February 20, 2012 8:48 AM
Brooke Edwards Staggs, City Editor

VICTORVILLE • With permits set to expire next year and more than $76 million invested into plans for Victorville’s second power plant, the city could finally strike a deal Tuesday night for a private company to take over the $1.2 billion project.

QGEN, a Massachusetts-based company that develops and operates utility-scale hybrid power plants around the world, has had exclusive rights for months to negotiate a purchase of the shelved Victorville 2 plant near Southern California Logistics Airport.

“We continue to talk to them,” Mayor Ryan McEachron said Friday, unable to go into further detail since the deal will be discussed Tuesday behind closed doors.

The California Energy Commission’s license for the project expires on July 16, 2013 — five years after it was first approved, according to CEC spokeswoman Sandy Louey.

To maintain the permit, the city has to either request an extension or submit preconstruction documents and secure approval to start construction before that date.

There is no filing fee for a petition requesting the deadline extension, but Louey said it should be done at least six months in advance to give the CEC enough time to review the request, write an analysis and make a decision.

Although the permit itself isn’t pricey or timeconsuming to extend, Thomas Barnett, executive vice president of Inland Energy, said that assumes his agency and the city can provide the CEC with a good reason for the delay and demonstrate the project will move forward “within a reasonable time period.”

However, there are other issues to worry about.

An air quality permit for the project has expired, Barnett said, with some analysis required to renew it.

The project also lost its place in line to connect to the state’s energy grid, and Barnett said it will require “considerable analysis and payment of fees” to get one back.

Lastly, with a new developer onboard, the plant’s design is likely to change — which will require changes to its permits. How long those changes will take and how much they will cost depends on how substantial the design changes are.

Talks with both NRG and Beowulf to build VV2 fell through, reportedly in part because of a contract that guarantees Inland Energy an estimated $5 million in annual revenue over the life of the plant for the company’s role in helping launch the project.

Then in fall 2010, Victorville entertained offers from seven companies interested in purchasing the lots to develop solar farms. However, the city ended up rejecting all of the bids shortly after news broke that Newport Beach-based Inland Energy had been tapped as the leading contender.

Victorville spent $10.2 million buying 300 acres north of SCLA for the project and another $15.9 million for third parties to secure permitting and perform engineering work, according to City Manager Doug Robertson. More than $11 million of that total went to Inland Energy, which signed a contract with Victorville in 2005 to develop what was then described as a $450 million hybrid power plant. The plant was supposed to start pumping 560 megawatts of power into the state energy grid by summer 2010, producing an estimated $6 million to $8 million in annual revenue for the city.

The city also lost $50 million it gave General Electric in 2007 as a deposit on turbines for the plant. Victorville was unable to pay off the balance and was forced to walk away from the deposit in 2010.

Victorville will be paying for that loss for another 30 to 40 years, bond documents show — at a total cost, under current interest terms, of roughly $193 million. Those bonds are currently in default, after the city missed a payment in December.

With Victorville hurting for cash, a deal to sell the 300 acres and project plans to QGEN is back on the closed session agenda Tuesday. It will be discussed before the City Council meeting, with time for public comment at 5 p.m. in City Hall at 14343 Civic Drive

Brooke Edwards Staggs may be reached at             (760) 955-5358       or at bedwards@VVDailyPress.com.

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