* Units may be needed with nuclear plant down
* The two gas units restarted in May
July 2 (Reuters) - The California Independent System Operator will keep two generating units at AES Corp's Huntington Beach power station available for dispatch into August to help replace lost generation from the damaged San Onofre nuclear plant, the grid agency said in a market notice on Monday.
The two retired power plants which AES restarted in May, will continue to be available for dispatch after Aug. 8, to bolster grid reliability in the San Diego and Orange County area.
The ISO got no response to its offer to market participants for alternate solutions by a June 29 deadline, the agency said.
Huntington Beach Units 3 and 4, natural gas-fired units with total capacity of 440 megawatts, were called on in early May as the ISO looked at reliability issues in the Southern California area without the 2,150-MW San Onofre plant which has been shut since January.
The ISO has extended its contract with AES under its capacity procurement mechanism until Aug. 8. At that time the agency will decide how long it wants to keep the plants available, a spokesman said.
Southern California Edison, a unit of Edison International said last month it will submit a plan to regulators by the end of July to outline a schedule to restart San Onofre Unit 2, but the plan requires approval of nuclear regulators which will take more time, until the end of August, at the earliest.
The San Onofre nuclear station is located halfway between Los Angeles and San Diego and is critical to the grid to import electricity into Southern California, the state independent system operator has said.
The ISO warned that San Onofre's extended shutdown raises the possibility of rolling power outages as warmer temperatures boost demand for power over the summer.
The San Onofre outage, entering its sixth month, began following the discovery of premature tube wear in steam generators made by Mitsubishi Heavy Industries and installed within the past two years.
The ISO also worked to accelerate completion of two transmission projects in Southern California and plans to utilize more conservation efforts as summer demand climbs.
The 1950s-era Huntington units, which AES retired at the end of 2011, would add generation in Southern California and, more importantly, bolster the transmission system to allow power from outside the state to flow to San Diego, the state's second largest city, ISO officials said previously.
The units were previously taken out of service in the mid-1990s, but restarted in 2003 following the 2001 California energy crisis, according to a company filing.