Power Plant Permit May Have a Catch

Arguing its way into a gray area of interstate commerce law, a state energy panel recommended Friday that AES Corp. be forced to sell any power it might make from two now-mothballed generators in Huntington Beach to the state in exchange for expedited review of the company’s operating permit.

The California Energy Commission’s licensing committee, which is overseeing the company’s pursuit of a fast-track permit, had previously stopped short of attaching such a condition to the project after being warned by commission lawyers that doing so would violate interstate commerce laws.

But in a revised decision, the committee found that the energy crisis leaves room for the state to require AES to strike a sales agreement with the Department of Water Resources, which brokers California’s power deals.

The condition would be applied with two important limitations. First, the required sales to California would last only as long as the energy crisis. Second, after the contract expired, AES could sell to anyone it chose.

If adopted by the full Energy Commission, which is to consider AES’ permit request Wednesday in Sacramento, the sales requirement would set a precedent.

In its 10-page executive summary, the licensing committee wrote that without a sales provision guaranteeing that power would be sold to California, the state would be deprived of its ability to respond effectively to the energy crisis.

Without such a condition, the summary concluded, all new power plants licensed under the governor’s executive order could “sell their entire output to out-of-state consumers, thereby perpetuating California’s electricity crisis, not solving it.”

Under executive orders issued by Gov. Gray Davis earlier this year, the Energy Commission has been directed to accelerate the approval process for the Huntington Beach units and a variety of other gas-fired generators. The governor’s goal is to bring power-starved Californians an additional 5,000 megawatts on line to meet an expected summer shortfall.

In Huntington Beach, Energy Commission members Robert Pernell and Arthur Rosenfeld have been overseeing a series of workshops and hearings to decide whether to cut the approval process for the AES project to 60 days from six months.

Garret Shean, a longtime lawyer and the commission’s hearing officer in this case, said that after reviewing arguments made by all parties about the interstate commerce issue, he gave the commissioners “the best legal advice I could.”

AES, California’s largest private power generator, already operates two other generators in Huntington Beach. The company has said that the two units that were mothballed by former owner Southern California Edison in 1995, when electricity was plentiful, have a combined potential output of 450 megawatts and could be up and running by July if the permit is granted on a fast track.

AES site manager Ed Blackford said the new condition “really doesn’t change anything.”

“We’ve said all along that this was to help California and to keep the power in the state,” he said, adding that the company is “making progress” in its negotiations with Water Resources. “I think we’re getting closer. We’ve made a proposal. I think right now the ball’s in their court.”

Huntington Beach officials, who have been seeking the sales agreement and a long list of other conditions, hailed the decision and said it reflected the committee’s commitment to addressing the city’s main concerns.

“It’s something we felt was important, and I think most Californians would,” City Councilwoman Shirley S. Dettloff said. “The reason these shortcuts are being taken is to supply the state with the power it needs. And to sell it out of state just doesn’t make sense.

“If we’re going to have the units come on line in a very reduced time period, which will not allow us to have all the environmental controls in place, then I think it only makes sense that the power stay right here.”

Another controversial condition recommended by the licensing committee would limit the operating permit for the two AES units to five years. The company has threatened to drop out of the fast-track process if that condition is not lifted.