The California Independent System Operator on July 7 weighed in with federal regulators for continued negotiation on a new generator interconnection agreement between Pacific Gas & Electric and CXA La Paloma LLC for the 1,124-MW La Paloma natural gas-fired power plant in McKittrick, California.

La Paloma filed its initial GIA and generator special facilities agreement with the Federal Energy Regulatory Commission on Oct. 9, 2001. FERC accepted the GIA and GSFA on Dec. 6, 2001, with an effective date of Aug. 3, 2001. On June 2, PG&E—saying that the overarching agreement is set to expire on Aug. 3 under its own terms—notified FERC of the termination. PG&E said it and La Paloma planned "to negotiate and submit a replacement agreement to provide for continued service."

The negotiation has apparently failed, insofar as La Paloma asked FERC in a June 23 motion to intervene and protest that CAISO had indicated that the replacement GIA "may not grant" the "same capacity of interconnection capacity—1,160 MW—that is provided for under the original GIA."

Consequently, FERC "should not permit termination of the original GIA" until La Paloma, PG&E and CAISO are "able to negotiate a replacement agreement" under the CAISO tariff, La Paloma said [ER21-2064]. The commission "also should clarify that neither CAISO nor PG&E may reduce" the "quantity of interconnection service for which La Paloma has paid," the generating company said.

In its July 7 response to the La Paloma filing, CAISO told FERC that the generator’s protest is "untimely and inaccurate." The grid operator said the negotiation "may reconcile the interconnection service capacity La Paloma originally requested, 1,160 MW, with the generating capacity La Paloma actually constructed." CAISO said it, La Paloma and PG&E "are still negotiating the replacement GIA, including the correct interconnection service agreement."

Furthermore, replacement GIA issues "should be presented to the commission only upon the parties completing their investigation and negotiation, and the parties are still engaged in both," CAISO said.

CAISO also took issue with the substance of La Paloma's claims to FERC.

"La Paloma argues that it should retain the interconnection service capacity it originally contracted for," the ISO said. "Although frequently that is the case, the commission has been clear that there are exceptions to this rule." FERC precedent "holds that the interconnection capacity in a GIA does not confer a property right, and that where an interconnection customer builds less generating facility capacity than that for which it requested interconnection service capacity service, it does not retain that interconnection capacity indefinitely."

CAISO also cited FERC Order No. 845, stating that "where the original interconnection customer, for example, reduces the generating facility capacity of its facility from what was originally proposed for interconnection, it would not retain rights indefinitely to any excess interconnection capacity thus created."

In reiterating the ongoing status of negotiations on a replacement GIA, CAISO said the parties "hope to resolve all issues." Without a revised agreement, the parties will file the replacement GIA unexecuted, CAISO said. "Until either happens, it is premature to resolve these issues before the commission."

CXA La Paloma in 2018 also clashed with CAISO in a somewhat high-profile case. The generation owner filed a complaint with FERC, requesting the commission to require a mandatory capacity market in California because of an increasing number of reliability must-run contracts for gas-fired power plants. La Paloma in its complaint to FERC said that regulation of the wholesale power market in California is fragmented and compartmentalized, and that CAISO is discriminating by failing to establish a capacity market, but FERC rejected the complaint (see CEM No. 1515).

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