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Sempra, Terra-Gen Get California Approval for Wind-Power Deals

Sempra Energy (SRE) and Terra-Gen Power LLC received approval to sell wind energy from two projects they’re developing in the U.S. and Mexico to California utilities.

The California Public Utilities Commission approved the contracts today at a meeting in San Francisco.

The agreements, with Sempra’s San Diego Gas & Electric and Edison International (EIX)’s Southern California Edison, will help the utilities comply with a state law that requires one-third of their energy to come from renewable sources by 2020. The companies in 2010 supplied 11.9 percent and 19.3 percent, respectively, according to the commission’s fourth-quarter 2011 report.

SDG&E was approved to buy the output from Sempra’s 156- megawatt Energia Sierra Juarez project in Baja California. The price is $106.50 a megawatt-hour, Scott Crider, a Sempra spokesman, said. That represents a cost of about $820 million over the duration of the contract, the utility said in a filing.

Southern California Edison was approved to buy the output from four additional phases of Terra-Gen’s 1,550-megawatt Alta Wind Energy Center in Tehachapi, California, which would be the world’s largest wind farm. Terms weren’t disclosed.

Two Phases

Two phases of Alta, the 168-megawatt seventh and 132- megawatts ninth, are expected to enter operation in January 2013. The 138-megawatt tenth phase and 90-megawatt eleventh are expected to begin shipping power to the utility in January 2015, Marc Ulrich, Southern California Edison’s vice president of alternative and renewable power, said by telephone. Terra-Gen may complete the latter two phases before that date and sell the power on the spot market, he said. The seven remaining segments, totaling 1,020 megawatts of capacity, were operational at the end of last year.

“We have enough land secured down in the area that could support up to about 1,000 megawatts,” Crider said of Sempra’s project by telephone yesterday. “It has always been our intent to develop this project in various phases,” he said.

The first phase approved today is expected to enter operation in August 2013, and BP Plc (BP/LN) is negotiating an agreement to jointly develop it, Crider said. Development of subsequent phases depends on similar power-purchase deals with other U.S. or Mexican utilities, he said.

Energia Sierra Juarez would still be built if Congress doesn’t extend the primary incentive for wind energy, a tax credit worth 2.2 cents a kilowatt-hour, according to Crider.

“It is not dependent on the production tax credit that is due to expire at the end of 2012,” Crider said. “This is a project that the state can count on,” he said. “We’re hopeful that the PTC will be extended in the near future, but it if isn’t then this is a project that will still be able to move forward.”

Joseph Greco, a senior vice president at Terra-Gen, didn’t reply to a phone message today seeking comment.

To contact the reporter on this story: Andrew Herndon in San Francisco at aherndon2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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