CARLSBAD — The clock is officially ticking for the city, San Diego Gas and Electric and NRG Energy to figure out how to close a funding gap to construct the utility provider’s new service center.
The Carlsbad City Council approved another six-month extension for the three entities to solve the problem during its March 7 meeting.
Suppose the parties can’t reach an agreement by March 31, 2024. In that case, the city will consider ending negotiations and taking its $10 million payout from NRG, according to Gary Barberio, deputy city manager of community services.
“SDG&E and NRG have invested a significant amount of time, financial assistance and resources,” Barberio said. “Everyone’s been trying to find solutions.”
However, a possible solution to the undisclosed funding gap issue has been identified.
According to Eric Leuze, vice president of asset management at NRG, the Texas-based energy company is selecting a development partner to redevelop the demolished Encina Power Station site.
Leuze said NRG’s selected development partner would be able to provide additional input for resolving the current funding gap.
Councilwoman Teresa Acosta said the nine-year timeframe has been too long and called for action. However, Acosta also said she wasn’t sold on stopping negotiations in March 2024 and suggested moving up the timeline.
The issue of finding a new destination for the energy utility’s North County service center stems from a 2014 agreement between the city, SDG&E and NRG Energy, which negotiated terms to demolish the Encina Power Station, construct a 632-megawatt natural gas peaker plant (Carlsbad Energy Center), and relocate SDG&E’s North Coast Service Center, which is used for fleet maintenance, repairs, emergency services and training.
Also, NRG agreed to cover $22 million for constructing the service center, which resides along Cannon Road between Avenida Encinas and Carlsbad Boulevard. If a deal cannot be reached, NRG would pay the city $10 million, although the city may lose at least 20 acres of land to be transferred from SDG&E to the city.
“You got our senior management’s commitment to move this forward … and reach a resolution where it’s a good place for all three parties,” said Jennifer Jett, vice president of operations support for SDG&E. “We’re trying to come up with a significantly reduced cost.”
All parties have searched for new locations, but SDG&E has specific requirements for its new service center, and none have been acceptable. In some cases, the city pulled the plug; in others, it was NRG or SDG&E.
The center, though, must be situated west of El Camino Real with good freeway access, according to SDG&E. In addition, the parcel must be 10 to 12 acres and relatively flat to allow for a new 30,000 to 32,000-square-foot building.
Acosta also expressed frustration about rising costs, adding that the city should refrain from contributing any money toward the funding gap, per the original deal. Although, Barberio said the city might have to contribute to the funding gap depending on the amount and other factors.
“I just want to finish,” Acosta said. “We need to push forward. People are frustrated, and I’m channeling what I’m hearing.”
In November 2022, SDG&E told the council it could reconfigure its service center on its property at the current site. The result would open up 10 acres to transfer to the city, and SDG&E would meet its requirements for its service center. While the 10 acres is short of the acreage in the original agreement, Barberio said it was still a benefit to the city.
But there are other challenges, Leuze said. For example, the approval process may take three to four years as the deal must be approved by the City Council, California Public Utilities Commission and California Coastal Commission.
Leuze said they would streamline the application process by submitting it concurrently to CPUC and Coastal Commission.