SDG&E’s Combined Cycle Project, Docket No. 89-NOI-1

Withdrawn, and Terminated on October 9, 1991

Docket No. 90-AFC-1: Withdrawn, and Terminated on October 9, 1991

Docket No. 93-AFC-1: Withdrawn, and Terminated on June 8, 1994

Project Manager: Bob Eller

Staff Counsel: Arlene Ichien and Erik Saltmarsh

Hearing Officers: Garret Shean, Gary Fay

Overview

Many Electricity Reports have identified a clear physical need for new power plants in the SDG&E service area, a need for capacity that did not exist with SCE or PG&E. While the Energy Commission kept licensing QFs in the SCE and PG&E areas, SDG&E did not file an application until 1990. SDG&E then submitted two separate AFCs involving partial and complete repowering of existing South Bay Unit 3. However, SDG&E withdrew both applications because of unfavorable circumstances. The irony remains, that in spite of continued need for electricity, the Energy Commission has still never licensed an SDG&E powerplant AFC.

This was SDG&E’s earliest and largest filing, on December 27, 1989. The ambitious project, in seven volumes, envisioned a 460 MW combined- cycle powerplant at one of five proposed sites: Encina, South Bay, and Sycamore Canyon (all in San Diego County), plus Blythe in the Riverside County desert and Heber in Imperial County. SDG&E had existing facilities at South Bay, Encina, and Heber.

CEC staff’s August 1990 Issues and Alternatives Report on the San Diego County Sites identified major potential problems in key areas such as air quality and biology. Staff’s analysis was proven correct in the South Bay proceedings to follow. However, the NOI did not advance towards any resolutions or conclusions. SDG&E requested a suspension in November 1990, followed by a letter of withdrawal dated September 9, 1991. (For SDG&E’s reasons, see the first South Bay discussion.) The Commission terminated the SDG&E Combined Cycle Project NOI on October 9, 1991.

AFC Filing and Project Description

On January, 22, 1990, San Diego Gas and Electric (SDG&E) filed an application to partially repower its existing South Bay Unit 3 Electric Generating Facility in Chula Vista. It would be known as the South Bay Augmentation Project. The proposed modification to this gas-fired plant on San Diego Bay would increase Unit 3’s capacity by 140 MW.

As a modification to an existing facility, Public Resources Code section 25540.6(a)(2) established that South Bay would be a 12-month AFC exempt from the NOI requirement.

Although SDG&E had a need for new capacity, South Bay was filed as a demonstration project under Public Resources Code section 25540.6(a)(5), in order to test an innovative NOx emission control technology. Demonstration projects are exempt from any need determination.

Potential Issues

The South Bay project had major data adequacy problems, primarily in air quality. SDG&E had difficulty obtaining air emissions offsets, and otherwise complying with the San Diego Air Pollution Control District rules. Even after the Commission found South Bay to be data adequate, the air district believed that it still lacked required information for the analysis to begin. The air district never was satisfied that SDG&E had a suitable application, with actual offsets.

The South Bay Augmentation Project also had local opponents in the Chula Vista area. They considered the powerplant to be an eyesore upon the bayfront, preferring the facility to be shutdown rather than modernized, and the area converted to parkland. The City of Chula Vista itself was hostile to the AFC. Under biology, potentially significant adverse impacts to the marine ecosystem were identified from the plant’s proposed use of San Diego Bay water for additional cooling.

The SCE-SDG&E Merger

While South Bay was under review, Southern California Edison (SCE) proposed to acquire the smaller SDG&E in a merger. The merger required PUC approval, and was very controversial. There was strong sentiment in San Diego against losing its local utility to Edison, a creature of the Los Angeles metropolitan area. The outcome of the merger remained uncertain.

Since Edison had an electricity surplus, the potential merger cast doubt upon the need for new capacity in the SDG&E service territory. If the merger went through, the South Bay Augmentation Project might thus be unnecessary from the standpoint of physical need.

SDG&E requested an indefinite suspension of the South Bay AFC on October 5, 1990, which was granted by the Committee.

By May 1991, the PUC had rejected Edison’s acquisition of SDG&E. There would be no merger. However, the San Diego air district had earlier rejected the air permit aspect of the South Bay AFC. Furthermore, the PUC was starting a new exercise in awarding permanent, long-term standard offer contracts to qualifying facilities for the sale of electricity to utilities, including SDG&E. This was to be the Biennial Resource Plan Update (BRPU) proceeding, a PUC competitive bidding alternative to any new utility-owned powerplant such as South Bay (or the Combined Cycle Project).

