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Mesa
The Company's Mesa Wind Farm is a 30 MW wind generation facility located in the San Gorgonio Pass near Palm Springs, California. The assets include a right-of-way ("ROW") on 440 acres of land owned by the Bureau of Land Management ("BLM"), a Power Purchase Agreement ("PPA") with Southern California Edison ("SCE"), 460 wind turbines, a collection system, a substation, roads and a maintenance building. The electricity production over the last nine years has been approximately 60 million kWh per year.
Of the original 460 65-kW Vestas V15 turbines, approximately 430 turbines are still operational. All operations and maintenance are subcontracted out to Green Energy Maintenance Corp. (formerly Airstreams Maintenance Corporation) ("GEM"), an independent company that has extensive experience in operating and maintaining wind farms and overhauling wind turbines.
The Company has a PPA and associated interconnection agreement with SCE that provides for the sale of electricity on an "as available" basis at SCE's Short Run Avoided Cost ("SRAC"). On April 12, 2010, SCE extended the PPA in compliance with an order by the California Public Utilities Commission ("CPUC") pending its approval of a new standard offer contract. However, prior to the CPUC's approval, SCE entered into the Qualifying Facility and Combined Heat and Power Program Settlement Agreement ("Settlement Agreement") with numerous parties. The Settlement Agreement resolves numerous outstanding Qualifying Facility ("QF") disputes and provides for an orderly transition from the existing QF program to a new QF/Combined Heat and Power program for QFs greater than 20 MWs. The existing SCE PPA expires within 120 days of a CPUC decision on the standard offer contracts. The CPUC approved the Settlement Agreement on December 16, 2010 (in Decision 10-12-035). However, the Settlement Agreement will not become effective until (i) after there is a final and non-appealable FERC approval of an application by the California Investor Owned Utilities (IOUs) to terminate their obligation pursuant to the PURPA to purchase from QFs greater than 20 MW, and (ii) the Settlement Agreement becomes final and non-appealable at the CPUC, (the "Settlement Effective Date"). SCE currently anticipates that the Settlement Agreement will become effective on November 23, 2011.
In anticipation of the expiration of the existing PPA, in July, the Company bid into the IOU renewable request for proposals processes. On November 2, 2011, the Company entered into a fixed price PPA with SDG&E for its 30MW wind generation facility. The SDG&E PPA contains conditions precedent to the effectiveness of this agreement including CPUC approval no later than June 1, 2012.
As part of its interconnection application for the Mesa repower and expansion project, the Company has received a system facilities study from SCE stating that the 30MW repower would require $15,500 in system upgrades. The Company also received a facilities study for the 20MW expansion, stating that the 20 MW would require significant upgrades making the expansion project uneconomical. After further evaluation, management has decided to delay the repower and expansion projects due to the execution of the SDG&E PPA. The Company expects to file a new interconnection application for the 20 MW expansion project. The Company continues to retain a $500,000 interconnection financial security deposit with SCE for the 30 MW repower.
The Company had submitted a plan of development ("POD"), and environmental and archaeological assessments required for a repower and expansion of Mesa Wind up to 50 MW and the BLM issued a Record of Decision approving that POD and, on September 21, 2009, granted a 24-year ROW extension to September 22, 2037. However, due to the two-year delay in processing the interconnection application, the Company was not able to repower within the timeframes set forth in BLM's record of decision. Accordingly, the Company will be required to update its POD and resubmit additional environmental assessments to support the new POD.
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