March 23, 2012
California, Mexico

State approves Baja California wind contract

Written by Morgan lee, The San Diego Union-Tribune, www.utsandiego.com 22 March 2012

A contract to provide San Diego with electricity from a future wind farm in Baja California was approved Thursday by state utilities regulators, despite concerns about pricing.

The Energia Sierra Juarez wind power plant would provide enough electricity to power the equivalent of about 65,000 homes within San Diego Gas & Electric territory.

A 20-year, $820 million power purchase agreement between project developer Sempra U.S. Gas & Power and corporate affiliate SDG&E was approved by a 4-1 vote of the California Public Utilities Commission. SDG&E customers will pay for the electricity.

Several hurdles remain for the wind farm, including presidential approval for a cross-border tie-in line and construction of a substation to access U.S. transmission lines. The project is the first stage of more extensive plans by Sempra to install turbines along a hundred-mile stretch of windswept highlands atop the Sierra Juárez in Baja California.

“I think it’s a very important energy resource for California,” Public Utilities Commissioner Timothy Simon said of the current proposal.

Commissioner Catherine Sandoval, who wavered in earlier discussions, voted in favor of the power purchase agreement, saying the price was “not tremendously higher” than comparable projects and that wind studies showed it would provide electricity during hours when demand is relatively high.

The Sierra Juarez contract offered a rare glimpse of current pricing for green energy. The terms of most power agreements remain confidential for years under rules designed to ensure competitive bidding, but deals between corporate affiliates – in this case two subsidiaries of utility holding company Sempra Energy – are made public before approval.

Dissenting Commissioner Mike Florio said the contract’s $106.50-per-megawatt price was too high for wind energy and warned that the cost of expanding the state’s renewable energy portfolio eventually could lead to a public backlash.

“Sooner or later the costs of these contracts that we’re approving are going to come home to roost,” Florio said.

Under legislation signed last year by Gov. Jerry Brown, electricity retailers in California must provide one-third of their power by 2020 from renewable sources such as wind, solar and geothermal plants. Energia Sierra Juarez would play a small part in helping San Diego Gas & Electric meet state mandates.

Unlike wind projects in the U.S., Sierra Juarez is not eligible for the federal production tax credit that has spurred rapid growth in the wind industry.

“Ultimately tax payers are not on the hook to subsidize this project,” said Chris Cate, vice president of the San Diego County Taxpayers Association.

Cate was among several representatives of San Diego business associations to attended the meeting in San Francisco and voice support for the project. Several ratepayer advocate groups have objected to the project.

Approval of the project’s cross-border tie-in line is opposed by labor unions in the United States, environmental groups on both sides of the border and California state legislators who say it would export potential U.S. jobs to Mexico.