California Independent System Operator Memorandum To: ISO Operations (MRTU) Committee From: Armando J. Perez, Director of Grid Planning cc: ISO Board of Governors ISO Officers Date: April 29, 2005 Re: Otay Mesa Power Purchase Agreement Transmission Project This memorandum requires Board action. EXECUTIVE SUMMARY This memorandum requests ISO Governing Board approval of the Otay Mesa Power Purchase Agreement Transmission Project (Project). The Project is a combination of new line construction and modifications to existing lines and substations that will result in the creation of two new 230 kv transmission lines in the San Diego area (see Figure 1). One of the new lines would go from Otay Mesa Substation to Sycamore Canyon Substation (37 miles total length - 28 miles of new line construction). The other transmission line would go from Otay Mesa Substation to Old Town Substation (33 miles total length - 24 miles of new line construction). The completion of the Miguel Sycamore Canyon 230 kv transmission line is proposed to be completed by June 2006. The completion of the Otay Mesa-Old Town 230 kv transmission line is proposed to be completed by June 2007. The Project is needed to reliably deliver power from the Otay Mesa Power Plant to San Diego customers. Without this project, congestion north of Miguel Substation would lead to the need to curtail Otay Mesa output during high load periods when the generation is most needed. The estimated capital cost of the Project is $ 209 million. Since the Project cost exceeds $20 million, ISO Board approval is required. The OMGP is needed to satisfy SDG&E s resource adequacy requirements. In its decision D.04-06-011, the California Public Utility Commission (CPUC) approved, among other items, SDG&E s request to enter into a ten-year power purchase agreement for the output of the Otay Mesa Generation Project, which is presently under development by Calpine Corporation. However, the Commission recognized that the output of Otay Mesa is not fully deliverable, and cannot fully satisfy SDG&E s local reliability needs, without some transmission system upgrades. The proposed Project is the preferred alternative for reliably delivering Otay Mesa generation to San Diego. Normally, the ISO reviews and approves projects before they are presented to the CPUC, however SDG&E has already applied to the CPUC for a Certificate of Public Convenience and Necessity (CPCN) for the proposed project. To date, there has not been a CPUC decision on this matter.
Fig. 1. Otay Mesa Power Purchase Agreement Transmission Project Map Existing transmission lines Proposed Project Project s alternative rejected due to higher cost and environmental impact Substation Power Plant AJP 4/25/05-2-
BACKGROUND In October of 2002, the CPUC directed SDG&E and the other utilities under their jurisdiction to file longterm procurement plans addressing power capacity needs for the years 2004 through 2023. In May of 2003, SDG&E issued a Request for Proposals (RFP) for reliability capacity for the procurement plan. Additional in-system generation was needed to provide for load growth and to reduce Reliability-Must-Run generation costs. In response to this RFP, in August 2003, Calpine submitted a proposal to provide generation capacity and energy from the OMGP. At that time, the Otay Mesa project was already fully permitted by the California Energy Commission (CEC) and Calpine had procured all the major equipment and started construction. In June 2004, after review of all the projects submitted for the RFP, the CPUC issued a decision (D.04-06-011) to approve new electric resource contracts for five proposals for new resources for San Diego. The Otay Mesa Generation Project was one of the approved proposals. However, the engineering studies indicated that the OMGP would cause significant congestion on the transmission system north of Miguel Substation if additional transmission system upgrades were not implemented. When the CAISO first approved the OMGP in May 2003, the approval letter specified that extensive congestion management would be required and that the full generation output cannot be delivered if the transmission system is not upgraded. After the Power Purchase Agreement for the OMGP was approved by the CPUC, SDG&E performed extensive studies to develop alternative plans for upgrades to allow for the full delivery of Otay Mesa output to San Diego. The proposed Project was determined to be the preferred transmission solution. The CAISO sent a letter of concurrence with the scope of the proposed project in November 2004. The Existing Transmission System The electric power needs of San Diego are met by a combination of local generation and imported power. Transmission connections between San Diego and neighboring regions