California regulators have approved a 20-year tolling agreement power contract between NRG Energy Inc. and Sempra Energy’s San Diego Gas and Electric Co. (SDG&E), giving new life to NRG’s long-stalled plans to repower its natural gas-fired generation plant in Carlsbad, CA.

After delaying a vote earlier this month, the five-member California Public Utilities Commission (CPUC) put aside concerns that approving a deal leading to a major new fossil fuel plant would undermine the state’s aggressive climate change policies  (see Daily GPIMay 7).

The CPUC approved SDG&E’s power purchase and tolling agreement with NRG’s proposed Carlsbad Energy Center, a five-unit, 500 MW gas-fired peaking plant that would replace the outdated, larger existing baseload generation plant at the site. A spokesperson for Princeton, NJ-based NRG said the company “appreciated the CPUC’s vote of confidence.”

Environmentalists criticized the 4-1 vote of approval, noting that regulators were not taking the time to determine if a series of renewable energy projects could provide the power supplies called for in the 20-year deal. In the end, the CPUC decided the gas-fired generation was needed for reliability as the state moves to more reliance on intermittent solar and wind power sources.

Once the appeals process is cleared and the project obtains a final approval from the California Energy Commission, NRG plans to proceed with the project next year, with operations starting up by the end of 2017 when the existing plant is slated to be shut down to comply with a state ban on the use of seawater for power plant cooling.

The latest state action comes after years of debate and changes, including the recently hammered out compromise to transform the old gas-fired generation site into a modern fast-start gas facility (see Daily GPIApril 9). Local officials in Carlsbad have gone from opposing the project to now supporting it.

An all-parties hearing on the project was held by the CPUC two days before the final vote May 21  after commissioners Catherine Sandoval, Carla Peterman and Liane Randolph expressed various concerns about the deal for more gas-fired generation. Ultimately, Sandoval was the only CPUC member voting against the agreement, which was an alternative decision crafted by President Michael Picker.