PG&E’s Oakley Application

(A.12-03-026)

Yuliya Shmidt, leadSelena Huang,

analystCandace Morey,

attorney

May 23, 2012Image of proposed Oakley plant from California Energy Commission: www.energy.ca.gov/2011publications/CEC-800-2011-002/CEC-800-2011-002-CMF.pdf

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Oakley (Contra Costa) Power Plant

New combined cycle natural gas-fired facility in Contra Costa County

584 megawatts (MW)

Heat rate of 6,752 British Thermal Units per kilowatt-hour (BTU/kWh)

Total cost of approximately $1.15 billion

Alleged to be efficient (low fuel consumption and GHG emissions) and fast-ramping

Bid into PG&E’s 2008 Long-Term Request for Offers (LTRFO)

Was shortlisted

PG&E executed a power and sale agreement (PSA) for the facility in 2009

Fully permitted (although CEC permit is being challenged in the courts) and began construction in June 2011

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Procedural Background

In 2007, the Long-Term Procurement Plan proceeding found a need of 800-1,200 MW of new generation for PG&E (D.07-12-052)

PG&E filled that need in 2008 and 2009 with two projects which have been approved (Mariposa and Mirant Marsh Landing)

To fill the last of its need, PG&E proposed three facilities simultaneously in 2009:

Oakley Plant (utility-owned generation, A.09-09-021): 584 MW

GWF Tracy (PPA, A.09-10-022): 145 MW

Calpine Los Esteros (PPA, A.09-10-034):109 MW

DRA recommended that the Commission approve either Oakley or GWF Tracy and Calpine Los Esteros

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Procedural Background

The Commission conditionally approved the GWF Tracy and Calpine Los

Esteros plants if Oakley were denied (D.10-07-042)

The Commission then rejected Oakley citing a lack of need for the plant

but allowing it to be resubmitted if one of three events occurred (D.10-07-

045):

a project fails creating an open need

PG&E is able to retire a Once Through Cooling plant ahead of schedule

The CAISO Renewable Integration Study demonstrates that there are reliability risks from integrating the 33% RPS

Since Oakley was denied, GWF Tracy and Calpine Los Esteros were

approved

Continued…

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Procedural Background

PG&E immediately filed a Petition for Modification (PFM) of the Oakley decision Changed the online date from 2014 to 2016 to better fit with PG&E’s need

All other aspects of the Application remained the same

Procedurally, the CPUC could not approve the facility as a PFM The Commission, sua sponte, converted the PFM to an Application

The Application for PG&E to purchase and operate the Oakley facility with a 2016 online date was approved in 2010 (D.10-12-050)

TURN challenged D.10-12-050 in the California Court of Appeal In March 2012, the Court annulled the Decision because did not follow

“proper procedures” (TURN v. California Public Utilities Commission, Case No. A132439)

Continued…

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Updated Application

PG&E immediately filed a new Application to purchase and operate the Oakley plant with the 2016 online date (A.12-03-026) Proposal is identical to previous Application

Leaves open the possibility that the plant comes online in 2014 and operates as a merchant until purchase date of 2016

PG&E claims this is unlikely

PG&E did not filed Testimony with its Application but alleged that its Testimony will be filed on May 16

Eight parties, including DRA, filed protests

Two parties – CARE and Independent Energy Producers – filed Motions to Dismiss

Administrative Law Judge Rulings set a Prehearing Conference for May 22, directed parties to immediately begin discovery, and shortened PG&E’s time to reply to protests

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DRA’s Protest PG&E has no authority nor outstanding need to procure this plant

PG&E has not met any of the three requirements for resubmitting Oakley

Need for new generation being determined in the LTPP (R.12-03-014) That proceeding is ongoing with a Decision expected by the end of 2012

It is the appropriate venue for a need determination

Application does not comply with requirements for filing a UOG proposal, new

rules require a Certificate of Public Convenience and Necessity (D.12-04-046)

The previous proceeding’s partial settlement on cost recovery – to which DRA is

a signatory – is no longer in effect

The plant may no longer be competitive and its value, as a potentially-used

plant, is not the same as a brand-new facility

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Follow-up Actions

At Pre-Hearing Conference on May 22 emphasized that: PG&E does not have authority for this plant

PG&E has not satisfied the requirements for submitting this Application

Challenge PG&E’s extremely aggressive proposed schedule

Request more time for discovery and intervenor testimony

Reserve right to hearings

Supported Independent Energy Producer’s Motion to Dismiss