include five 230 kv lines that head north towards Los Angeles, one major 500 kv line that heads east to Arizona (the Southwest Power Link or SWPL), and one 230 kv line that heads south to Mexico. The maximum power that can be reliably imported into San Diego through these facilities is 2850 MW. With the most critical of these transmission facilities out of service (the SWPL), this capability is reduced to 2500 MW. The summer peak load in the San Diego area this year is forecasted to be 4586 MW. The difference between the load in San Diego and the import capability must be supplied by local generation sources. Current local generating resources include the Encina Power Plant, the South Bay Power Plant, and a number of combustion turbine facilities located around the service territory. Both the Encina and South Bay Plants are under Reliability Must Run ( RMR ) contracts with the CAISO because they are necessary to meet the reliability requirements of the area. Otay Mesa Generation Project The OMGP will consist of two combustion turbine generators and one steam turbine generator. The maximum total net generation output will be 615 MW 1. The basic interconnection facilities associated with the OMGP include: 1. Looping the Miguel-Tijuana 230 kv transmission line into the new Otay Mesa 230 kv switchyard. 1 This value is based on the interconnection capacity provided by Calpine. AJP 4/25/05-3-
2. Converting the Miguel-Otay Mesa section of the Miguel-Tijuana 230 kv line to two bundled 900 kcmil ACSS circuits with separate circuit breakers. 3. Installing two remedial action schemes that will trip Otay Mesa generation for loss of the 230 kv circuits between Otay Mesa and Miguel which share the same tower The California Energy Commission has already permitted the above facilities as part of the plant s basic interconnection plan of service. The cost of these facilities is not included in the cost estimate for the Project that is the subject of this memo. Calpine plans to complete construction of the OMGP by December 2007. The anticipated commercial in-service date for the Project is January 2008 when all the transmission upgrades will be completed. The CAISO and SDG&E agree that the plant should not be allowed to come on-line before all the transmission additions are completed. Presently, the construction of the plant is on hold pending the approval of the Project. Description of the Problem and the Transmission Project The scope of facilities associated with the basic interconnection of the OMGP to the grid as described above would connect the OMGP directly to Miguel Substation. However, with the OMGP connected to Miguel Substation, and without any additional transmission upgrades from Miguel into the San Diego load area, there would be significant congestion north of Miguel. The most effective means for eliminating this congestion would be to reduce the output of the OMGP. The likelihood of encountering congestion would increase with increased San Diego area load. As a result, when the OMGP is most needed (summer peak load period), it would likely need to be curtailed to mitigate transmission congestion. To mitigate the transmission constraints north of Miguel the following project was developed: 1. Creation of an Otay Mesa-Sycamore 230 kv line. This will require 28 miles of new overhead line construction from Miguel to Sycamore on existing structures. 2. Creation of a Miguel-Old Town 230 kv line. This will require construction of a 14-mile overhead line section (10 miles of new structures in an existing ROW and 4 miles of existing structures) and two underground sections (7 miles in Downtown San Diego and 3 miles on the Chula Vista Bay front). Each of these new lines will be routed through Miguel Substation but they will not normally be connected to Miguel Substation. However, switching will be available to connect these lines to Miguel, which will be desirable under some operating conditions. To allow this switching, it may be necessary to upgrade several circuit breakers due to the increased short circuit duty at Miguel and Tijuana. In addition to the two 230 kv transmission lines, the Project also includes: Installing new 230 kv circuit breakers and associated equipment at the Old Town and Sycamore Canyon Substations to terminate the new 230 kv lines. Installing two 230 kv circuit breakers and associated equipment at the Miguel Substation to allow for connections of the new lines to this substation when desired. Reconductoring the Sycamore Canyon-Fanita Junction (Carlton Hills Tap) section of the existing Chicarita-Carlton Hills- Los Coches 138 kv transmission line. AJP 4/25/05-4-
