0000004209.00000 Advice 4209-E: 2021-2023 AES Alamitos Resource Adequacy Power
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ADVICE LETTER (AL) SUSPENSION NOTICE ENERGY DIVISION Utility Name: Southern California Edison Date Utility Notified: May 26, 2020 Utility Number/Type: U 338-E [X] E-Mailed to: Advice Letter Number(s): 4209-E [email protected] Date AL(s) Filed: May 8, 2020 ED Staff Contact: Jaime Rose Gannon Utility Contact Person: Darrah Morgan ED Staff Email: [email protected] Utility Phone No.: 626-302-2086 ED Staff Phone No.: 415-703-2818 [X] INITIAL SUSPENSION (up to 120 DAYS from the expiration of the initial review period) This is to notify that the above-indicated AL is suspended for up to 120 days beginning May 26, 2020 for the following reason(s) below. If the AL requires a Commission resolution and the Commission’s deliberation on the resolution prepared by Energy Division extends beyond the expiration of the initial suspension period, the advice letter will be automatically suspended for up to 180 days beyond the initial suspension period. [X] A Commission Resolution is Required to Dispose of the Advice Letter [ ] Advice Letter Requests a Commission Order [] Advice Letter Requires Staff Review The expected duration of initial suspension period is 120 days [ ] FURTHER SUSPENSION (up to 180 DAYS beyond initial suspension period) The AL requires a Commission resolution and the Commission’s deliberation on the resolution prepared by Energy Division has extended beyond the expiration of the initial suspension period. The advice letter is suspended for up to 180 days beyond the initial suspension period. _____________________________________________ If you have any questions regarding this matter, please contact Jaime Rose Gannon at [email protected]. cc: EDTariffUnit [email protected] ADVICE LETTER (AL) SUSPENSION NOTICE ENERGY DIVISION [email protected] [email protected] Gary A. Stern, Ph.D. Managing Director, State Regulatory Operations May 8, 2020 ADVICE 4209-E (U 338-E) PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA ENERGY DIVISION SUBJECT: 2021-2023 AES Alamitos Resource Adequacy Power Purchase Agreement to Meet Resource Adequacy Requirements I. PURPOSE Pursuant to Decision (“D.”) 19-11-016, Southern California Edison Company (“SCE”) submits this Advice Letter seeking approval of a Resource Adequacy (“RA”) power purchase agreement (“AES Alamitos PPA”)1 between SCE and AES Alamitos, LLC (“AES”) for Units 3, 4 and 5 of the AES Alamitos Generating Station (“AES Alamitos”) from 2021 through 2023 to meet SCE’s system, LA Basin (“LAB”) local, and flexible RA requirements. SCE requests that the California Public Utilities Commission (“Commission” or “CPUC”) adopt a resolution approving, without material modification, this Advice Letter on or before August 27, 2020. The following table summarizes the AES Alamitos PPA. Seller Generation Location RA / Contract Product Term of Type Capacity Agreement AES Gas-fired AES Alamitos 1165.82 Megawatts LAB local January 1, 2021 – Alamitos, generation Generating Station, (“MW”) RA December 31, LLC Units 3, 4 & 5 – 2023 Long Beach, CA 1 SCE is using the commonly understood phrase “PPA” for ease of reference, but the agreement is a confirmation under an EEI enabling agreement, which differs from a traditional PPA but not in respects material to this Advice Letter. P.O. Box 800 8631 Rush Street Rosemead, California 91770 (626) 302-9645 Fax (626) 302-6396 ADVICE 4209-E (U 338-E) - 2 - May 8, 2020 II. BACKGROUND AND SUBJECT OF THE ADVICE LETTER There have been six (6) units at the AES Alamitos Generating Station that are once- through cooling (“OTC”). For environmental reasons, the State Water Resources Control Board (“SWRCB”) has worked toward phasing out the use of OTC technology at coastal power plants that use marine water for cooling. To that end, the California Independent System Operator (”CAISO”), California Energy Commission (”CEC”), and Commission worked closely with the SWRCB to develop a policy to achieve water quality goals while ensuring electricity grid reliability.2 On May 4, 2010, the SWRCB approved an OTC policy that included many grid reliability recommendations made by the CAISO, as well as a joint implementation proposal developed by the CEC, Commission, and CAISO.3 The policy came into effect as a regulation on October 1, 2010.4 The final compliance date for the Alamitos facility under the OTC policy is December 31, 2020; however, AES Alamitos retired Units 1, 2 and 6 early on December 31, 2019, to provide emission offsets to build a new 640 MW Combined Cycle Gas Turbine power block in phase one at the facility. Also under construction is a 100-MW energy storage system that is also contracted with SCE through its Local Capacity Requirements (“LCR”) RFO. AES also has planned to add another thermal power block, as well as additional energy storage banks. At this time, AES Alamitos Units 3, 4 and 5 are still in operation and are under an RA contract with SCE that expires December 31, 2020. On November 7, 2019, the Commission adopted D.19-11-016 in the Integrated