Chevron USA’s Richmond Cogeneration Facility (Chevron Richmond, Richmond, Richmond Cogeneration)
Docket No. 86-SPPE-1
Small Power Plant Exemption Granted October 7, 1987
Staff Counsel: Linda Waits
Presiding Member: Commissioner Bob Mussetter
SPPE Filing and Project Description
Chevron filed an Application for a Small Power Plant Exemption (SPPE) on November 10, 1986 for a 98 MW net cogeneration plant, which would produce steam and electricity for use in Chevron’s oil refinery at Richmond, in western Contra Costa County.
The large refinery (4.5 square miles) at the edge of San Francisco Bay would consume nearly all electric power generated by the plant. Refinery-produced electricity would replace Chevron’s purchases from Pacific Gas and Electric (PG&E). No more than 44 GWh per year (5 MW) of excess electricity would be sold to PG&E. By producing electricity for internal use, Richmond was thus another self-generator, following IBM (Docket No. 85-SPPE-2) and El Segundo (Docket No. 85-SPPE-5). However, ER 6 now applied, so this became the first project evaluated under the new demand conformance test for industrial self-generation facilities.
The fuel would be natural gas or liquefied petroleum gas, with diesel fuel as a backup. The cogeneration plant would replace an existing steam plant and two boilers currently in use by the refinery, providing a source of air emission offsets. The new plant’s NOx emissions would be controlled by the selective catalytic reduction (SCR) system. Overall, the new plant would reduce the refinery’s air emissions.
The SPPE Process
SPPE eligibility is limited to plants with a capacity of 50 MW up to 100 MW. 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" (Public Resources Code section 25541(a)), 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)." (Public Resources code section 25541(b)).
If an exemption is granted, no AFC need be filed, and the applicant can obtain local permits to build the powerplant. An SPPE is thus an exemption from the Energy Commission’s site certification process.
CEC staff’s environmental and energy resources 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 Initial Study and Environmental Issues
On May 5, 1987, CEC staff issued its Initial Study and Proposed Negative Declaration, finding no significant impact on the environment or energy resources from the proposed Richmond Cogeneration Facility. There was no challenge to the staff’s environmental findings or conclusions. Richmond conformed to the requirements of section 25541(a) of the Warren-Alquist Act.
Intervenors PG&E and the Northern California Pipe Trades Council asserted that Richmond could not qualify for an SPPE because the project’s generating capacity exceeds 100 MW, the jurisdictional limit under Public Resources Code section 25541. Chevron and CEC staff jointly claimed that the facility did qualify, having a generating capacity below 100 MW, with applicant adopting staff’s computations. The issue resulted in a highly technical adjudication.
CEC staff testified that the project had a gross design capacity of 100.6 MW, from which an auxiliary (internal) load of 3.3 MW was subtracted, leaving a maximum net design capacity of 97.3 MW in accordance with section 1935(b) of the CEC regulations. (Section 1935(b) was subsequently repealed, and generating capacity for jurisdictional purposes is now determined in accordance with sections 2001 and 2003 of the CEC regulations in Title 20.)
PG&E presented an engineering witness who challenged staff’s assumptions and methodology, claiming that "maximum net design capacity" means the highest output at an instantaneous point in time. PG&E used the lowest site temperature to increase plant gross capacity, while CEC staff utilized an average temperature. PG&E calculations placed Richmond’s maximum net design capacity at 107.9 MW, later revised to 105.3 MW (108.6 MW gross, minus the same 3.3 MW auxiliary load used by staff). PG&E also found that the project would exceed 100 MW nearly 36% of the year.
Intervenor Pipe Trades Council offered written testimony from its mechanical engineer, relying upon the powerplant’s nameplate rating. This produced a gross design capacity of 101.66 MW, from which it subtracted an auxiliary load of .59 MW, leaving a net design capacity of 101.7 MW. Numerous load items deemed non-essential, including those associated with refinery steam production, were deleted from this calculation of auxiliary load.
The Committee and Commission generally agreed with the CEC staff approach that utilized average or typical ambient conditions to calculate the maximum net design capacity for a baseload facility. (CEC Decision, pages 28-30.) PG&E’s reliance upon the maximum possible calculation for gross capacity, no matter how brief or atypical the conditions that produced it, was found to be unreasonable. Also rejected was the Pipe Trades Council’s low figure for auxiliary load that deleted loads essential to the plant’s cogeneration function. The steam production loads had to be included in a proper calculation for a cogeneration plant. (CEC Decision, pages 33-34.)
Taking either the CEC staff’s gross design capacity of 100.6 MW or the 101.66 MW from the Pipe Trades Council, and subtracting the appropriate auxiliary load of 3.3 MW, the Committee calculation found the project’s maximum net design capacity to be less than 100 MW (98.36 MW from staff/97.3 per the Council). Richmond thus qualified for an SPPE and intervenors’ jurisdictional challenge failed. (CEC Decision, page 34.)
Demand Conformance for the Richmond SPPE
Need for Richmond was evaluated under ER 6’s first-ever self-generation test:
"(1) With respect to that portion of the power sold to the utility, the Commission will apply the principles and conditions applicable to QFs.
(2) With respect to that portion of the power produced for internal use, self-generation projects will be presumed needed if the applicant demonstrates that it attempted to negotiate a rate with the utility it would otherwise purchase power from and cannot obtain a rate that in the applicant’s judgment is less than the value of the self-generation project (cost of power from the proposed project less intrinsic value to the self generator). This presumption may be rebutted by "clear and convincing" evidence."
For section (1), electricity sold to PG&E, Richmond had to satisfy the physical and economic need components of the ER 6 demand conformance test for QFs. With Richmond agreeing to sell PG&E no more than 5 MW a year, CEC staff and applicant argued that the project would pass the physical need test due to its de minimis impact upon the utility’s core resources. Although intervenor PG&E claimed these sales would adversely impact its core resources, the Committee and Commission sided with staff and applicant. Richmond’s electricity sales were too small to impact PG&E’s core resources, thus complying with the physical need test. (CEC Decision, pages 40-42.)
Richmond easily met the economic need test by selling its electricity under a Standard Offer 1 contract, whose real-time pricing provisions avoided any excessive costs to ratepayers. Thus, Richmond passed section (1) of the self-generation test for its electricity sales to PG&E. (CEC Decision, pages 42-43.)
As for section (2), the internal use of power, the evidence revealed failed attempts by PG&E and Chevron to negotiate a special rate, including applicant’s rejection of three separate PG&E offers to keep the refinery as a customer. Chevron explained and justified its reasons for determining that each PG&E offer was not in applicant’s best economic interests, compared to building the cogeneration plant.
PG&E testified regarding the generous benefits offered Chevron by its offers, trying to show that, under a proper economic analysis, it was in applicant’s best interests to accept one of PG&E’s proposals.
Applying section (2) of the self-generation need test, the Committee and Commission found that Chevron had established a reasonable economic basis in support of its judgment to proceed with the cogeneration plant, rather than accept any of PG&E’s offers. This upheld the presumption in section (2) favoring an applicant’s calculation of its own best interests. PG&E had failed to produce convincing evidence to rebut Chevron’s assessment of the risk and benefit factors favoring construction of the cogeneration plant. Section 2 was satisfied. (CEC Decision, pages 49-52.)
Chevron’s Richmond Cogeneration Facility therefore passed the Demand Conformance Test for self-generation facilities.
In a 55 page Decision, The Energy Commission unanimously granted the Richmond Cogeneration Facility a Small Power Plant Exemption on October 7, 1987. The project was constructed under local permits and began operating in 1992.