Coastal power plants figure into Sunrise equation

By: DAVE DOWNEY - Staff Writer | Saturday, October 14, 2006 10:27 PM PDT ∞

CARLSBAD ---- The owner of the Encina Power Plant is set to announce in November plans to build a big generator in an inland community to replace Encina, as well as several small "peaker" plants on the 95-acre Carlsbad site, a company official said last week.

Coupled with the June filing of plans to replace ---- rather than retire ---- the aging South Bay Power Plant in Chula Vista, the pending announcement could significantly boost the regional electricity supply.

The twin coastal power-plant developments are spurring fresh questions about the need for San Diego Gas & Electric Co.'s proposed $1.3 billion power line to the desert that it calls Sunrise Powerlink. And tension between SDG&E and the owners of the power plants has surfaced at recent hearings on the power line, including one at Ramona in mid-September.

In any event, SDG&E officials maintain that the transmission project is still needed.

With those developments, it has become clear that owners of the aging natural-gas-fired power plants on the San Diego County coast do not intend for them to just fade into retirement.

Steve Hoffman, Western Region manager for NRG Energy, the company that purchased the 52-year-old, 960-megawatt Encina plant at the end of last year, declined to disclose the site of the proposed plant for now, but offered a few details.

"It is a site that is remote from housing development," Hoffman said. "It is much further inland from here."

A megawatt is the standard measuring unit of electricity, and is roughly what it takes to keep the lights on in 750 to 1,000 homes most of the time. Much more than that is needed to power air conditioners during heat waves, like the one San Diego County residents sweated through in July.

In the other development, LS Power, owner of the South Bay Power Plant in Chula Vista, filed an application with the California Energy Commission in June to replace that generator with a so-called combined-cycle plant that would generate 620 megawatts of power.

According to the application, the new plant would use two-thirds as much natural gas as the existing one, which is more than 40 years old, while generating one-third as much air pollution.

Like SDG&E's 550-megawatt Palomar Energy Center in Escondido, the proposed new South Bay plant and the planned NRG plant would employ combined-cycle technology. That means they would use natural gas to fire turbines and produce electricity, then use steam left over from that operation to produce still more power.

"It's likely to be slightly larger than Palomar with better efficiencies," Hoffman said of the NRG Energy plant.

He said NRG expects to build the plant by 2010 and retire Encina at that time.

In addition, he said, NRG plans to build a series of "peaker" generators on the east side of the Encina site. He declined for now to say what the electrical output would be for those miniature power plants that would be called upon in hot weather. But he said those would come online much faster than the big inland plant, likely in 2008.

Hoffman said the company intends to file an application with the state next spring.

Counting on South Bay plant's retirement


While the June filing for South Bay and the anticipated November announcement by NRG make clear the owners don't want their prominent smokestacks to disappear from the coastal skyline, the developments have added a layer of haze to the picture of the need for Sunrise.

That 500-kilovolt power line would wind through the desert of Imperial County and the backcountry of San Diego County for 150 miles.

With wires strung from metal towers as tall as 160 feet, the superhighway of electricity would run through Anza-Borrego Desert State Park, Ranchita, Warner Springs, San Ysabel, Ramona, Scripps Ranch and Rancho Penasquitos.

Sections would be buried underground in the San Diego Country Estates area and in Rancho Penasquitos.

Opponents say the line would harm wildlife and mar scenic views in the country, while dragging down property views in rural and suburban communities.

SDG&E maintains it needs the project to fill a looming 1,000-megawatt shortfall in 2010, the year its line would be completed if the California Public Utilities Commission grants permission to build next year.

The company also says it needs the wires to bring in electricity from solar and geothermal plants in Imperial County that tap the power of the sun and underground geysers, and fulfill a state mandate to obtain 20 percent of power from nonfossil-fuel sources by 2010.

There's just one problem, said Bill Powers of San Diego, an engineer and activist who has extensively studied Sunrise. The 1,000-megawatt gap assumes South Bay will retire in 2009 with nothing left in its wake. Now that LS Power is going through the permitting process, one can subtract 620 megawatts from the forecasted 1,000-megawatt shortage, he said.

