California grid to extend reliability contracts

* Grid needs 14 older units to continue to run

* Potrero, South Bay units still needed for reliability

HOUSTON, Sept 10 (BestGrowthStock) – The California Independent
System Operator may pay owners of about 1,000 megawatts of
older natural gas-fired generation to continue operating next
year, the grid agency said this week.

The ISO said its board authorized the agency to extend
existing contracts for 14 generating units that because of
location are needed to support a reliable electric grid to
avoid blackouts.

The agency will determine by Oct. 1 whether all 14 plants
will be needed next year. Because of age and technology, the
plants do not run enough hours in the year to make money in the
state’s wholesale market without extra payments from the grid.

The “reliability must-run,” or RMR, contracts cover
Mirant’s (MIR.N: ) four Potrero units near San Francisco,
totaling 362 MW; four Calpine Corp (CPN.N: ) units at the Gilroy
Energy Center totaling 180 MW; three units at Dynegy’s (DYN.N: )
South Bay station near San Diego totaling 307 MW; and three
units at Dynegy’s Oakland station totaling 165 MW.

Continued reliance on the largest Potrero unit, rated at
206 MW, is set to end once the TransBay Cable is operational
and reliable, the ISO said in a statement.

Testing of the 50-mile (80-km) cable running under San
Francisco Bay, began in late 2009. However, full operation of
the 400-megawatt, direct-current line, has been delayed.

Reliance on units at Dynegy’s South Bay plant in Chula
Vista will continue until the $1.9 billion, 500-kilovolt
Sunrise Powerlink is completed, along with some other grid
improvements, the ISO said.

The 120-mile line is expected to begin service in 2012,
officials at Sempra Inc’s San Diego Gas & Electric said in
July.

Because of public opposition to the South Bay plant in San
Diego, Houston-based Dynegy shut two units there last year when
the ISO determined the units were no longer needed to support
the grid.

“A few coastal communities would like to see older power
plants in their areas close down,” the ISO said.

While the agency is working with neighborhood and business
groups, utilities and plant owners to replace aging plants with
more efficient generation or additional transmission options,
certain units must continue to be available to meet federal
electricity reliability mandates, the agency said.

Totaling 1,014 MW, the units under RMR contract represent
less than 2 percent of California’s 55,000 MW of installed
generation.

(Reporting by Eileen O’Grady;editing by Sofina
Mirza-Reid)

California grid to extend reliability contracts