In a ruling that highlights how California Public Utilities Commission (CPUC) decisions can have broad impacts on proposed power projects, the CPUC recently denied San Diego Gas & Electric Company (SDG&E) the authority to enter into a power purchase tolling agreement for the Quail Brush Energy Project proposed near Santee in San Diego County. As a result, Quail Brush Genco, LLC, suspended its California Energy Commission (CEC) application for a license to operate the plant pending its evaluation of opportunities to move forward with its project.

The Quail Brush Energy Project was proposed as a new 100 MW gas-fired peaking power plant located in the City of San Diego next to the City of Santee. Quail Brush Genco, LLC sought authorization of the project from the CPUC for a power purchase tolling agreement, and a license from the CEC to operate the plant.

On March 28, 2013, the CPUC issued its ruling, Decision 13-03-029, denying SDG&E’s request for a power purchase tolling agreement. The CPUC found it was not reasonable to authorize the purchase of local capacity because the need for incremental local capacity would not exist until 2018—four years into the 20-year power purchase tolling agreement. However, SDG&E was given the opportunity to return and request future authorization, if it could demonstrate that there was a need for the energy at that time.

In the same decision, the CPUC authorized SDG&E to enter into a power purchase tolling agreement related to the Escondido Energy Center—a project that had a “small size, high viability and environmental benefits from its repower” within an existing facility. The CPUC cited its history of encouraging increased efficiency and repowering existing facilities, which would result in less environmental impacts and savings to the ratepayers. 

Upon finding that the CPUC denied SDG&E’s Quail Brush application, the California Energy Commission requested that Quail Brush Genco, LLC explain whether the project could be revised to maintain its viability for review and approval. On April 8, 2013, Quail Brush Genco, LLC instead requested a 12-month suspension to assess opportunities for the project to move forward in light of the CPUC’s decision. These decisions not only show how separate commission decisions are interrelated and can impact proposed power projects, but they highlight certain project aspects that should be considered when seeking CPUC or CEC approval. 

If you have any questions about the Quail Brush Energy Project or CPUC or CEC proceedings, more generally, please contact Sophie Akins in the firm’s California Public Utilities Commission group or your Best Best & Krieger LLP attorney.