California Electric Reliability Is Top Concern for FERC

Edison International’s plans to retire two Southern California nuclear reactors has made the state’s ability to generate sufficient power a top concern of federal regulators.

Edison’s Southern California Edison electricity utility said today it will permanently shut the 2,200-megawatt San Onofre Nuclear Generating Station, closed since January 2012, because of uncertainty over when or if regulators would allow the reactors to return to service. The plant, midway between Los Angeles and San Diego, was shut down after a radioactive leak and the discovery of unusual wear on tubes that transfer reactor heat to power-generating turbines.

“It was already near the top of the list of areas of concern for reliability, but it shot up to the top of the list and it’s going to be a few years before that can essentially be solved,” Philip Moeller, a Federal Energy Regulatory Commission member in Washington, said in a telephone interview. “Higher prices depend on supply, and that is always a potential when you take out a big part of the supply mix.”

Wholesale electricity for delivery at Southern California’s SP15 hub for 2014 rose 30 cents, or 0.6 percent, to $51.80 a megawatt-hour, the biggest one-day gain since May 21, broker data compiled by Bloomberg show.

California Prices

SP15 prices have averaged $50.97 a megawatt-hour so far this year on the Intercontinental Exchange, heading for the highest annual average since 2008.

The California Independent System Operator Corp., which runs the state’s grid, said in March that it may prove “difficult” to manage parts of the grid, particularly Southern California, without San Onofre and during a below-average year for hydroelectric generation.

California Governor Jerry Brown said in an e-mailed statement that the state and its power utilities have “worked to provide Southern California with reliable electric power year round” since the nuclear power plant shut.

“At my direction, California’s top energy experts will continue developing a long-term plan that ensures there is reliability for decades to come,” he said.

The loss of San Onofre, and the pending shutdown of additional power plants over the next few years because of state regulations limiting the intake of water for cooling, will increase the risk of blackouts for several years, Moeller said.

Natural Gas

Shutting the reactors will also boost the state’s reliance on natural gas to produce electricity, he said.

About 360 million cubic feet of gas a day will be needed to produce electricity to replace San Onofre, based on an 85 percent utilization rate for the two reactors, said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York.

Kyle Cooper, director of research with IAF Advisors in Houston, estimated that 400 million to 500 million cubic feet a day will be needed. The gas burn may be higher on the hottest days of the year because less efficient units will need to be brought online, he said.

Unlike nuclear reactors, the power plants used to fill the San Onofre shortfall will produce greenhouse gas emissions, Steve Berberich, chief executive officer of the California ISO, said on a call with reporters today.

“We are moving in the wrong direction from a greenhouse-gas-direction perspective,” he said.

Emissions might climb by 7.9 million metric tons annually in San Onofre’s absence if the lost generation is replaced with natural gas-fired power plants and electricity from outside the state, according to Bloomberg New Energy Finance.

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