Project Manager: Jack Caswell

Staff Counsel: Paul Kramer

Hearing Officer: Garret Shean

Presiding Member: Commissioner Arthur Rosenfeld

AFC Filing, Data Adequacy, and Project Description.

Applicant AES filed an Application for Certification for the Huntington Beach Generating Station Retool Project on December 1, 2000. The site was the existing Huntington Beach Generating Station in Orange County, which AES had purchased from Southern California Edison (SCE) in 1998 through the utility divestment phase of industry restructuring administered by the PUC.

SCE had previously built five units at Huntington Beach, but then retired Units 3 and 4 in 1995 because of limited use. In this AFC, AES proposed to retool and operate Units 3 and 4 at 225 megawatts (MW) each, for a total project of 450 MW. With the addition of Units 3 and 4, AES would generate 1,103 MW at Huntington Beach.

The new, upgraded AES units would be natural-gas fired, combined cycle facilities. The project proposed to utilize the existing infrastructure left behind by SCE. The site, adjacent to the Pacific Ocean, also had residential, commercial, and industrial neighbors. The Huntington Beach facility was typical of many former utility plants located on the coast. But it would be the Huntington Beach schedule that made this project unique. The AFC was found data adequate by the Energy Commission on February 7, 2001.

Executive Order D-22-01

On February 8, 2001, the day after Huntington Beach achieved data adequacy, Governor Davis signed Executive Order D-22-01. It was one of several Executive Orders signed that day which directed the Energy Commission and other agencies to respond to the electricity supply shortage by taking a number of extraordinary emergency measures.

The provision of Executive Order D-22-01 which applied to Huntington Beach mandated the CEC to "expedite to the extent feasible" AFCs for "existing thermal powerplants that require retooling". The Executive Order gave the Energy Commission very specific directions: "In order to bring such thermal powerplants online as soon as possible, the Energy Commission is authorized to reduce the time in which to conduct a reasonable review of the application, consistent with the objectives of environmental protection and the protection of public health and safety."

On February 16, 2001, the Energy Commission staff proposed to apply Executive Order D-22-01 to Huntington Beach whole hog by recommending that the CEC complete the AFC process "in 60 days." A two-month, 450 MW AFC would have normally been considered a fantasy. But, in the crisis era of rolling blackouts, this super expedited schedule became the Energy Commission's target in response to the emergency. The Huntington Beach AFC ended up being certified in three months, amazing speed at the time. However, two more months were then tacked on due to applicant's Petition for Reconsideration.

Issues.

The Huntington Beach expedited schedule was truly amazing when you consider that this was never an uncontested AFC. Intervenors California Unions for Reliable Energy (CURE) and the City of Huntington Beach both raised a number of concerns, tried to slow down the process, and ended up arguing for several restrictive conditions on the powerplant.

Emergency Conditions

Since the applicant was attempting to obtain a beneficial AFC schedule due to the state's electricity supply emergency, CURE and the City of Huntington Beach asserted that the CEC had to guaranty that Huntington Beach's electricity actually helped California. Intervenors proposed a condition limiting the plant's sales to California, including provisions for the CEC to monitor other AES facilities to insure that electricity sales are kept within California. The parties filed opposing briefs arguing the legality of such unprecedented restrictions.

The duration of Huntington Beach's license was also disputed. CEC staff, CURE, and the City of Huntington Beach all wanted a five-year limit, to expire in 2006. The California Coastal Commission also favored such a limitation. The shared concern was potential environmental impacts, primarily related to increased water intake and thermal discharge from the plant into the Pacific Ocean. (This biological issue afflicted all coastal plants that used ocean water for cooling and then discharged it at higher temperatures back into the ocean environment.) Studies at Huntington Beach were to be conducted/concluded after certification, and, the more limited license would ensure that environmental impacts from the project were properly understood in time to take corrective action or shut down the facility. AES first opposed any limitations on its license, later insisting on at least a ten-year term.

Compromise initially prevailed, as AES accepted a special Condition of Certification, Emergency -1, proposed by the Committee, requiring the applicant to enter into a contract with the California Department of Water Resources (DWR) to sell California the electricity from Huntington Beach Units 3 and 4 "to address the electricity supply emergency."

Emergency-2 restricted the license to a ten-year term, subject to an interim review in 2006 that could result in CEC termination of the license if AES failed to present evidence that it had complied with the conditions of certification, including biology mitigation based upon studies yet to be completed. Intervenors' requests for monitoring of other AES electricity sales were rejected.

Adoption.

At the May 10, 2001 Business Meeting, the Energy Commission unanimously certified Huntington Beach, combining a record-breaking expedited schedule with unique emergency conditions.

AES immediately began constructing the powerplant and commenced negotiations for a contract with DWR.

However the formulation approved by the Commission in its May 10, 2001 decision collapsed.

Reconsideration.

On June 11, 2001, applicant AES filed a formal Petition for Reconsideration with the Energy Commission asking for the deletion of Condition of Certification Emergency - 1. AES based its request upon the failure of negotiations between itself and DWR. DWR had sent a letter to AES declaring that it was terminating all negotiations. There would be no contract between DWR and AES for the sale of Huntington Beach's electricity to California. Unless Condition Emergency - 1 was removed, there would be no new Huntington Beach powerplant at all.

CEC staff's Solomon-like response to the Petition for Reconsideration proposed that applicant's request to delete Condition Emergency - 1 be granted, but that, in exchange, Condition Emergency - 2 be amended from a ten-year to a five-year license. This approach still attempted to retain the benefits of a new 450 MW powerplant that AES offered with Huntington Beach.

The Energy Commission, on July 11, 2001, essentially adopted the staff recommendations. The Commission granted the AES petition to remove "Emergency Condition 1" of the Huntington Beach certification and changed "Emergency Condition 2" to a 5-year license, with the burden of proof on AES to obtain a 5-year extension. The vote was 3-1, with Commissioner Laurie dissenting and Commissioner Pernell absent.

Huntington Beach construction proceeded with different schedules for Units 3 and 4. Unit 3's additional 225 MW came on-line on July 31, 2002, with Unit 4's 225 MW following a year later on August 7, 2003.