Recognizing the environmental, health, and economic consequences of building new fossil fuel power plants in San Francisco, Mayor Newsom recently met with the San Francisco Public Utilities Commission, City Attorney’s Office, California Independent System Operator (CAISO), the California Public Utilities Commission, Mirant Corporation, Pacific Gas & Electric, as well as environmental and community advocates in order to investigate cleaner and cost-effective alternatives to the current CT proposal.

A retrofit of the diesel turbines at the Mirant Potrero plant has been identified as a viable alternative to constructing the four new power plants, transforming the current turbines to run on natural gas and potentially biofuels. Mirant Corporation has also agreed to upgrade its existing turbines to reduce emissions and to run the retrofitted turbines for reliability needs only.

This commitment will mean overall emissions from the retrofit alternative will be lower than the emissions from the proposed project.

The text of the letter:

Dear Honorable Members of the Board of Supervisors:

I write to update you on recent efforts of our office regarding the proposed Combustion Turbine Peaker Project (CTs). As you know, a package of legislation addressing this issue is pending at the Board of Supervisors (file numbers 080592, 080523, 080577, and 080524).

The decision about whether or not to build new fossil fuel power plants would have environmental, health and economic consequences far beyond our terms as elected officials. It is a decision I do not take lightly. I appreciate the Board’s support for a continuance of the legislation during the last two weeks to allow us to continue to explore potential alternatives to the proposed project.

I believe we have identified a more promising way forward than the current proposal. Staff from the SFPUC and my office has worked diligently over the past several weeks to understand the viability of pursuing a retrofit of the diesel turbines (Retrofit) at the Mirant Potrero plant as an alternative to constructing the four new power plants currently proposed.

To explore this alternative I have met with key stakeholder groups including environmental advocates from a range of organizations as well as principals from regulatory agencies and power providers. I have asked difficult questions of the Retrofit option and have been surprised to see this option stand up to those questions. On Friday, May 23, Ed Harrington, City Attorney Dennis Herrera and I met with the President of CAISO - Yakout Mansour, the Chairman of the CPUC - Mike Peevey, the CEO of Mirant - Ed Muller, the CEO of PG&E - Bill Morrow and our respective staffs. In this meeting we vetted the possibility of retrofitting the diesel turbines and asked each stakeholder to give us the necessary commitments to advance this alternative. In follow-up letters from each entity has made commitments to make the Retrofit option viable.

Confirming correspondence from CAISO and Mirant is attached. Health and environmental consequences are of critical importance to the Retrofit option. In discussing the alternative we learned several important facts. Most importantly, CAISO has agreed, in writing, that Unit 3 at Potrero d be closed down when the Transbay Cable comes online near the end of 2010. This is a critical commitment from the agency and will eliminate the largest pollution source at the current plant. I know we all share the concern expressed by Supervisor Maxwell and others that Unit 3 — which is responsible for the largest emission at the Potrero plant — be taken off line. We now know that will happen.

We must, however, resolve the need to create 150 megawatts of generation within the City.

The current diesel turbines at the Potrero plant generate approximately 156 megawatts of power, however, they do so with substantial emissions. The Retrofit would transform these turbines to run on natural gas and potentially biofuels. We have a written commitment from Mirant to upgrade its existing turbines with the Best Available Controls Technology (BACT) to reduce emissions even further and to run these retrofitted turbines for reliability needs only. This commitment gives us good reason to conclude that the overall emissions from the Retrofit would be lower than the emissions from the proposed CTs. Our SFPUC would analyze the projected emissions from the retrofitted turbines to provide an independent evaluation of the statistics provided by Mirant and others. Additionally, PG&E and the CPUC are committed to working with us to identify further innovative solutions to diversify our energy delivery mechanisms, expand our renewable portfolio and meet aggressive savings goals as we move forward. In coordination with the City Attorney, we will aggressively pursue these commitments.

I am greatly encouraged that the Retrofit alternative will improve the health and environment for the surrounding neighborhoods. It will provide us a short term bridge to the future when we can implement renewable energy and energy reduction strategies to meet the future power generation needs of our City.

It is our goal to implement these strategies aggressively to convince CAISO within a short time frame that even the retrofitted peakers are no longer necessary. Mirant has committed to shut down the retrofitted turbines as soon as CAISO grants permission.

In addition to the health and environmental benefits, the Retrofit will be considerable less expensive.

The proposed CT project would cost approximately $273 million. While portions of this will be covered by money from the Department of Water Resources, there will still be an outstanding financial obligation which could require the City to continue operating the CTs for many years. In contrast, the proposed Retrofit would cost somewhere between $50 and $70 million. The costs would be covered by the Reliability Must Run contract with CAISO and there would be no financial risk to the City.

Moreover, we would likely be able to sell the four combustion turbines for somewhere between $10 and $60 million which could help fund vital City services including future energy projects.

Based on the facts and commitments that have been established on the Retrofit option, I ask your support in exploring this alternative more fully. I ask that the current legislative package (File Nos. 080592, 080523, 080577, and 080524) be returned to committee or continued until at least July 8th. I will work with Ed Harrington, the City Attorney, and our staffs in the coming weeks to pull together the Retrofit alternative. We would then introduce necessary legislation codifying the retrofit alternative to the Board so there can be a hearing on the alternative. I strongly believe that after an opportunity to fully evaluate this alternative you would agree with me that there is a better way forward to improve our environment and the health of local residents than the current proposal.

Thank you very much for your consideration and your ongoing concern and attention to this issue.

Sincerely,
Gavin Newsom
Mayor

See Related: PUC NOW SUPPORTS NEWSOM RETROFIT PLAN FOR POTRERO DISTRICT POWER PLANT

See Related: SAN FRANCISCO DEPARTMENT OF ENVIRONMENT

See Related: PG&E CLIMATE SMART

See Related: GLOBAL WARMING

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