On Nov. 18, California Public Utilities Commission (CPUC) Administrative Law Judge Carol Brown issued a proposed decision on Southern California Edison’s application to purchase a natural gas fired power plant that some think will be the death knell for the Mohave Generating Station.
Brown’s proposal comes in response to Southern California Edison’s (SCE) July 21, 2003 application to the CPUC to buy the as-yet-unfinished Mountainview power plant 60 miles east of Los Angeles.
The Mountainview plant is described in the decision as a “new state-of-the-art combined-cycle gas turbine generating station…with an expected net electrical output of 1,054 MW…. The facility will use natural gas as its sole fuel, and the gas will be delivered via a new 17.5-mile gas interconnection lateral to be built by Southern California Gas Company (SoCalGas). The water supply for Mountainview will be treated reclaimed wastewater from the City of Redlands and groundwater from wells on the site.”
Less than a month after SCE filed the Mountainview application, the Navajo Nation filed a Motion to Intervene in the proceeding, stating, “The Navajo Nation seeks to intervene in this proceeding to ensure that issues regarding the future of the Mohave Station are not considered in this rulemaking, but that they are properly considered in A.02-05-046, the Application of Southern California Edison Regarding the Future Disposition of Mohave Generating Station.”
The Mohave proceeding was started on May 17, 2002 when SCE, the majority owner of 30-year-old coal-fired power plant, filed an application with the CPUC asking to shut down Mohave or to have California ratepayers foot the bill for the initial $58 million needed to begin installing pollution controls.
In the year and a half since the Mohave application was filed, the commission has had to deal with two major issues. The first is tribal and popular opposition to Peabody Coal’s use of more than 4,000 acre feet a year of N-aquifer water to slurry coal from the Black Mesa Mine to Mohave.
Peabody, under leases with the Hopi Tribe and the Navajo Nation, mines Hopi and Navajo coal on Black Mesa at two facilities, the Black Mesa Mine and the Kayenta Mine. Coal from the Black Mesa Mine is dedicated to Mohave and is transported 273 miles to the plant in Laughlin, Nev., through a coal slurry pipeline.
The second issue facing the commission is that Mohave owners are under court order to install pollution control equipment at the plant. The installation of the equipment and other repairs at the plant and to the pipeline are estimated by SCE to cost more than $1 billion. The work necessary to fulfill the terms of the Consent Decree is already far behind schedule, virtually ensuring that the Mohave plant will have to be shut down at the end of 2005 (the deadline set by the court order) for an undetermined period of time.
If the plan in Judge Brown’s Nov. 18 proposed decision goes forward, the Mountainview plant will be a wholly-owned subsidiary of SCE, from which SCE, Mountainview’s only customer, will buy electricity according to the terms of a proposed 30-year contract. Mountainview is expected to go online in 2006.
During the proceeding, SCE made several price comparisons between acquiring the Mountainview plant and other options for electricity generation, such as building a natural-gas fired power plant from scratch. In each case, SCE found that Mountainview was the most financially advantageous to California ratepayers.
What the CPUC did not require, and SCE did not do, despite strong urging from the Navajo Nation as an intervenor, was to compare the costs of acquiring and completing Mountainview with the costs of keeping Mohave operational after the end of 2005.
Dr. Charles J. Cicchetti, testifying on behalf of the Navajo Nation in the Mohave proceeding on Oct. 10, stated, “…[T]he need for generation expressed by SCE in its Mountainview proceeding is totally at odds with its M[ohave] G[enerating] S[tation] Application. It is inconceivable that a cost effective 1,580 MW generating station would be so seemingly casually abandoned, as SCE has proposed here. MGS has been a valuable and cost effective workhorse for SCE and the West. Even with the cost of upgrades, and paying more for coal and water, MGS would still be a cost effective plant. At a minimum, SCE needs to reconcile its expression of imminent ‘need’ in its Mountainview proceeding with shutting down MGS in this proceeding, especially when no other party agrees that this should happen.”
The commission has expedited the Mountainview proceeding because SCE had an option to buy the partially-built power plant at a “discount price” that expired at the end of last month. SCE may, however, extend the option to buy to February 29, 2004, although the price and option payments would increase. The CPUC also granted a “one-time waiver” of one of its own rules on transactions between affiliates (in this case SCE and its wholly-owned subsidiary Mountainview) to get this project moving forward, despite objections from the Navajo Nation.
Dr. Cicchetti argued for the Navajo Nation that in proving that there was a need for Mountainview and that the contractual relationship between SCE and Mountainview should be allowed, SCE had stated that there was a “looming gap” between electricity needs and electricity generating capacity for California ratepayers.
“In Responses to Data Requests in its Mountainview Application… SCE states that it ‘…has a “looming gap” in its dispatchable generation needs due to a number of factors: continued load growth, expected resource adequacy requirements, expiring contracts and contract allocations, and the assumed shutdown of the Mohave plant’ [emphasis added by Dr. Cicchetti].
“However, in its application to shut down MGS, SCE is seemingly cavalier about the need for capacity. Yet, in its Mountainview application, SCE attempts to justify the need for the sweetheart PPA [purchase agreement] with its wholly-owned subsidiary by claiming a “looming gap” in its dispatchable generation, a looming gap caused in large part by its anticipated shut down of the MGS plant. So, on one hand, SCE wants to shut down the MGS, while on the other hand SCE attempts to justify the need for an expensive, self-dealing PPA based on closing the MGS. SCE is talking out of both sides of its mouth.”
While the CPUC did not require that the cost of electricity generation at Mountainview and Mohave be compared, it did include in its proposed decision this statement regarding the separation of the two proceedings: “Nothing done by the adoption of this decision concerning the acquisition of Mountainview prejudges the Commission’s determination of the future of the Mohave Generating Plant in [Proceeding] A.02-05-046.”
(Tanya Lee is a northern Arizona freelance writer.)