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DOE will rehear California suppliers on payment question

Jan. 18, 2001—The U.S. Energy Department will reconsider requests by two generators seeking assurance they will get paid for selling power to the California Independent System Operator. Comments are due Feb. 16.

Under an order adopted Dec. 14 and since extended by the Energy Department (DOE), power companies with surplus electricity must sell it to California. The federal agency resorted to the order after some suppliers began resisting sales into California without payment guarantees.

But the order contains no provisions assuring sellers will be paid. With Southern California Edison Co., a unit of Sempra Energy, and Pacific Gas & Electric Co., a unit of PG&E Corp., both running out of cash, power generators are growing more and more concerned about how they will get paid.

In its motion for rehearing, PPL Montana LLC points out that the Energy Department order requires 75 generators and marketers to provide energy to the ISO at negotiated rates or at rates determined by the Energy Department but requires no guarantees or other credit protections for the generators. Reliant Energy Services Inc., a unit of Reliant Energy Inc., raised similar concerns Jan. 6.

With the California market in chaos, Reliant Energy Inc. spokesman Richard Wheatley said Thursday the company’s natural gas suppliers have become concerned and have asked Reliant for “letter of credits.” Reliant owns about 3,500 MW in California.

Energy Sec. Bill Richardson Wednesday extended the emergency order, which was set to expire Wednesday, until Jan. 23. DOE also said it is prepared “to exercise its authority to ensure supplier compliance with the order if necessary.”

Richardson said rolling blackouts in California and concerns about the financial status of the state’s electric utilities underscore the difficult situation California is facing in obtaining adequate supplies of electric power.

“I am extending this emergency order because it is still needed to help the California Independent System Operator provide vitally needed electricity,” he said.

The emergency order requires that, if the ISO certifies it has been unable to obtain an adequate supply of electricity in the marketplace, certain electricity suppliers are be required to make excess power available to the ISO.