Under these conditions, SDG&E decided to abandon its South Bay certification effort. SDG&E requested to withdraw the South Bay AFC in a letter to the Energy Commission dated September 9, 1991. The Commission terminated the AFC on October 9, 1991.

AFC Filing and Overview

A new South Bay AFC was filed by SDG&E on March 1, 1993. This South Bay Unit 3 Repowering Project would increase the facility’s generating capacity by approximately 500 MW, compared to only 140 MW for the earlier AFC, and would involve decommissioning Unit 3’s boiler, thus eliminating this boiler’s air emissions. The project included three new 150 MW gas turbine-generators.

Essentially, SDG&E had now given up on the PUC’s Biennial Resource Plan Update (BRPU) proceeding. Rejecting QF competitive bids as inferior to a South Bay Repowering, SDG&E decided that filing its own AFC was more likely to produce economical and needed power than the PUC’s process.

The elaborate and lengthy BRPU was intended to benefit ratepayers by identifying the least-cost sources for new utility powerplants. The BRPU winners were then supposed to sign contracts with the utilities. The effort proved to be unsuccessful. SDG&E, SCE, and PG&E would all challenge or undermine the BRPU. Thus, the new South Bay AFC was SDG&E’s declaration of independence from the BRPU. (For more on BRPU, see San Francisco Energy, Docket No. 94-AFC-1.)

Potential Issues

All the serious problems which the original South Bay AFC had faced were back, including air quality and biology. The San Diego Air Pollution Control District still found SDG&E’s data to be incomplete and the entire project questionable. Under biology, increased thermal discharge from the facility remained a potentially significant adverse impact on the bay ecosystem.

The City of Chula Vista, and especially Chula Vista citizens groups, were much more vigorously opposed to the second AFC. One association intervened to challenge a project transmission line through their neighborhood on the grounds of potential health effects from electro-magnetic fields (EMF). SDG&E’s proposal to underground this line did not alleviate the citizens concerns, even though undergrounding reduced the unproven, but highly emotional, EMF risks.

A ratepayers organization, the Utility Consumer Action Network (UCAN), intervened on the grounds that South Bay was too expensive. South Bay’s competitors from the BRPU process also attacked the AFC as more costly than their own alternative QF projects. Demand conformance would thus have been contested by intervenors on economic grounds related to the BRPU process.

Some community advocates, with city support, favored converting the South Bay site to parkland or other alternative uses. Repowering South Bay would extend the project’s life, precluding such conversions. This led to several land use non-conformity questions. According to Chula Vista, the South Bay Repowering Project conflicted with Chula Vista’s Local Coastal Plan, Redevelopment Plan, and Community Plan. These were all serious potential obstacles to project approval, even though CEC staff only acknowledged a clear conflict with the Redevelopment Plan, which called for a community park on SDG&E’s property.

CEC staff published its Preliminary Staff Assessment (PSA) for South Bay on January 20, 1994. While inconclusive on numerous subjects (such as air quality), the PSA identified concerns in the areas of visual resources, biological resources, water resources, and land use. (Executive Summary, p. ii of the PSA.)

Electric Industry Restructuring

By spring of 1994, the PUC had issued its "Proposed Policy Statement on Restructuring California’s Electric Service Industry". This began the process of converting to a competitive energy marketplace, sweeping aside both the old regulated monopoly structure and the BRPU. On the horizon there was massive but unpredictable change in the way electric utilities would function.

Based upon impending restructuring (deregulation), SDG&E withdrew the South Bay Unit 3 Repowering Project in a May 23, 1994 letter to the CEC. The letter stated: "SDG&E believes that continuing to process the AFC in order to create a long-term capacity addition to SDG&E’s generation assets is no longer a reasonable strategy in light of the increased uncertainties and risks."

The Energy Commission issued a formal Order of Withdrawal for the second South Bay Unit 3 Repowering Project on June 8, 1994.

SDG&E later sold South Bay as part of the utility divestiture phase of industry restructuring. South Bay would be in the news during the supply crisis of 2000-2001, when charges were made that South Bay's power was being intentionally withheld to drive up prices.