Small Power Plant Exemption Granted April 12, 1989

Staff Counsel: Caryn Hough

Hearing Officer: Susan Gefter

Presiding Member: Commissioner Richard Bilas

SPPE Filing and Project Description

The Mojave Cogeneration Company (MCC) filed an Application for a Small Power Plant Exemption (SPPE) on June 30, 1988 for its 55 MW Mojave Cogeneration Project, which would produce steam for the U.S. Borax Boron Mine and refinery, plus electricity for sale to Southern California Edison. The fuel would be natural gas, with commercial fuel oil as a back-up, and the project was located at a disturbed industrial site near Boron, at the southeast corner of Kern County. The facility also required construction of some new transmission lines.

This application resolved a jurisdictional problem caused when Mojave increased its net sales capacity to 55 MW without changing project equipment. At a lower capacity, below the 50 MW threshold, Commission staff had earlier determined that Mojave was not subject to CEC jurisdiction.

At 55 MW, the Energy Commission issued a June 7, 1988 Order asserting jurisdiction, Docket No. 88-C&I-3. In response, Mojave filed for an SPPE.

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 had traditionally been an exemption from the Energy Commission’s site certification process. However, as with Navy 2 (Docket No. 88-SPPE-1), approval of Mojave included a Compliance Plan with Conditions of Exemption. Mojave’s Compliance Plan was 29 pages long.

CEC staff’s environmental 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 Mojave Initial Study and Environmental Issues; Conditions of Exemption

On February 24, 1989, CEC staff issued its Initial Study and Proposed Negative Declaration, finding no significant impact on the environment or energy resources from the Mojave facility, provided certain mitigation measures were implemented. The applicant agreed to the staff’s mitigation measures, which became Conditions of Exemption in the Mojave Compliance Plan.

Air Quality

CEC staff found Mojave's initial air emissions would result in a significant adverse impact. However, the combination of emission controls at the project along with emission reductions of existing equipment would fully mitigate the project's potential significant adverse air quality impact. The use of water injection along with Selective Catalytic Reduction would reduce NOx emissions. Natural gas as the primary fuel would also limit sulfur dioxide (SO₂) and particulate emissions. To offset the project's emissions increases, the applicant agreed to offer the following mitigation measures: reduce the NOx and particulate emission rates from the combustion turbine, curtail the operation of the boilers at the U.S. Borax facility and duct burners at the other U.S. Borax cogeneration combustion turbine, interpollutant trade excess NOx and SO₂ reductions for particulate increases, and retro-fit high efficiency drift eliminators at the existing U.S. Borax cooling towers for further particulate emission decreases. (Pages 11-16 of the CEC Decision.)

Biology

In Biology, the project’s new transmission line would impact sensitive desert species, such as the desert tortoise and Mojave ground squirrel. Mojave agreed to purchase replacement habitat at a rate of 5 acres purchased for each acre lost. This was the same 5 to 1 mitigation ratio that the Department of Fish and Game had been insisting upon in the Luz cases, starting with Docket No. 87-AFC-1. Biology was uncontested. (Pages 18-19 of the CEC Decision.)

With the Conditions of Exemption agreed to by CEC staff and applicant, Mojave thus conformed to the requirements of section 25541(a) of the Warren-Alquist Act.

Demand Conformance

Need for the Mojave project was evaluated under ER 6 (the 1986 Electricity Report), which at page 6-3 expressly required an SPPE to pass the exact same demand conformance test as an AFC, due to the abundance of energy resources in the state.

Physical Need

Passage of the Physical Need Test could be achieved through dispatchability, or other evidence that core resources would not be displaced. ELFIN modeling showed that Mojave, although dispatchable, could still displace a maximum of 71 GWh of SCE’s core in 1991, .1% of Edison’s total generation.

CEC staff found any such displacement, no matter how small, to mean that Mojave failed the Physical Need Test. Applicant and the Committee disagreed, concluding that this displacement level was uncertain and inconsequential, having a deminimis effect. Mojave therefore passed the Physical Need Test. (Pages 31-34 of the CEC Decision.)

Economic Need

The ER 6 Economic Need Test required a proposed project not to increase total utility system costs, compared to the system without the facility. Using ER 6 assumptions, CEC staff found that Mojave would cost Edison’s ratepayers approximately $37 million more than running the system without it during the 1991-1997 period. Applicant did not dispute Mojave’s failure of the Economic Need Test. (Pages 34-35 of the CEC Decision.)

The Balancing Test

ER 6 allowed a project which failed the Physical and Economic Tests to still be found needed if the applicant could make a "showing of overriding circumstances" by clear and convincing evidence establishing that it is clearly in the public interest to permit the facility. This was another discretionary balancing test, in which a project had to prove that its benefits substantially outweighed its costs.

CEC staff originally contested applicant’s claims that, because Mojave reduced air emissions, provided reliable electricity, and used natural gas efficiently, it passed the Balancing Test. This was not enough for staff. However, staff and applicant then reached a stipulation under which Mojave would commit $250,000 a year for eleven years to implement an Environmental Compensation Fund to secure air emission reductions or an equivalent environmental benefit. Under this stipulation, it was agreed that Mojave did pass the Balancing Test. (Page 36 and pages 40-41 of the CEC Decision.)

The Committee, taking numerous factors into account, including the Environmental Compensation Fund, concurred that Mojave passed the ER 6 Balancing Test, complying with Public Resources code section 25541(b) of the Warren-Alquist Act. (Pages 41-45 of the CEC Decision.)

Adoption

The Energy Commission unanimously granted the Mojave Cogeneration Project a Small Power Plant Exemption on April 12, 1989, in a 50 page Decision with an additional 29 page Compliance Plan. The Mojave project was constructed under local permits and began operating in 1990.