Staff Counsel: Caryn Hough

Hearing Officer: Garret Shean

AFC Filings and Project Descriptions

On December 9, 1985, Mobil Oil Corporation filed a pair of 237 MW oilfield cogeneration applications, the Belridge Cogeneration Project in Kern County, and the San Ardo Cogeneration Project in Monterey County. Both were natural gas-fired Thermally Enhanced Oil Recovery (TEOR) projects, which produce steam to heat thick, underground oil to a more liquid state, so it can then be pumped to the surface. Mobil proposed to sell its electricity from both the Belridge and San Ardo facilities to Pacific Gas and Electric Company (PG&E). However, Mobil’s attempts to negotiate power sales agreements with PG&E had not been successful at the time the AFCs were filed.

The Utility Sales Contract Requirement

The 1985 Electricity Report (ER 5) required at page 88 that every applicant proposing to sell power to a utility "provide a written agreement or commitment specifying the terms and conditions under which the power is to be sold" to that utility. This agreement would be the basis for CEC analysis of whether the facility passes the ER 5 need tests.

However, ER 5’s language did not specify when an applicant had to provide its utility sales contract to the Commission. The Mobil Belridge and San Ardo AFCs, in spite of their contract deficiency, were essentially handled as normal proceedings during most of 1986. A discovery process was undertaken and CEC staff began preparations to issue its Preliminary Staff Assessment.

Mobil always promised to submit its contracts with PG&E as soon as agreement was reached. Draft contracts, with terms PG&E had not agreed to, were filed and granted confidentiality. However, Mobil ultimately failed in its negotiations with PG&E. There was no agreement, and signed electricity sales contracts were never provided.

The lack of power purchase contracts finally caught up with the two AFCs when demand conformance started to be discussed. After a suspension in September 1986, it became clear that the cases were going nowhere without electricity sales contracts.

Mobil withdrew its two AFCs in a letter dated August 29, 1988, and the Commission formally terminated Mobil San Ardo and Mobil Belridge on September 21, 1988.

The main lesson of these proceedings was reflected in ER 6, the 1986 Electricity Report, which specified at page 6-3 that an applicant selling power to a utility must provide "a fully executed contract . . . at the time an application is filed."