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State OKs Plan for More Power in San Diego

SDG&E wins approval to buy a power plant and sign a contract with Calpine. Critics threaten a legal challenge.

June 10, 2004|Marc Lifsher | Times Staff Writer

SAN FRANCISCO — The California Public Utilities Commission on Wednesday approved a utility's ambitious plan to sharply increase the supply of electricity in the rapidly growing San Diego area.

But the plan by San Diego Gas & Electric Co., designed to help avoid another energy crisis like the one that swept the state in 2000 and 2001, faces a legal challenge from a San Francisco consumer group. Energy analysts said the legal challenge might slow the plan but was unlikely to derail it.

Approval of the SDG&E plan is part of the commission's effort to get new power plants built, both by utilities and independent power producers. The PUC wants the plants built quickly to avoid power shortages during a projected tight energy market in California between now and 2007.

Led by PUC President Michael R. Peevey, the commission voted 3 to 2 to allow SDG&E to buy the unfinished state-of-the-art Palomar power plant at Escondido in north San Diego County. The utility also was given the go-ahead to sign a long-term contract with San Jose-based Calpine Corp. to buy power produced at the company's Otay Mesa plant near the Mexican border.

The two plants, when completed between 2006 and 2008, will provide enough electricity to meet the needs of 1.2 million homes in SDG&E's service area of San Diego County and parts of southern Orange County.

The Utility Reform Network, known as TURN, said it would ask the commission to reconsider its decision. The group said it would take its case to the state Court of Appeal if needed. TURN contends that Peevey was biased in favor of the SDG&E plan because he was involved in negotiating the Calpine contract, which the consumer group says will stick ratepayers with high-priced power.

Peevey maintains that he participated in the negotiations to ensure that the unfinished power plants get up and running, for the sake of both San Diego County and the state as a whole.

"We have not built a power plant in San Diego County for many, many years," he said. "We just cannot close our eyes to the reality that this is a very fast-growing part of the state ... and we cannot be so foolhardy as to say no to power plants."

Commissioner Carl W. Wood disagreed. Echoing TURN's complaints, he said the electricity from Calpine's Otay Mesa plant would be too expensive and won't even be needed for several years.

Wood argued that electricity produced at Palomar, combined with improved conservation measures and renewable energy programs, should provide SDG&E with a cushion of reliable generating capacity to meet power crunches between now and 2008.

Wood also said the utility, a subsidiary of Sempra Energy, should rebid the long-term contract to buy power from the Otay Mesa plant. He said he "had serious concerns about the way the parties negotiated," particularly Peevey's involvement in crafting the agreement.

Wood's objections, contained in an alternative proposal before the PUC, got only two votes from the five-member commission. The San Diego proposal was then approved with votes from Commissioners Peevey, Susan P. Kennedy and Geoffrey F. Brown. Wood and Commissioner Loretta M. Lynch voted no.

Calpine and SDG&E praised the PUC's decision.

"This clearly illustrates that the project is needed and is cost-efficient," Calpine Vice President Curt Hildebrand said. Commission approval of the long-term contract will help Calpine complete funding for the $300-million power plant, he said.

SDG&E Vice President Steve Davis called the vote "good news for our customers and our region." He said he doubted that a legal challenge from consumer groups would slow execution of the contract for power from Otay Mesa.

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