California court gives QF permission to sell power on open market

By the OGJ Online

HOUSTON, Mar. 22, 2001—In a ruling with broad implications, a California judge Thursday said a geothermal energy supplier can temporarily sell its electricity on the open market, even though the company has a long-term contract with Southern California Edison Co.

CalEnergy Operating Corp. alleged Southern California Edison’s parent Edison International breached the contract by failing to pay for any output since Nov. 1. The plants filed suit Feb. 20 in Imperial County Superior Court seeking back payment from Edison, authorization to suspend contracts with Edison, and permission to sell power elsewhere in California if Edison is unable to pay its bills.

CalEnergy Chairman David L. Sokol said the geothermal plants will receive higher prices on the spot market than renewable generators agreed to accept in negotiations with the state, Edison, and Pacific Gas & Electric Co., or the $79/MW-hr that has been incorporated in the California Public Utility Commission’s (PUC) proposed order for so-called “qualifying facilities.”

The PUC’s proposed order will force the utilities to resume payment to small generators called qualifying facilities. Many have shut down because they haven’t been paid in several months. Sokol said what the state offered “was less than the state is paying out-of-state fossil fuel energy providers in long-term contracts, and less than half what we are allowed under federal law.”

With the precedent in place, it raises the question of whether other qualifying facilities who have similar contracts with utilities and who have not been paid for power also will seek relief in court.

Sokol noted that the ruling did nothing to assure the plants will collect $140 million Edison allegedly owed CalEnergy for power produced since Nov 1. Sokol said the geothermal plants will continue to pursue legal and legislative remedies to receive back payment.

The debt will continue to place a “great strain” on company operations, he said, while Edison has continued to collect tens of millions daily from ratepayers and has amassed approximately $2 billion in cash.

Sokol added that he was encouraged by the governor’s Mar. 20 announcement proposing legislation and action by the PUC that would require Edison and PG&E to begin paying current bills for electricity received from qualifying facilities such as CalEnergy.

But, Sokol cautioned, “While we are hopeful that this legislative and regulatory action can move forward quickly, there are many details to be worked out in the governor’s proposal. Even with quick action, there is a serious question whether Edison is willing to pay any of its current bills from qualifying facilities.”

He noted that, like today’s court ruling, the governor’s proposal provides no plan or schedule to require Edison to pay the approximately $140 million Edison owes for power CalEnergy has delivered to date.

CalEnergy’s geothermal complex employs about 200 workers and produces a total of 268 MW—enough to supply 268,000 homes. It is one of 10 members of the renewable energy creditors committee, a group of green power suppliers who formed the committee on Feb. 15 to explore options to collect back payments from Edison. Together, the group said it is owed more than $300 million by Edison.