Small Power Plant Exemption Granted June 26, 1986

Staff Counsel (Demand): John Chandley

Hearing Officer: David Mundstock

Presiding Member: Commissioner Arturo Gandara

SPPE Filing and Project Description

The Champlin Petroleum Company and the South Coast Energy Company (an unregulated SCE subsidiary) filed their Application for a Small Power Plant Exemption (SPPE) on November 18, 1985. Champlin was an 80 MW cogeneration plant which would produce electricity for sale to SCE and steam for use in the recovery of oil from the Wilmington Oil Field near Long Beach Harbor. Two alternative sites at the oilfield were under consideration by applicants and both were analyzed by CEC staff.

The SPPE Process

SPPEs are governed by Public Resources Code section 25541. The CEC must make two separate findings in order to grant an SPPE - that "No substantial adverse impact on the environment or energy resources will result from the construction or operation of the proposed facility" and that "Generating capacity will not be added which is substantially in excess of the forecast of electrical energy demands adopted pursuant to subdivision (e) of section 25305)."

CEC staff’s environmental analysis for an SPPE is presented in an Initial Study, which the CEC conducts as the CEQA lead agency for the project under Public Resources Code section 25519(c). Traditionally, a facility which qualifies for issuance of a negative declaration is considered to also satisfy the environmental finding for granting an SPPE.

The SPPE demand conformance finding had not been seriously contested in prior cases. The Champlin proceeding focused attention on the importance of clarifying the standards to be used in making that finding.

The Initial Study and Environmental Issues

CEC staff issued its Initial Study and proposed Negative Declaration for Champlin on April 18, 1986. It concluded that, with certain mitigation measures agreed to be the applicants, the project would not have a significant effect on the environment.

The Champlin SPPE raised no major environmental issues in any technical area.

Demand Conformance for the Champlin SPPE

At this time in mid 1986, CEC staff had concluded that the number of proposed powerplants (both AFCs and SPPEs) seeking Energy Commission approval greatly exceed the need for new facilities in the SCE service area as established under Electricity Report 5 (ER 5). CEC staff thus presented testimony challenging the need for a series of facilities, including Champlin. (The Arco-Watson history includes a comprehensive discussion of the demand conformance issues raised by CEC Staff.) In each of these proceedings with a demand conformance adjudication, the applicants won and CEC staff lost. After this series of defeats, in which the challenged powerplants were all found needed by several Committees and the Commission as a whole, CEC staff ceased to adjudicate demand conformance.

Champlin, together with Arco-Watson (Docket No. 85-AFC-1), were the first proceedings in this series where the staff adjudicated demand conformance. For Champlin, this forced the Energy Commission to try and determine the nature of the SPPE need finding. Just what did not "substantially in excess of the forecast" mean?

To Commissioner Arturo Gandara, Presiding over the Champlin SPPE, this was a very simple, common sense test. Commissioner Gandara had previously stated his views in a 14 page Concurring and Dissenting Opinion in the Placerita case, Docket No. 84-SPPE-1. With Champlin, he would merely implement his own approach to SPPEs. Commissioner Gandara thus did not subject the Champlin SPPE to the complicated ER 5 demand conformance tests required for an AFC. To Commissioner Gandara, those AFC need tests, as well as the CEC staff case, were irrelevant to an SPPE.

It was easy for Commissioner Gandara to conclude that at 80 MW, tiny Champlin would satisfy Public Resources Code section 25541(b) by not being substantially in excess of the ER 5 forecast of energy demands in the SCE service area:

The Committee’s Proposed Decision thus recommended that the SPPE be granted, with little regard for the ER 5 need tests beyond a single paragraph containing certain findings in Champlin’s favor.

At the Energy Commission’s June 26, 1986 Business Meeting, the Committee’s Proposed Decision on the Champlin SPPE came up for approval with Commissioner Gandara absent. The other Commissioners, led by Chairman Imbrecht, made it clear that they rejected the Proposed Decision’s approach to demand conformance for an SPPE. Commissioner Gandara’s language quoted above, which stressed Champlin’s small size, was stricken from the Decision. Instead, the Commission relied exclusively upon those findings showing that Champlin was needed in accordance with certain ER 5 policies.

Chairman Imbrecht went further in a Concurring and Dissenting Opinion, dated June 26, 1986, which accused the Champlin Committee of not following ER 5 and ignoring CEC staff’s concerns. Chairman Imbrecht argued that Champlin should have been subjected to the same ER V tests as if it were an AFC. However, as an SPPE, it could be approved if it "substantially meets" the appropriate ER V test. The Chairman’s opinion analyzed the record and determined that the Champlin SPPE could be granted because the project did achieve substantial compliance with ER V.

Champlin was constructed under local permits and began operations in 1989. The Energy Commission decision granting the SPPE provided for a complete exemption from further CEC jurisdiction, a legal approach which I (as the Hearing Officer) believed was the intent of Public Resources Code section 25541.

As a result of the Champlin dispute, subsequent Electricity Reports, starting with ER 6, often included specific language directing that SPPEs be subjected to the identical need test required for AFCs. (Under electric industry de-regulation of the mid 1990s, all demand conformance requirements were eliminated from the Warren-Alquist Act, including the need findings for Small Power Plant Exemptions in Public Resources Code section 25541.