet local capacity reliability.

In that approval, SDG&E was required to procure at least 200 megawatts from the preferred resources of energy efficiency, demand response and renewable resources, though it was allowed to have up to 100 percent of the procurements from those sources.

If SDG&E's power-purchase agreement with Carlsbad Energy Center is approved for 600 megawatts, that would leave the remaining 200 megawatts of the maximum allowed 800 megawatts to come from preferred resources by requirement, and allow for the awaited retirement of the Encina facility.

Picker's alternative differs from Yacknin's in that he appears willing to approve a modified version of SDG&E's application, despite the utility not specifically requesting the option.

On the basis that SDG&E's application did not offer any alternatives — specifically an alternative for lowering the contracted capacity — Yacknin appears ready to deny the application without providing conditions on which she'd support the agreement.

Her proposed decision said she recommended denial "without prejudice" to a renewed application for its approval in the event that SDG&E's request for offers (RFO) fails to produce more than the minimum required 200 megawatts of preferred resources, or for approval of an amended purchase agreement application for a smaller project in the event that the request for offers produces more than the 200 megawatts of preferred resources.

Two main opponents of the proposal — the Sierra Club and the California Environmental Justice Alliance — contend that by aiming to fulfill the entire portion of its local capacity reliability not set aside for preferred resources, the application violates the requirement that SDG&E issue a meaningful all-source request for offers for “some or all” of its resource requirement.

Though that could have SDG&E meeting the minimum target should it follow with only preferred sources for future procurements toward the 2022 needs, Yacknin seemed to agree with the project's opponents when she said the plan does not provide enough opportunity for SDG&E meeting more than the minimum requirement.

"It would relieve SDG&E of the duty to procure renewable generation to the fullest extent possible once it achieves the 200 MW minimum target for preferred resources," Yacknin said in her proposed decision.

"A better statement of the fundamental issue before us is whether the benefit of a competitive procurement process and its potential for procuring additional preferred resources beyond the minimum required … outweighs the risk of delaying Encina’s timely retirement and/or creating a reliability gap upon its retirement. We conclude that it does."

Picker offered an opposing opinion.

"We weigh the risk of a reliability gap and/or delay in the Encina OTC retirement [and its potential ratepayer costs] against the possibility that SDG&E might be able to procure more than the minimum amount of an additional 200 MW of preferred resources and storage as a result of its current RFO," he wrote.

"On balance, we find that the public interest in awaiting the results of SDG&E’s RFO is outweighed by reliability, safety and cost risk."

If allowed to move forward as proposed, the Carlsbad project would consist of six generating units, with each unit capable of multiple starts and stops per day. The project would have an expected online date of Nov. 1, 2017, and is expected to provide power for 20 years.

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