Luz Engineering Corporation SEGS Project (Harper Lake) Unit VIII (Luz 8, Luz SEGS 8, SEGS 8)

Docket No. 88-AFC-1

March 31, 1989 Commission Decision Granting Certification

Project Manager: Gary Heath

Staff Counsel: David Mundstock

Hearing Officer: Garret Shean

Presiding Member: Commissioner Richard Bilas


Project Summary


AFC Filing and Project Description

Prior to completion of the first Luz proceeding at Kramer Junction (SEGS Units III-VII, Docket No. 87-AFC-1), Luz filed a new AFC on February 27, 1988 for Unit VIII, an 80 MW facility at Harper Lake. Five SEGS Units were planned for this massive new site and they would be the subject of three separate AFCs.

On April 13, 1988, the Commission determined that the Unit VIII filing was incomplete in thirteen technical areas identified by CEC staff. Major deficiencies included lack of spring surveys for rare and endangered plants and animals, failure to demonstrate the availability of transmission line capacity, inadequate analysis of the projectís impacts upon groundwater, and failure to identify proposed air quality mitigation measures (offsets). After Luz supplied the missing data, the Commission accepted the Unit VIII AFC effective August 3, 1988.

The Harper Lake site was a vacant former alfalfa ranch in the Mojave Desert of San Bernardino County, 135 miles northeast of Los Angeles. Much of the land had already been impacted by the farming operation. This was not pristine desert, a significant improvement over the earlier Luz Kramer Junction site (Luz SEGS 3-7). The proper name was Harper Dry Lake, although the area included marshlands.

Unit VIII would occupy 400 acres with solar collectors, rows of mirrors that concentrated the sunís energy onto a system of pipes circulating a heat transfer fluid. The heat transfer fluid was used to produce steam which powered a conventional turbine to generate electricity for sale to Southern California Edison (SCE). To supplement its solar power, Luz also utilized natural gas-fired heaters to heat the heat transfer fluid for electricity production. The AFC included a twelve mile transmission line to connect Unit VIII with SCEís Kramer Substation. Unit VIII (and the other Harper units) relied upon underground aquifers for their water supply.

Major Issues


Protected Species (Mitigation)

As with the Kramer Junction site, the major species of concern were the desert tortoise (protected as a state and federal candidate for threatened or endangered species listing) and the Mojave ground squirrel (protected as a state threatened species and a candidate for federal listing). However, since the Harper Lake site was previously disturbed by the alfalfa ranch, it was now a highly degraded tortoise and squirrel habitat. SEGS VIII would have much less impact on the tortoise and ground squirrel than Units III-VIII at the pristine Kramer Junction site. Biology issues could thus be resolved in a cooperative manner.

CEC staff calculated that Unit VIII would cause a long-term tortoise/squirrel habitat loss of 27 acres and a temporary loss of 40.5 acres, to be mitigated by acquisition of off-site tortoise/ground squirrel habitat at a ratio of 5 to 1 and 2 to 1, respectively. (Biology Condition of Certification 1, pages 138-140 of the CEC Decision.) Additionally, Luz proposed to construct a tortoise fence along Harper Lake Road, the main access road to the site. The fence was intended to prevent tortoise fatalities on the road. (Biology Condition of Certification 4.f., page 144 of the CEC Decision.) In its February 10, 1989 Biological Opinion, the Department of Fish and Game concurred with the approach taken by CEC staff and Luz.

The Marsh (Enhancement)

A mile and a half east of the SEGS VIII site was a distinctive wetlands complex, most of which Luz had acquired together with the alfalfa ranch. The wetlands consisted of the northern, central, and southern marshes, part natural and partly the result of agricultural runoff from irrigation. The biological science staff of the San Bernardino County Museum recognized the marshland as a unique county resource, a portion of which had been designated as an Area of Critical Environmental Concern by the Bureau of Land Management.

The central marsh was the largest, an important habitat for migrating and resident birds. Eighty acres of this marsh were managed for waterfowl hunting by a local duck club. A portion of the smaller southern marsh was owned by Luz, together with the northern marsh area. However the northern marsh was now dry due to the cessation of agricultural irrigation.

CEC staff, Luz, and local supporters of the wetlands decided to work together towards preserving and enhancing the marshlands, beginning in the SEGS VIII proceeding. While the wetlands were not directly impacted by SEGS VIII, subsequent SEGS units at the Harper Lake site, especially Unit XII, would be much closer to the marshes and could have an adverse impact absent proper planning to ensure the marsh water supply and protect habitat for foraging birds.

It was agreed that Luz would discharge the SEGS VIII cooling tower blowdown water into the northern marsh. (Biology Condition of Certification 5, page 147 of the CEC Decision.) This enhancement measure was intended to restore the northern marsh, subject to careful monitoring designed to ensure that the discharge would not be harmful to wildlife. Luz also agreed to conduct a two-year baseline biological study of the central and southern marshes, preparatory to the possible discharge of cooling tower water to these marshes, as appropriate. (Biology Condition of Certification 8., page 148 of the CEC Decision.)