Resource Planning proceeding, R.16-02-007. In D.19-11-016, the Commission determined there is a significant possibility of system RA shortfalls beginning in 2021 and extending to 2023.5 The Commission therefore concluded that additional incremental capacity resources are necessary to forestall a potential system reliability emergency.6 In addition to requiring load-serving entities to procure 3,300 MW of incremental system RA capacity to come online between August 1, 2021 and August 1, 20237 as a bridge strategy to allow time for new clean electrical capacity to come online, the Commission recommended that the SWRCB extend the OTC compliance deadlines for certain OTC facilities, including AES Alamitos Units 3, 4 and 5.8 2 California Energy Commission’s Tracking Progress, Once-Through Cooling Phase-Out (last updated in April 2019) at p. 1, available at: https://www.energy.ca.gov/sites/default/files/2019-12/once_through_cooling_ada.pdf. 3 Id. 4 Id. 5 D.19-11-016 at Finding of Fact (“FF”) 5, 17. 6 Id. at pp. 2-3, FF 5, 10, Conclusion of Law (“CL”) 1. 7 Id. at Ordering Paragraph (“OP”) 3. 8 Id. at p. 2, CL 5, OP 1. ADVICE 4209-E (U 338-E) - 3 - May 8, 2020 Specifically, the Commission recommended that the SWRCB extend the OTC compliance deadline for AES Alamitos Units 3, 4 and 5 for up to a period of three years until December 31, 2023.9 AES does not plan to retrofit these units with alternate cooling technologies to comply with Track 1 or utilize any operational or technical measures to comply with Track 2 of the OTC policy. In D.19-11-016, the Commission also waived the prohibition in D.12-04-046 against the investor-owned utilities (“IOUs”) contracting with OTC units beyond their compliance deadlines, even if the deadlines are later extended, for the OTC units for which the Commission recommended OTC compliance deadline extensions.10 The Commission authorized the IOUs to contract with OTC units in anticipation of potential compliance deadline extensions, but those contracts would not go into effect if the SWRCB does not grant the compliance deadline extensions and the durations of the contracts shall be limited to the time periods specified by the SWRCB.11 With specific regard to procurement from OTC units, D.19-11-016 required IOUs to obtain approval by Tier 3 Advice Letter.12 On December 20, 2019, SCE issued its RA Request for Offers for RA Capacity Purchases and Sales (“DEC2019 RA RFO”) seeking to buy RA from, and sell RA to, responding market participants from all supply sources that were eligible to provide RA capacity products for the August 2020 - December 2024 RA compliance months/years. Consistent with D.19-11-016, SCE allowed OTC units for which the Commission recommended OTC compliance deadline extensions to bid into the solicitation. SCE received offers on January 7, 2020 and made its shortlist and selections between January 24, 2020 and February 14, 2020. The DEC2019 RA RFO concluded on April 17, 2020 and SCE ultimately executed four RA purchase agreements and one RA sales agreement. One of those RA purchase agreements is the three-year (2021-2023) RA-only agreement with AES Alamitos Units 3, 4, and 5 to meet SCE’s system, LAB local, and flexible RA requirements, i.e., the AES Alamitos PPA. In compliance with D.19-11-016, SCE seeks approval of the AES Alamitos PPA in this Tier 3 Advice Letter. III. GENERAL PROJECT DESCRIPTION AES Alamitos Units 3, 4 and 5 are natural gas fired generating units that are 332, 335, and 498 MW, respectively providing a total of 1165.82 MW capacity in the LAB local reliability area. The approval of this AES Alamitos PPA would substantially help SCE meet its system, LAB local, and flexible RA requirements. With the contract, AES would be responsible for offering the units into the CAISO market consistent with the CAISO 9 Id. at OP 1. 10 Id. at CL 6, OP 2. 11 Id. 12 Id. at p. 48. ADVICE 4209-E (U 338-E) - 4 - May 8, 2020 Tariff, including a must-offer obligation. The AES Alamitos PPA will ensure that the resource is available to the CAISO market through December 2023. IV. THE AES ALAMITOS PPA IS REASONABLE AND CONSISTENT WITH D.19- 11-016 To forestall a potential system reliability emergency, D.19-11-016 allowed SCE to procure from certain OTC resources to serve as a bridge for new incremental capacity coming online starting in 2021 and extending to 2023.13 D.19-11-016 (1) authorizes SCE to enter into contracts with certain OTC facilities, such as AES Alamitos Units 3, 4, and 5, in anticipation of their potential compliance deadline extensions; and (2) waives the prohibition in D.12-04-046 against contracting with OTC units beyond their compliance deadlines, even if those deadlines are later extended.14 The Commission authorized the IOUs to contract with OTC units in anticipation of potential compliance deadline extensions, but those contracts would not go into effect if the SWRCB does not grant the compliance deadline extensions and the durations of the contracts shall be limited to the time periods specified by the SWRCB.15 The AES Alamitos PPA complies with the requirements in D.19-11-016.