Hunters Point. In assessing the reliability need for the Jefferson-Martin project, PG&E and the ISO assume that both units at Hunters Point will be shut down by the end of 2005. The ISO has stated, however, that if Jefferson-Martin is not operational by the end of 2005 or if new generation has not come on line, it would require Hunters Point units to remain on-line under a "reliability must run" (RMR) contract.

Under the terms of a 1998 settlement agreement with CCSF, PG&E is obligated to "permanently shut down the Hunters Point Power Plant as soon as the facility is no longer needed to sustain electric reliability in San Francisco and the surrounding area and the Federal Energy Regulatory Commission (FERC) has authorized PG&E to terminate PG&E's Reliability Must Run contract for the facility." The Commission approved this agreement in D.98-10-029. The ISO and PG&E assert that inclusion of Hunters Point in the supply forecast would defeat the intent of the settlement agreement, because its inclusion would delay the perceived need for an alternative resource. The ISO maintains that new resources are built to attain planning goals, which, in the ISO's view, include closure of both units at Hunters Point.

Another concern with Hunters Point arises because the Bay Area Air Quality Management District (BAAQMD) will implement decreasing nitrogen oxide (NOx) emission limits beginning on January 1, 2005. For Unit 4 (constructed in 1958) to continue operations, PG&E must either undertake a $15 million retrofit to install Selective Catalytic Reduction equipment or obtain Interchangeable Emission Reduction Credits (IERCs) from BAAQMD. PG&E has received IERCs for Unit 4 for use through 2005 and states that, if necessary, it will seek additional IERCs to keep Unit 4 operational beyond 2005. If Unit 4 continues to operate, it is expected that all available IERCs would be consumed by the end of 2008. Unit 1 (constructed in 1976) will meet the new NOx standards, although other BAAQMD regulations limit its operation to no more than 877 hours per year.

The ISO argues that both Hunters Point units should be excluded from the supply forecast for environmental, economic, and mechanical considerations, in addition to the settlement agreement. It states that Hunters Point Unit 4 is at or beyond the useful life of generating units of similar vintage and type and is six times as likely to suffer a forced outage than the general generation portfolio in the ISO control area, while Hunters Point Unit 1 is approximately three times more likely than average to be offline. The ISO expects that Hunters Point would require significant and increasing investment to continue operations.

CARE supports the closure of both units at Hunters Point. CARE submits that Hunters Point disproportionately affects the health and well being of San Francisco's Bayview Hunters Point neighborhood. CARE explains that this neighborhood has the highest pollution emissions in the city and the highest asthma hospitalization rate-twice the citywide average. CARE maintains further that the Hunters Point plant has degraded the Bay ecosystem and is a contributor to light pollution in the area.

280 Citizens states that it shares the goals of other parties in this proceeding to shut down Hunters Point Unit 4. 280 Citizens maintains, however, that generation should continue to be available from Unit 1 and, if necessary, could be available from Unit 4 through 2008. ORA believes that it is reasonable to assume that at least Unit 4 will likely not operate beyond 2005.