[Sustain] Peaker Project Now Has Deep Economic/Environmental Flaw

[Eric Brooks]

Hi all,

With the May 5 hearing testimony on the new peaker proposal by the San
Francisco Utilities Commission (SFPUC) staff, it has become clear that
the new plan has a deep flaw in it, and if allowed to proceed, the SFPUC 
is going to get the City mired in a disastrous economic and 
environmental boondoggle.

The plan totally fails to account for the fact that over the next ten
years, the California energy landscape will so profoundly change due to
new global warming regulations and spiking natural gas prices that the
entire project will become financially impossible to maintain as
written, and the inevitable result will be that the proposed plant will
be allowed to run at maximum, leaving severe economic and environmental
damage in its wake. Here's the problem:

The SFPUC revealed that peakers must run at least 18 years in order to
pay themselves off and will be contractually allowed as much as 30 years
of operation if necessary to pay off those costs.

The critical flaw in this model is that in 2016, after the Department of
Water Resources is no longer required to purchase electricity capacity
from the peakers, the City and County of San Francisco will be fully on
the hook for the remaining $110 million cost of the project with no
guarantees of power purchasers. PG&E, the biggest such potential
customer, has already said no, largely due to a new state mandate for it
to cut its production of new fossil fuel projects. Other potential
customers will face the same environmental restrictions over the next
two decades and will likely be unable to purchase our peaker capacity.

This building environmental restriction on fossil fuel energy purchases
will then combine like gasoline to a spark with the reality that natural
gas production is about to peak (within the next decade) just as oil is
peaking and skyrocketing in price now. This means that our ability to
sell natural gas power capacity at a reasonable price will likely
collapse, (driving potential gas energy customers even further away) and
we will be forced to run the peakers full tilt, in what might well be a
vain attempt, to sell enough hard power to meet even the 30 year
contract deadline, and we will likely -still- not regain costs and will
have to -amend- the contract to run the peakers well -past- 2040 and/or
at higher than the 4000 hour per year limit to regain those costs.

This -guarantees- that the peakers will pollute -far- more than the
existing Mirant plant, which will certainly close within the next
decade. This is because Mirant is no longer locked into -any- operation
to regain costs and just 4 years from now we will have built hundreds of
megawatts of renewables, efficiency and capacity both under the 
Community Choice renewable energy project and under new State and San 
Francisco climate change requirements; and because the then completed 
Transbay Cable project will bring us -another- 400 megawatts of capacity 
(enough to meet almost half of San Francisco's daily electricity needs).

The alarming boondoggle scenario described above makes the peaker plants
a -probable- economic and environmental disaster. It would be insanity
to put ourselves in this massively risky future scenario just to avoid a
few years of air and water pollution from Mirant; pollution that can be
much more effectively avoided by canceling the peaker project and then
devoting our full time and energy on closing down Mirant as soon as
possible by replacing it with a carefully designed mix of renewables,
efficiency and Transbay Cable capacity; and by redirecting the activist 
energies currently being wasted on the necessity of blocking the peaker 
project, into a full on high powered environmental and social justice 
campaign to demand the immediate closure of Mirant.

peace,

Eric