Certified on November 13, 1985

Project Manager: Darrel Woo

Staff Counsel: David Mundstock

Hearing Officer: Steve Cohn

Presiding Member: Commissioner Arturo Gandara

AFC Filing and Data Adequacy

Gilroy Foods filed its AFC on August 17, 1984, for a 115 MW cogeneration facility. The Commission accepted the AFC as data adequate on September 19, 1984.

Project Description

The Gilroy Foods Cogeneration Facility was intended to supply steam for dehydrating and food processing at the Gilroy Foods plant and electricity for sale to PG&E under a Standard Offer 4 contract. As a Qualifying Facility (QF), Gilroy Foods was seeking to become the first non-utility cogenerator certified by the Energy Commission in the PG&E service area.

The project was located in an industrial section of Gilroy, Santa Clara County, approximately 30 miles south of San Jose. Natural gas was the primary fuel for the gas turbine and boilers. Gilroy Foods was a long established company in the area and its cogeneration project had significant local support.

To mitigate the project’s emissions a combination of emission controls on the project and emission offsets was employed. NOx emission controls on the turbine included the use of a low-NOx combustor (known as the "Quiet Combustor) and steam injection. Emission offsets came from the shutdown of an existing boiler and the reduced operation of natural gas-fired dehydrators at the food processing plant.

In addition, utility offset credits were used to offset the balance of the project’s emissions. Utility offset credits were based upon the notion that the operation of the new cogeneration project would "displace" the operation of old and "dirty" utility boilers. Those displaced emissions could then be credited to the new project’s emissions. (It should be noted that the Bay Area Air Quality Management rules no longer allow for utility displacement credits.)

Issues

CEC staff and applicant Gilroy Foods worked closely together in a cooperative manner to try and successfully resolve potential issues in the case. Relatively few issues were ever raised to the Committee level.

Structural Engineering

There was disagreement among CEC staff engineers as to the proper seismic standards that a QF had to meet. The CEC normally imposed stringent standards upon utility powerplants, whose reliability was deemed critical to the state, but no precedent existed for QF, non-utility seismic standards.

Gilroy Foods had proposed only to meet minimal seismic standards under the Uniform Building Code (UBC), which meant less protection against earthquakes than provided by traditional CEC conditions of certification. Gilroy Foods defended this approach on the grounds that, as a private company, it would suffer the financial loss from quake damages, with no cost to the ratepayers, in sharp contrast to a utility powerplant, where outages would be charged to the ratepayers.

A strongly divided CEC staff ended up not recommending the adoption of more stringent seismic standards, while informing the Committee of the situation. Staff proposed that Gilroy Foods investigate an upgrade of their seismic standards.

At pages 55-56 and 70-75 of the Decision, the Committee and the Commission disapproved the staff approach as too passive. Staff was directed to be firmer in having real standards and recommending their adoption. The Decision rejected basing seismic standards upon project ownership, declaring that all powerplants licensed by the CEC should be equally reliable in their ability to keep operating after an earthquake. The Decision provided in Structural Engineering Condition of Certification #1 that Gilroy Foods must use the more stringent seismic criteria identified by CEC staff, if the CEC determines that they are cost-effective for Gilroy Foods. The end result was an eventual upgrade of Gilroy’s seismic standards.

Gentry Foods

Gentry Foods, another food processor/dehydrator, was Gilroy Food’s competitor and neighbor. Gentry Foods intervened in the case to raise the concern that its plant operations could be damaged by an increase in humidity caused by moisture emanating from the Gilroy Foods cooling tower. Gentry Foods wanted the CEC to require Gilroy Foods to gather meteorological data and conduct extensive before and after monitoring to protect against this danger, with the CEC retaining jurisdiction to require future mitigation if necessary. Gilroy Foods rejected the entirety of Gentry’s claims, although it was apparently willing to pay Gentry $10,000 if they would go away.

