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PG&E Asked to Consider Storage Alternatives for Three NatGas Plants

California regulators on Wednesday asked Pacific Gas and Electric Co. (PG&E) to determine if storage and/or other alternatives to fossil fuel could replace three natural gas-fired peaking plants.

The proposed directive by the California Public Utilities Commission (CPUC) could put the largest combination private-sector utility on a collision course with the state grid operator and FERC.

As it currently stands, the proposal “does not require PG&E to sign contracts," a CPUC spokesperson said. "It requires the utility to ascertain whether there are competitive offers for battery storage within 30 days, and if there are, PG&E will execute contracts."

If the CPUC mandates that the utility move forward, PG&E would be required to solicit bids for battery storage or other resources to replace gas-fired peaking plants. CPUC officials maintain that energy storage could be "fast-responding, reliable and constructed in a short time frame," which had been the definition for small gas-fired peakers strategically located around load centers.

CPUC envisions battery storage replacing three Calpine Corp. gas-fired plants -- Feather River, Yuba, and Metcalf -- which lack long-term contracts with utilities. The plants have been identified by the California Independent System Operator (CAISO) as needed for local reliability purposes on the grid. Because CAISO is regulated by the Federal Energy Regulatory Commission, the situation may be more complicated.

CPUC’s proposal in the form of a resolution may be discussed and voted on at the next regular meeting Jan. 11. The commission noted the proposal if enacted could lead to increased ratepayer costs.

Last year, Calpine informed CAISO that it wanted to drop participating generator agreements (PGA) for four peaking plants. In June it began assessing whether to make the San Jose, CA-based Metcalf Energy Center available for CAISO dispatch beginning in January. Calpine said all five plants were uneconomic to run at current prices.

Calpine requested that the CAISO run studies on each plant to determine whether they were needed to ensure local reliability. CAISO determined Yuba City and Feather River were needed to meet local capacity needs and designated them as reliability-must-run (RMR). Last month, CAISO determined that the Metcalf plant was needed for local reliability, also designating it as RMR.

In supporting its proposal, CPUC staff noted that over the past 11 years CAISO has been relying on RMR contracts less. As it now stands, Calpine has three RMR contracts for Feather River, Yuba City and Metcalf pending at FERC.

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