Project Cost The estimated cost of the Project is $209 million, which excludes the plant s basic interconnection costs. DISCUSSION Benefits of the Project The Project would provide the following benefits: 1. Provide for the firm delivery of the OMGP to San Diego; 2. Support future reliability needs due to continued load growth; 3. Prevent the OMGP from increasing transmission congestion north of Miguel; 4. Reduce RMR costs by allowing the displacement of a portion of the RMR generation in the SDG&E service area; 5. Provide higher operational flexibility during scheduled outages; 6. Improve system voltages; 7. Reduce system losses; 8. Avoid the need to trip additional generation and load for the Miguel transmission line corridor outage; 9. Provide grid expansion capability for future load growth (Specifically, the addition of the Otay Mesa-Old Town 230 kv line will provide the ability to reinforce the source of power to the rapidly growing downtown area of San Diego.); and 10. Enable the retirement of a portion of old and relatively inefficient generation in the San Diego area. The studies for the Project and its alternatives indicate that the Project is the preferred alternative for achieving the benefits listed above. In addition, the Project will minimize environmental impacts by utilizing underground construction and by striving to avoid residential areas where practicable. Alternatives to the Project Several alternatives to the Project were studied. The most competitive alternatives are summarized in the following table: Alternatives for the Otay Mesa Power Purchase Transmission Project Alternative Advantages Disadvantages 1. Construct an Otay Mesa- Mission #3 230 kv line instead of the Otay Mesa -Old Town Same as the preferred alternative - Estimated to have a higher cost due to a longer underground section. - Higher transmission losses. - Would require the full dispatch of South Bay generation where the preferred alternative would only require the partial dispatch of South Bay Generation. - May constrain exports from Mexico. AJP 4/25/05-5-
Alternatives for the Otay Mesa Power Purchase Transmission Project Alternative Advantages Disadvantages 2. Construct an Otay Mesa - Mission #3 230 kv line instead of the Otay Mesa - Old Town 230 kv line and connect the Tijuana 230 kv line to Miguel instead of Otay Mesa 3. Construct an Otay Mesa - South Bay 230 kv line instead of an Otay Mesa - Old Town 230 kv line, upgrade South Bay Substation from 138 kv to 230 kv, and complete several lower voltage upgrades 4. Construct the Otay Mesa - Sycamore 230 kv line but not the Miguel-Old Town line. Same as the preferred alternative, although, it may reduce potential congestion north of Otay Mesa while increasing potential congestion north of Miguel. Same as the preferred alternative. Lower cost. - Estimated higher cost due to the new Otay Mesa-Miguel line section. - Congestion north of Miguel with high CFE exports. - Higher load tripping requirement for the Miguel corridor outage. - Does not provide for the combined deliverability of both OMGP and South Bay generation. - Estimated to have a higher cost due to the 69 kv and 138 kv upgrades required to provide the combined deliverability of both OMGP and South Bay generation. - Would require a new 230 kv switchyard and 230/138 kv banks at South Bay, which is not currently included in the long-term plan. - Exports from Mexico may be constrained. - Could lead to the need to sectionalize the 69 kv system and reduce system reliability. - Would require excessive generation tripping for a Miguel corridor outage. - Higher losses. - Does not provide for the full delivery of the OMGP. - Would not provide a 230 kv source to downtown to allow for necessary upgrades in that area. - Would cause congestion at South Bay and Miguel. - Excessive generation tripping would be required for the Miguel corridor outage. - Higher losses. The detailed engineering analysis for the Project as well as the ISO s letter detailing its review of this analysis is available upon request. AJP 4/25/05-6-
MANAGEMENT RECOMMENDATION Based on a thorough analysis of the alternatives, both ISO Management and SDG&E have concluded that the recommended transmission project is the preferred transmission solution. Therefore, ISO Management recommends the following motion for Board consideration: MOVED, that the Board of Governors, 1. Approves the Otay Mesa Power Purchase Agreement (OMPPA) Transmission Project to allow the full dispatchability and deliverability of the Otay Mesa Generation Project. The OMPPA was determined to be necessary to satisfy San Diego area resource adequacy requirements by the California Public Utilities Commission and the San Diego Gas and Electric Company. 2. Directs San Diego Gas and Electric Company to complete the permitting, design, and construction of the Otay Mesa Power Purchase Agreement Transmission Project. AJP 4/25/05-7-