The Committee held a contested evidentiary hearing on July 11, 1985, in which Gentry tried to make its case scientifically, based upon what both Gilroy Foods and CEC staff felt was pure speculation, supported by little evidence of any real potential for damage.

At pages 155-156 of its Decision, the Committee and Commission came up with a Solomon-like solution to the problem. Finding no proof that Gentry will be impacted by Gilroy, but some potential for impact under certain unlikely circumstances, the Committee crafted a unique Condition of Certification. It directed Gilroy Foods to not operate the cogeneration facility in a manner which increased the air’s moisture content so as to adversely impact Gentry Foods. Gentry Foods would have the responsibility for optional monitoring of its own moisture and other atmospheric conditions, with the CEC retaining jurisdiction to impose appropriate mitigation if Gentry can establish an injury in violation of the condition.

The Energy Commission never heard about this issue again, and Gentry Foods was later acquired by Gilroy Foods, rendering the entire matter moot.

Demand Conformance

Demand Conformance for Gilroy Foods was analyzed under the ER V Specified Reserved Need Test. At workshops, CEC staff and Gilroy Foods discussed the difficulty Gilroy faced in meeting the test’s various conditions.

At one point Gilroy Foods claimed an exemption from the need test under Public Resources Code section 25540.6(e), based upon a technology demonstration for the quiet combustor. This claim was denied on the basis that the quiet combustor technology had already been demonstrated and was not sufficiently advanced to qualify for the demand conformance exemption. (See pages 48-50 of the Commission Decision.) Applicant would have to try something else to overcome the Specified Reserved Need Test.

In order to increase its chances of passing this test, Gilroy Foods negotiated with PG&E to modify its original contract, which provided for a "must run" baseload facility. Gilroy Foods introduced its modified contract at the July 18, 1985 hearing. The powerplant was now dispatchable by PG&E for half of the year. PG&E could thus accept or reject Gilroy’s electricity, depending upon its own needs and the comparative costs of different options.

Under the original baseload contract, CEC staff would have testified that Gilroy Foods failed Condition 4(a) of the test, because, given the then current surplus of power, no baseload facility could match PG&E’s load conditions. However, with the amended contract, staff testified that the dispatchable facility would match PG&E’s loads sufficiently to satisfy Condition 4(a). Staff felt that the dispatchability provisions negotiated by Gilroy Foods were an important and constructive precedent. (Page 36 of the CEC Decision.) The Gilroy Foods applicant knew how to solve problems in order to achieve its license.

The Committee agreed with staff and concluded that Gilroy Foods would satisfy Specified Reserved Need Test Condition 4(a), if the amended contract was formally executed and PG&E acted reasonably to ensure economic dispatch. (Pages 37 and 52 of the CEC Decision). Formalization and implementation of the amended contract became Need Conditions of Certification 1-2 at pages 52-53 of the CEC Decision.

To be on the safe side, the Committee also analyzed need for Gilroy under Condition 4(b), the balancing test, concluding that it will provide an overall benefit. (Although Conditions 4(a) and 4(b) were in the alternative, CEC staff, Gilroy Foods and the Committee all conducted an analysis under both.) Therefore, the Gilroy Foods Cogeneration Facility was found to be in conformance with the 1985 Electricity Report (ER V). (Page 52 of the CEC Decision.)

Adoption.

The Energy Commission unanimously approved the Gilroy Foods Cogeneration Facility AFC on November 13, 1985. Commissioner Commons filed a concurring opinion in which he emphasized the saturation of baseload capacity in the PG&E service area. His opinion stated that Gilroy Foods would have been denied certification, had it not negotiated a load following agreement with PG&E.

The Gilroy Foods Cogeneration Project was constructed and began operations in 1988. Applicant held groundbreaking and dedication ceremonies to coincide with a day at the Gilroy Garlic Festival, which insured good attendance. Gilroy Foods remained one of the Energy Commission's favorite applicants.

The powerplant was later purchased by Calpine and is now known as Calpine Gilroy.