III. Qualifying Facilities and the Cogeneration Era (1981-1990)
The Public Utilities Regulatory Policy Act of 1978 (PURPA) was Federal legislation passed under President Carter that encouraged non-utilities to build powerplants whose electricity would be sold under contracts to the utilities. Projects that met PURPA standards were called Qualifying Facilities, or QFs.
California's investor owned utilities such as PG&E and SCE did not appreciate the competition offered by QFs and dragged their feet on implementing PURPA. This led to a PUC fine, and the floodgates finally opened to California QFs. The Qualifying Facilities, with oil companies in the lead, took over the job of building new powerplants in California. Except for PG&E's geysers plants, the investor-owned utilities virtually abandoned the field of new powerplant construction to the QFs.
Most Qualifying Facilities were cogeneration plants, in which energy was used for an industrial purpose plus producing electricity. The Energy Commission favored cogeneration as another alternative technology, stating in 1981 at page 375 of the CEC's Electricity Tomorrow that any cogeneration facility meeting basic standards "will be deemed needed." Cogeneration plants were also exempted from the Notice of Intention requirement.
The Energy Commission now faced a decade dominated by Qualifying Facilities, primarily natural gas-burning cogeneration plants. However, QFs came in all packages, including 900 MW of coal cogeneration (Belridge), solar power (Luz, a special adventure) and garbage burners (the most controversial technology which rightfully failed to be licensed).
Originally, the PUC placed no limit on the number of allowable QF contracts that the utilities had to sign. It later became clear that there were too many QFs, especially small facilities sized at 49 MW to avoid Energy Commission jurisdiction. Need (and cost) for all these new power plants would become significant issues at the Energy Commission later in the 1980s, after the PUC halted the signing of additional QF contracts, and set deadlines which phased out nearly all QFs. (See ARCO-Watson for a major adjudication over demand conformance.)
I consider this era to have begun with the Occidental Geothermal Plant, Docket No. 81-AFC-1, the first QF licensed by the Energy Commission (see the Geothermal section above); and to have ended with the last Luz solar AFC (Units IX-X) certified in 1990, Docket No. 89-AFC-1. (The final QF actually licensed was the Crockett Cogeneration Project in 1993 (Crockett II), Docket No. 92-AFC-1, but that was a unique re-run. I believe the entire heavily disputed Crockett history belongs in the QF era.)
The cogeneration plants and other QFs were not large facilities. Most were in the 100-200 MW range, and many were Small Power Plant Exemptions (SPPEs) of less than 100 MW. The largest QF to be certified, ARCO-Watson at 385 MW, broke all records for an AFC approved by the Energy Commission. (That mark would stand until the Merchant Plant era more than a decade later of 500-1,000 MW AFCs.) There was also self-generation, in which an industrial company built a powerplant primarily to service its own electricity needs.
During this period, the Qualifying Facilities were numerous and diverse. On the whole, I believe those QF plants licensed by the CEC and built during the 1980s served California extremely well.
Had the Public Utilities Commission successfully nurtured a new generation of QFs, the entire deregulation fiasco could probably have been avoided. However, the investor-owned utilities, helped by FERC, were able to achieve their goal of shutting off further competition from QFs. (See the BRPU discussion in the San Francisco Energy case, part of "The Void", which follows.)
Without any new Qualifying Facilities seeking certification, the number of AFCs filed at the Energy Commission during the 1990s shriveled until none were left.