South Bay Power Plant Not Sunk; Options Are Limited

Saturday, Jan. 20, 2007 | LS Power, a private New Jersey-based company, had been expected to sell power from a new, more efficient South Bay Power Plant to San Diego Gas & Electric. Such a contract would be vital to financing the replacement plant’s estimated $400 million construction.

But SDG&E says it does not need power from the South Bay plant or its replacement. That doesn’t guarantee the new plant proposal is dead, but it clearly delineates SDG&E’s stance and puts the local energy company in a position of power. Without a contract with SDG&E, LS Power is left with few options to sell the power it would generate.

“Is it over? Can you pop the cork yet? Can you say that the South Bay Power Plant is going away?” asked Scott Anders, director of the Energy Policy Initiatives Center at the University of San Diego. “I wouldn’t celebrate yet. But if SDG&E is not going to purchase power from LS, I don’t see how LS builds the plant.”

An SDG&E official told a joint Chula Vista City Council and Unified Port of San Diego Board of Port Commissioners meeting Thursday that his company does not want the type of electricity LS Power would offer. SDG&E says it doesn’t want power from plants that provide base loads — the plants that meet the region’s everyday demand. The company instead says its needs smaller plants that can be fired up quickly to meet demands at peak hours.

The Thursday announcement was the first public surfacing of a private process that demonstrates the power SDG&E wields in dictating the region’s energy future.

“For five years, SDG&E has been trying to convince LS Power to [construct] a plant that fits our load profile. They have not been willing to do that,” Jim Avery, an SDG&E senior vice president, said in a Friday interview. “There are lots of options, but I cannot envision a situation under which I would agree to take peaking power out of a base load plant.”

If SDG&E passes on the plant’s power, the decision could impact Chula Vista’s pitch to bring a new Chargers stadium to the city. Those involved in negotiations say SDG&E’s position buoys the chances that the aging power plant will be torn down and not replaced, potentially clearing the way for a stadium.

“It was a bombshell,” Chula Vista City Councilman John McCann said of SDG&E’s Thursday announcement. He has been leading the city’s push to recruit the Chargers.

“I think most folks would think it would be a great idea to tear down the old power plant and put up a stadium in its place,” McCann said.

An LS Power spokesman downplayed the significance of the SDG&E announcement Friday, saying it would not impact the company’s project development.

“SDG&E is our customer, but they’re also a competitor. So what they said was not a big shock to us,” said David Hicks, an LS Power spokesman. “SDG&E says they’ll never buy power from us. What they mean is that they’ll never buy power from us unless they have to.”

The South Bay Power Plant cannot simply be torn down. The California Independent System Operator, which operates the state’s electricity grid, has given the plan a must-run designation, meaning that it’s essential for maintaining the region’s reliability. Though it produces power less efficiently than newer plants, it must remain in place until other power sources are found.

Hicks said building a replacement plant on the South Bay site is the “fastest and most sure way to get rid of the bigger, older power plant.” Replacing the old plant could also clear the way for a stadium, Hicks said.

SDG&E said it has plans to bring enough power to the region without buying electricity from the LS Power replacement. The $1.4-billion, 120-mile Sunrise Powerlink transmission line would bring 1,000 megawatts to the region, though environmentalists are fighting its construction. Even without that project, Avery said SDG&E would be able to generate enough power locally.

But those power sources are not yet guaranteed — they have not been put under contract.

Michael Shames, executive director of the Utility Consumers’ Action Network, a San Diego-based advocacy group, said he sees little new in SDG&E’s position, which confirmed what many expected.

“I hear them (SDG&E) saying that they don’t need South Bay,” Shames said. “They don’t need any power plant truthfully because they have lots of options. But I’m not hearing them say they won’t consider it. SDG&E can’t legally say we won’t consider a bid from the South Bay because that would be illegal.”

Avery said SDG&E will consider any bid LS Power submits when it puts out a request for 1,000 megawatts of new power next month. “But if the proposal can’t satisfy my need (for peak power),” he said, “how could I possibly enter into a contract?”

The Unified Port of San Diego purchased the South Bay plant and the 160 acres surrounding it in 1999 with the intent of demolishing the plant and opening up western Chula Vista’s bay front for redevelopment. But when Chula Vista city officials told the port they wanted to retain the financial boost from the power plant’s taxes, the port backed off.

LS Power assumed the 706-megawatt plant’s lease from Duke Energy in May. The company has planned to replace the South Bay plant with a more efficient 620-megawatt natural-gas-fired plant that would create enough energy to power about 600,000 homes. The replacement would produce energy more efficiently and free up 115 acres of bay-front land for redevelopment.

Opponents argue that the new plant, while more efficient, would pollute nearly as much as the existing plant, which has operated at 30 percent of its capacity the last two years. LS Power has agreed that a new plant would not exceed the current plant’s 2004-2005 emissions.

— Staff writer Andrew Donohue contributed to this report.

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