Biology Conditions 9 and 10 (pages 148-149 of the CEC Decision) further committed Luz to temporarily providing well water to the southern marsh if Luz stopped existing irrigation by its tenant farmers and to a study of comparative biological impacts on the marshland from alternative sites under consideration of SEGS Unit XII.

The SEGS VIII biology conditions thus included mitigation as well as enhancement and the analysis of cumulative impacts from other planned SEGS units at Harper Lake. (However, the danger of selenium in the blowdown water prevented implementation of this approach. Many years later, Luz provided a limited amount of well water to the marsh as a substitute measure. See the SEGS IX-X case.)

Air Quality

CEC Staff and Luz agreed on an approach that both reduced and mitigated SEGS Unit VIIIís NOx emissions. Luz would utilize the experimental Alzeta Pyrocore burners at Unit VIII, which promised to lower NOx levels to 25 ppm, down from 40 ppm at Units VI and VII. (Air Quality Condition of Certification 1-14, page 73 of the CEC Decision.) (The air district still considered 80 ppm to be the Best Available Control Technology (BACT) for NOx, but the district's position was irrelevant in the face of applicant/staff agreement at the lower figure.) These new emissions would be mitigated by NOx reductions from 80 ppm to 60 ppm at Kramer Junction SEGS Units III-V. (Air Quality Condition of Certification 1-1, pages 69-70 of the CEC Decision.) Thus, Luz offset its new NOx emissions from Unit VIII and air quality became an uncontested subject in this proceeding.

Unfortunately for everyone, the Alzeta Pyrocore burners were gas-fired HTF heaters that could be dangerous if not installed and operated properly. They exploded and burned on January 10, 1990, soon after SEGS VIII went into operation. It was the world's largest solar power accident, shutting Unit VIII down for a lengthy period and weakening Luz financially. (See page 547 of the Luz SEGS Unit IX-X Decision.)

Water Supply

CEC staff concluded that Luzís use of groundwater for SEGS Unit VIII would not have an adverse impact upon the aquifer because the planned Luz extraction amounted to a decrease in water use compared to historical levels of irrigation at the same site. (December 8, 1988 FSA, Page Water-14.)

At the December 12, 1988 evidentiary hearing, the staff and applicant water supply witnesses were cross-examined by a neighboring land owner, intervenor James LaMont. Mr. LaMont expressed concern about ground subsidence and depletion of water supplies in the Harper Lake area caused by excessive groundwater extractions. (12/12/88 RT 59-68.) However, Mr. LaMont had no counsel and presented no evidence, so that his impact on the Unit VIII proceeding was minimal.

Transmission System Engineering

CEC Staff identified a shortage of transmission line capacity in the Western Mojave area due to the large number of new qualifying facilities being planned. In addition to Luz, which intended to construct Units VIII-XII at Harper Lake, there were also the Mojave Cogeneration Project and units being proposed by the California Energy Company, starting with Coso Navy 2.

In order to accommodate this expected generation load, Southern California Edison had developed a major upgrade plan, featuring the construction of a new 220 kV transmission line from the Kramer Substation to Victor. This project would be under PUC jurisdiction (A.89-03-026), and it was an absolute necessity in order for Luz and Cal Energy to continue with their current plans. (Pages 465-469 of the CEC Decision.) Disputes between Edison, Luz, and Cal Energy over paying the costs of this new transmission line would become a lingering PUC issue for many years to come.


CEC staff concluded that Luz would impact overcrowded schools in the Harper Lake region and developed mitigation measures under which Luz would negotiate the amount of payments for the cost of additional Unit 8-related students, based upon annual surveys to be conducted by the school districts. The Committee and Commission later strengthened these mitigation provisions, requiring Luz to pay affected school districts $2,500 for the cost of each additional student instead of negotiating the amount. (Socioeconomics Conditions of Certification 2a-c, pages 228-230 of the CEC Decision.)

Staff identified a variety of other potential impacts and proposed conditions to encourage local hiring and reduce the creation of a housing shortage (Socioeconomics Conditions of Certification 1 and 3, pages 228 and 230 of the CEC Decision.) The subject of Socioeconomics was uncontested as between CEC staff and Luz.

Intervenor District Council 16 of the United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry (District Council), represented by Adams & Broadwell, presented its own Socioeconomics evidentiary case which was a major adjudication. District Council contended that the low construction wage and benefit levels offered by Luz would bring in out-of-state workers, resulting in nearly $2,000,000 in impacts on local public services, including schools and health care, as well as numerous other adverse impacts on housing and public safety. (Pages 217-221 of the CEC Decision.)

District Council argued that a condition of certification requiring Luz to pay prevailing wages (as required for government projects under Labor Code section 1773) was the only effective measure that would actually mitigate these impacts by causing local (unionized) workers to be hired instead of a migratory, low-paid, low-skilled work force. Luz opposed the District Council case while CEC staff remained neutral. (Pages 221-224 of the CEC Decision.)