And now it looks like Encina's contribution to the regional power supply will not disappear, either.

Hoffman suggested the plants' replacement could negate the need for the line.

"In-basin generation is a much more cost-effective alternative to Sunrise Powerlink," Hoffman said. "What it doesn't do is bring in renewables (nonfossil-fuel power) into the regional portfolio. But we believe there are other options for renewable energy. An existing transmission line, the Southwest Powerlink (in the vicinity of Interstate 8), runs through some of the most promising wind generation sites remaining in the state of California."

Being held hostage


For its part, SDG&E says it needs both coastal power plants and the big new transmission line. It is not an either-or situation, said company spokeswoman Stephanie Donovan.

"We still need a transmission line to ensure that we have the system we need to meet our growing needs in the future," Donovan said.

And, she said, "We know we will need power from those two plants in one form of fashion or another."

Still, there is tension between SDG&E and the companies proposing to fire up new coastal power plants.

Under state oversight, the existing coastal plants, despite their inefficiencies, cannot be retired because the region needs them. And SDG&E pays a premium for their electricity on torrid summer days.

Jim Avery, SDG&E's director of electric, said earlier that the utility paid $230 million last year to operators of South Bay and Encina.

"Rignt now, we are essentially held hostage to the local power plants," Donovan said.

Donovan said construction of Sunrise would relieve SDG&E of having to make those payments, as it would provide a way for the company to meet electricity demand with less expensive power brought in from the desert. She said Sunrise's presence would put welcome pressure on the plant operators to make their prices more competitive.

"The bottom line is, we are looking at the bottom line for our customers," Donovan said.

Hoffman said he is not concerned about offering competitive prices.

"We believe that we can compete with any other resource option on a cost and reliability basis," he said.

At the same time, the South Bay owner suggests SDG&E has seemed too eager to see that plant's demise.

In a filing with the California Public Utilities Commission, San Francisco attorney Brian T. Cragg wrote that, "LS Power is concerned that the Sunrise application seeks to strengthen the case for new transmission by unnecessarily denigrating the role of new in-area generation."

Moving back toward monopoly


Powers, the engineer, said the bottom line for operators of the coastal plants is Sunrise could bite into their markets, at least initially. If the power line is built, it will make it difficult for those operators to make their projects pencil out, he said.

"It would definitely be a major blow, and probably a fatal blow to one of the plants," Powers said. "You might still need a reduced-size facility at one location. But if Sunrise goes through, the opportunities for them are going to be severely restricted."

What it comes down to for both is finding a party to sell their power to. And because SDG&E is by far the largest electricity retailer in the region, that means the owners are faced with persuading the big utility that serves all of San Diego County and southern Orange County to sign a contract.

"The only way we can finance the construction of the new South Bay is to get a long-term power purchase contract with a customer," said David Hicks, a spokesman for LS Power. "We have to sell the power to justify building a $440 million power plant."

Scott Anders, research and administrative director for the Energy Policy Initiatives Center at the University of San Diego, said part of what is playing out in the debate over Sunrise is sheer economics. He said SDG&E can make a return on its investment with the power line, but all it can do when it buys electricity from the power plants of other companies is pass on costs to consumers.

At the same time, Anders said the utility is moving to strengthen its grip on the regional market, something it dominated until the state's failed experiment with electricity deregulation at the turn of the century. The company previously owned the coastal plants, then had to get rid of them because of the deregulation law.

"SDG&E was a vertically integrated monopoly," Anders said. "They owned generation. They owned transmission. They owned distribution. They owned everything."

When the deregulation experiment imploded, the Legislature unraveled some restrictions. And SDG&E is taking advantage of that. An example is the new Palomar plant in Escondido.

"Now they're getting back into the power plant business," Anders said. "They're moving back to this vertically integrated structure."

Contact staff writer Dave Downey at (760) 740-5442 or ddowney@nctimes.com.

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