Here is information on the ability of CA generators to run in excess of their 
orginal offset NOx quantities.

Alan Comnes

 -----Original Message-----
From:  Schoen, Mary  
Sent: Monday, June 18, 2001 3:23 PM
To: Comnes, Alan
Cc: Guerrero, Janel
Subject: Re: FW: Davis Eases Power Plant Pollution Rules

The following is more explanation about the recent Executive Order (EO) 
signed by the Governor of California on June 11, 2001.  In order to avoid 
future blackouts, Governor Gray Davis is waiving limits on hours of operation 
and the associated emissions for natural gas-fired peaker units if they 
adhere to certain conditions.  He is requesting local air districts to allow 
natural gas-fired peaker power plants to operate in excess of their hourly, 
daily, quarterly and/or annual emission limitations if they do the following:

1. Agree to sell power to the California Department of Water Resources or to 
a utility located in California 
2. To serve an operating utility,s own load
3. Agree to sell to another California-based utility

The gas-fired peaker units must also pay a mitigation fee to the local air 
districts of $7.50 per pound of oxides of nitrogen (NOx) and $1.10 per pound 
of carbon monoxide (CO) emitted.  (The Governor set this number - it is, 
however, the same amount the South Coast AQMD is charging for NOx offsets in 
the modifications it made to the RECLAIM program.) These mitigation fees will 
be used to clean up or retire other sources of pollution in the same air 
basin.  The Governor is ordering the California Air Resources Board to work 
with the Environmental Protection Agency to ensure that power plants willing 
to operate under this order obtain the necessary approvals.

As you know, there are many peaking plants that are close to exhausting their 
allowable operating hours.  Once these facilities exhaust the amount of 
allowable hours they would have to either shut down the units or negotiate an 
agreement with the local air agency to continue to operate.  With the 
exception of Mirant Potrero in San Francisco and Reliant Energy Mandalay in 
Ventura County, no facilities have negotiated such agreements.  The EO issued 
by the Governor gives the peaker facilities a blanket approval to operate 
beyond the restrictions.  The Governor believes that waiving of the 
requirements will also minimize reliance on backup diesel-fired generators, 
which have even higher emissions than the natural gas peakers.  In my 
previous discussions with the US EPA Region 9, they did say they were willing 
to work with the state to provide variances to power plants' operating 
limits.  However,  in the two instances mentioned above, the EPA required the 
plants to agree to install pollution control equipment at a specific future 
date.  This aspect of the agreement was critical to EPA, because the 
increased emissions from the peakers with increased hours are now significant 
enough (major source status) to trigger New Source Review which requires 
installation of Best Available Control Technology (BACT).  The EO by the 
Governor makes no mention of future controls.

According to municipal utilities and other generators, the Governor's action 
could provide up to 1,200 Megawatts of additional power this summer by 
expanding the number of hours of operation at natural gas-fired plants.   The 
EO will expire on October 31, 2001, unless revoked, modified or extended by 
further executive order.  The air director of the Ventura air board has 
already sent comments opposing this order due to its negative air impacts.  
Environmentalists will also no doubt object.  The EPA has not yet responded.  
Despite the potential negative environmental effects, the political pressure 
will be strong to let these plants operate.  I will keep my ears open for 
additional developments on this matter, please let me know if you have any 
questions.



From: Alan Comnes/ENRON@enronXgate on 06/12/2001 11:57 AM
To: Mary Schoen/NA/Enron@Enron
cc:  

Subject: FW: Davis Eases Power Plant Pollution Rules 


Mary,

Any insight into this latest change would be appreciated by the traders.  Is 
this order any different than the SCAQMD $7.50/ton program already 
implemented?  Will EPA allow that state to do this?

Thanks,

Alan Comnes
 -----Original Message-----
From:  Comnes, Alan  
Sent: Tuesday, June 12, 2001 9:55 AM
To: Alonso, Tom; Alvarez, Ray; Badeer, Robert; Belden, Tim; Calger, 
Christopher F.; Dasovich, Jeff; Driscoll, Michael M.; Fischer, Mark; Foster, 
Chris H.; Guzman, Mark; Hall, Steve C.; Heizenrader, Timothy; Kaufman, Paul; 
Mainzer, Elliot; Mallory, Chris; Mara, Susan; Motley, Matt; Perrino, Dave; 
Platter, Phillip; Richter, Jeff; Scholtes, Diana; Swain, Steve; Swerzbin, 
Mike; Williams III, Bill; Wolfe, Greg
Subject: Davis Eases Power Plant Pollution Rules 


 
Tuesday, June 12, 2001 
Davis Eases Power Plant Pollution Rules 
 Electricity: Order will allow more production from heavily polluting 
'peaker' facilities. 