The Committee and Commission found no sufficient nexus between paying prevailing wage and the avoidance of migratory workers, suggesting that higher wages would also be attractive to a transient workforce. Instead, the Commission chose to add mitigation in the area of medical care, intending to reduce burdens upon local public health services from an uninsured Luz work force. (Pages 224-228 of the CEC Decision.) Socioeconomics Condition of Certification 4 at pages 230-231 of the CEC Decision now required Luz to offer its workers and their dependents an appropriate health insurance plan, with sample parameters set forth in the verification. To my knowledge, this is a unique condition, found in no other CEC decision.

Demand Conformance

SEGS VIII was generally a replay of the Demand Conformance scenario for Units III-VII. Luz again failed the ER 6 physical and economic need tests, making the balancing test decisive. (Pages 11-12 of the CEC Decision.) This time CEC staff concluded that SEGS Unit VIII did pass the balancing test, in part because the facilityís Standard Offer 2 contract was less costly to ratepayers than the Standard Offer 4 contracts held by Units III-VII. (Pages 12-13 of the CEC Decision.) The Commission decision virtually re-stated the prior Kramer Junction analysis in finding that the societal benefits associated with certifying the solar facility outweighed the burdens. Crediting Luz with environmental enhancement, the Commission directly referred to the north marsh restoration project as a substantial benefit to the areaís wildlife. (Pages 13-17 of the CEC Decision.)

Commission Decision

The Commission considered certification of Luz SEGS Unit VIII at the March 29, 1989 Business Meeting.

Tom Adams, representing District Council, disagreed with the Commissionís socioeconomic findings and again called for the imposition of a prevailing wage requirement. He also raised a new California Environmental Quality Act (CEQA) issue, claiming that the decision failed to properly discuss alternatives to the applicantís project, specifically alternative sites. In opposition to Mr. Adams, Staff Counsel argued that the CEC process for considering alternatives fully complied with CEQA under functional equivalency.

Intervenor James LaMont appeared to raise various issues, including depletion of the basinís ground water and decommissioning. Mr. LaMont suggested that the existing decommissioning language was ineffective without a requirement for performance bonds or the establishment of decommissioning funds over the projectís life. The conditions were not modified.

The Luz SEGS Unit VIII AFC was certified on a 4-1 vote, Commissioner Mussetter dissenting.


District Council filed a petition for reconsideration dated April 14, 1989. It challenged the evidentiary basis of the Commissionís imposing socioeconomics mitigation other than a prevailing wage requirement, and it asserted that the decision violated CEQA by failing to provide an adequate discussion of alternative sites. CEC staff (on May 4, 1989) and Luz (on May 5, 1989) filed papers in opposition to the petition for reconsideration.

The staff pointed out that under section 1765 of the CEC regulations, the evidentiary burden was on District Council to present its own case for alternative sites. Instead, District Council had offered evidence for alternative mitigation, without ever raising the issue of alternative sites until after the hearings had closed. Staff further asserted that since all significant, site-related adverse impacts from Unit VIII had been mitigated to a level of insignificance, there were no remaining impacts requiring consideration of alternative sites under the Commissionís Certified State Regulatory Program, which is exempt from the EIR requirements relied upon by District Council.

The Commission heard oral arguments on the petition at the May 10, 1989 Business Meeting. A Commission Order, dated May 10, 1989, denied the petition for reconsideration on a 3-1 vote for the following reasons:

* The record does not limit mitigation to the single remedy of prevailing wages offered by District Council.

* The Committee and Commission have formulated socioeconomics mitigation measures in areas such as health care, schools and housing which are appropriate and sufficient.

* In response to District Councilís comments on the PMR and the Proposed Decision, the Committee expanded its own discussion of alternatives to include a comprehensive, independent, comparative review of Luzís alternative sites that had been submitted in the AFC.

* District Council failed to assert the existence of unmitigable site-specific environmental impacts, nor did it suggest that any additional alternative site should be examined.

* Absent any unmitigable adverse impacts, neither CEQA nor the CEC regulations requires the Commission to go through a totally academic exercise of examining an unbounded number of alternatives.




District Council did not seek judicial review of the CEC decision certifying Luz SEGS Unit VIII. Once the deadline for appeal had passed, Luz immediately began fast-paced construction of the facility, which started operations in December 1989, just in time to qualify for the maximum amount of available tax credits. The explosion and fire at Unit VIII which immediately followed due to a series of Luz errors involving the experimental Alzeta Pyrocore burners was horrendous. However, Luz corrected this problem and persisted with its ambitious expansion plans at Harper Lake.

Luz units licensed by the Energy Commission continued to operate under ownership of the limited partners following the 1991 bankruptcy of Luz Engineering Corporation, a bankruptcy that included the other Luz management/financial entities and put Luz out of business.