Environmental Law

Catching the Wind: California Approves One of Nation's Biggest Contracts

By Dennis Pfaff and Kevin Livingston, Editors

California utility regulators Thursday approved what ranks as perhaps the biggest wind energy contract in the nation's history, a 1,500-megawatt deal involving Southern California Edison Company.

The California Public Utilities Commission voted unanimously to approve the agreement between Edison and Australia's Alta Windpower Development LLC that will sprout new capacity in the already active generating region in the Tehachapi area of Southern California (see PUC press release here; formal approval document here).

"It is, to the best of our knowledge, the largest wind contract in the United States and possibly the world," Mike Marelli, who manages renewable power contracts for Edison, told Climate Law Update. "It's a very significant project."

Marelli said the contract differed from usual agreements that involved a certain facility from which the utility buys electricity. Instead, it is structured "as a development obligation" under which Alta seeks to put projects together and dedicates the first 1,500 megawatts to Edison. In turn, it assures Alta of a customer for the power. A separate power purchase agreement will be created for each project brought on line, according to the document approved by regulators Thursday.

"These megawatts will not be delivered by one giant wind project but by several smaller generating facilities that execute individual power purchase agreements" in phases extending through 2020, said Michael R. Peevey, president of the California utility commission, during Thursday's session.

In its action Thursday, the commission approved both a master agreement between Edison and Alta and the form of the power purchase agreements. The first wave of the project is expected to come on-line around 2010.   

"This is a major milestone in the development of this project and it will hopefully put in place the ability to put the other pieces in alignment," Marelli said. He said Edison is also working to build new transmission facilities to get power from the Tehachapi area, located in Kern County. 

Peevey suggested that the contract may represent only the second-largest such project in the country, after one in Texas, the nation's leading wind power state. By any measure, however, the scope of the California venture would be vast.

According to Edison's web site, the agreement envisions more than 50 square miles of wind parks, triple the size of any existing wind farm in the United States. Commissioner Rachelle B. Chong noted that the project, once fully up and running, would generate power equivalent to about three traditional power plants.

Marelli said some larger contracts might be contemplated elsewhere but it was unlikely they had contracts in place.

Although some terms of the deal were confidential, Marelli said it would not cost ratepayers more than what the utilities commission has calculated the cost of a new conventional plant, such as a gas-fired plant. 

Edison, like other utilities in California, is under an obligation to meet state requirements that 20 percent of the electricity it sells come from renewable resources by 2010 (access state renewable portfolio standards here). Although there is some flexibility in complying with the mandate, Edison spokeswoman Vanessa McGrady said the utility would have contracts in place to meet the goal.

Edison, she added, has the largest renewable portfolio of any utility in the United States, accounting for about 17 percent of the company's juice.

In his remarks Wednesday, Peevey noted that the project was "not without risk," principally because of uncertainty over the future of federal tax credits (see recent Climate Law Update story on this issue here).

"All wind developers remain dependent on the extension of federal production tax credits which are set to expire at the end of this year," he said.

(Photo of wind turbines in Tehachapi area, courtesy Department of Energy/National Renewable Energy Laboratory, credit -- Warren Gretz) 

Full post as published by Climate Law Update on May 15, 2008 (boomark / email).