By DAN MORAIN, Times Staff Writer





     SACRAMENTO--Gov. Gray Davis agreed Monday to lift air emission limits on 
heavily polluting power plants and allow them to run at capacity this summer 
as long as the electricity they produce is sold in the state. 
     State officials said the plants must be pressed into use to avoid 
blackouts. 
     Davis' executive order lets the generators build the cost of air 
pollution fines into the price the state pays for electricity produced by 
natural gas-fired power plants, said Catherine Witherspoon of the California 
Air Resources Board. 
     Municipal utility districts--including the Los Angeles Department of 
Water and Power--and independent power companies could supply as much as 
1,200 megawatts from so-called peaker plants, facilities that generally are 
permitted to operate for only a few hundred hours a year because they pollute 
so heavily. That is enough power for more than 1 million homes. 
     Other gas-fired power plants that have been shut down because of air 
pollution restrictions also could be started up as a result of the order. 
     In a news conference Monday, state officials said the order will have 
the effect of lowering air pollution by limiting the use of far dirtier 
diesel generators, which industry could use if power supplies are threatened. 
     "If we don't get every last megawatt we can [from natural gas-fired 
plants]," said Witherspoon of the air board, "we will see people turning to 
diesel more frequently." 
     Added Kellan Fluckiger, a top energy advisor to Davis: "If you don't run 
these, you're either going to have outages or you're going to run something 
dirtier." 
     Fluckiger said the order expands "the number of hours these things can 
run and the amount of energy they can produce." 
     New natural gas-fired power plants emit about half a pound per 
megawatt-hour of operation of ozone-producing pollutants. The plants affected 
by the order emit between two and five pounds of oxides of nitrogen per 
megawatt-hour. 
     If the plants are pressed into operation for 200,000 megawatt-hours this 
summer, there will be between 400,000 and 1 million additional pounds of 
oxides of nitrogen emitted into the air. 
     The state probably will end up paying the fees associated with the extra 
pollution through higher electricity prices. The fees amount to $7.50 per 
pound of oxides of nitrogen--or $7.5 million if the plants operate for 
200,000 hours--and $1.10 per pound of carbon monoxide emissions. The money 
would be used to reduce air pollution from other sources. 
     "Under this order, dirty power plants can run as long as they want and 
pollute as much as they want so long as they pay into a fund," said Gail 
Ruderman Feuer, senior attorney with the Natural Resources Defense Council. 
"Our concern is that there's no guarantee that the fund will result in 
emission reductions any time soon." 
     A Ventura County air pollution control official said that running one 
peaking power plant operated by Reliant Energy for one hour is the equivalent 
of adding 20,000 new cars to Ventura County highways for an hour. Reliant 
Energy could not be reached for comment Monday night. 
     "To the extent that they run when not needed for an emergency, it's 
going to put more air pollution into Ventura County skies and it's going to 
make our air dirtier," said Dick Baldwin, air pollution control officer for 
Ventura County. 
     Los Angeles DWP Director David Wiggs hailed the order, saying it was 
needed so the city can sell the state as much as 1,000 megawatts of power 
this summer. 
     "This was the issue we had to have solved or we could not offer any of 
our excess capacity to the state," Wiggs said. 
     He added, however, that the city and state have not yet agreed on a 
price for the power. Wiggs said the city is "negotiating to get our cost as 
low as we can legally charge" so that customers of the city utility district 
are not subsidizing consumers in the rest of the state. Municipal utility 
districts elsewhere in the state also are expected to benefit from the order. 
     Though the order was aimed at spurring municipal utilities to sell power 
to the state, it also applies to independent power producers such as Reliant 
Energy of Houston and Duke of North Carolina--both of which have called on 
Davis to ease air pollution restrictions on their old natural gas-fired 
facilities. 
     "This puts more money in the Texans' pockets and more air pollution in 
Ventura County residents' lungs," said Baldwin of Ventura County. 
     Doug Allard, a Santa Barbara County air pollution control officer, also 
said it seems as if the governor is giving private power generators much of 
what they had sought. 
     "We have serious concerns about the order," said Feuer of the Natural 
Resources Defense Council. "It's taking the discretion away from local air 
districts to regulate power plants in their region." 


* * *
     Times staff writer Nancy Vogel contributed to this story. 
     RELATED STORY 
     Utility: Edison plans to raise $1 billion in debt restructuring. C1 
Copyright 2001 Los Angeles Times
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