Appeals court lifts order requiring Reliant to sell power

By the OGJ Online Staff

HOUSTON, Apr. 6, 2001—Reliant Energy Inc. obtained a stay from the US Court of Appeals for the Ninth Circuit of a lower court’s decision forcing the company to sell power in California without a guarantee of compensation.

The appeals court lifted the injunction late Thursday forcing Reliant to sell power to the California Independent System Operator without assurances of payment. The ISO is dependent on Pacific Gas & Electric Co. and Southern California Edison Co. which distribute the power to consumers for payment.

Friday Pacific Gas & Electric Co. filed for reorganization under Chapter 11 of US bankruptcy code. Southern California Edison Co. is reportedly holding an emergency executive meeting Friday and also is on the brink of bankruptcy.

Both utilities suspended payments to the ISO for power months ago. Generators were forced to sell to the ISO to keep the lights on under an order issued by US District Judge Frank Damrell, but they were not being compensated.

“We will continue to sell power to California,” said Richard Wheatley, spokesman for Reliant. But the company would not comment on whether it was receiving any payment.

“I’m not going into that,” said Wheatley. “We are optimistic that shortly we will have a long-term agreement with the DWR [California Department of Water Resources].”

The emergency panel said in its ruling Reliant had a “high likelihood of success” in its appeal of Judge Damrell’s ruling. A hearing before the full appeals court is set for July. The same issue also is pending in a case filed by Reliant at the Federal Energy Regulatory Commission.

Reliant challenged the ISO’s interpretation of its tariff, including suspension of the utilities’ creditworthiness standards, which Reliant said must be in place for sales to occur to ISO. The ISO determined in-state generators such as Reliant are obligated to provide power whether the purchaser is creditworthy or not in an emergency under its “participating generator agreements.”

FERC has set an Apr. 12 hearing on the issue.

Meanwhile, Reliant and other generators are owed billions for past due power bills. No current figure was available for unpaid bills accumulated by Reliant. But as of Mar. 1, the company was owed $358 million for power delivered into California market, said Wheatley.

In a conference call with Lehman Bros., advisors to Gov. Gray Davis reportedly said the governor supported the recovery of past balances by issuing bonds of $8 billion backed by the utilities’ revenue stream. The California Public Utilities Commission recently increased rates by 3 cents/kw-hr.

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