OREANDA-NEWS. San Diego Gas & Electric (SDG&E) may be unable to close a purchase power agreement for a new 600MW gas-fired peaking plant in San Diego because of concerns that the project would stifle renewable energy resources.

The utility wanted the deal with the Carlsbad Energy Center to meet local capacity needs created by the early retirement of the San Onofre nuclear power plant. A subsidiary of NRG Energy has proposed completing the \$2 billion plant by 2017 on the site of the Encina power plant, which is retiring later that year because of state restrictions on once-through cooling technology.

But a California Public Utilities Commission (CPUC) judge last week in a proposed decision recommended rejecting the deal. The judge said even though the commission required it to procure renewable generation to the "fullest extent possible," the utility was proposing a deal that would block it from procuring more than the minimum amount of that resource.

SDG&E had reached the deal with the Carlsbad plant in response to a CPUC order last year that required it to procure 500-800MW by 2022 to meet local reliability needs. The order required the utility to procure at least 200MW, and up to 100pc, of that capacity from energy storage or "preferred resources" that include energy efficiency, renewables and demand response.

The judge's proposed decision last week said it was unreasonable to approve the Carlsbad deal before SDG&E had demonstrated through an open request for offers that it was not feasible or cost-effective to procure more than 200MW of energy storage or preferred resource. The CPUC will have to approve the decision for it to take effect.

Analysts at the investment bank UBS today said although the plant can still try to qualify under a subsequent request for offers, they saw a "clear threat" that the size of the plant will be scaled back if there are other preferred resources.