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California and the West

Utilities to Resume Paying Producers

Electricity: Some small companies that provide power say the new rate plans are not enough to get them back online.


SACRAMENTO — The state's two biggest utilities are scheduled to resume paying hundreds of small power producers this week, but at least some producers say they plan to remain offline.

Jay Henneberry, an attorney representing a small gas-fired power plant in Oxnard, said his client does not plan to start generating electricity again for Southern California Edison today, because of a controversial new rate plan that he said would force his client to operate at a loss.

The company, EF Oxnard Inc., sued Edison last week, alleging that the utility owes it more than $13.5 million for past electricity deliveries. The lack of payment, according to EF Oxnard officials, prompted natural gas suppliers to cut them off in February, forcing Oxnard to stop producing electricity.

Henneberry noted that the new rate plan fails to address the utilities' past debt to producers, which who are collectively owed more than $1.8 billion.

"Those payments are only on a going-forward basis," Henneberry said. "They do nothing for $13.5 million owed to my client."

The situation underscores the problems the state faces as it tries to get California's nearly 700 producers of alternative and renewable energy paid and, in cases such as EF Oxnard, back in business.

These companies, which include producers of solar, wind and thermal power, provide more than a quarter of the electricity consumed in California. But their output has been cut by as much as half in recent weeks due in part to the payment problems.

A new rate plan approved by the Public Utilities Commission last month to help get those producers paid has triggered a growing number of gas-fired power producers to sue Pacific Gas & Electric and Edison to get out of their contracts with the utilities. The power suppliers say the new rate plan would force them to operate at a loss, because it does not adequately compensate them for rising natural gas costs.

"We are not going to run our plants if we can't run them profitably," said Marty Quinn, executive vice president and chief operating officer of Ridgewood Power LLC, which owns three small gas-fired generators in California that are not operating.

In a related matter, a hearing is scheduled today in a legal battle between Edison and a small geothermal producer. An Imperial County judge previously freed CalEnergy from its contract with Edison because of the utility's failure to pay the company, which has since been selling its supplies on the wholesale power market.

The court is expected to rule today on CalEnergy's request for roughly $100 million in payments it is owed by Edison, and could also act on an Edison request that Cal- Energy be required to resume selling power to the utility.

"If Edison shows that it is credit-worthy and capable of making payments on a going-forward basis, I'm sure the judge will take that into account," said CalEnergy official Jonathan Weisgall. "But one of our concerns is how long will Edison continue to make these payments."

An official with Sierra Pacific Industries, which received court permission earlier this month to sell power generated by six plants it owns in California to a buyer other than PG&E, said Sierra Pacific does not plan to resume transmitting electricity to the utility.

"From our point of view we have terminated those contracts," said Bob Ellery, Sierra Pacific's director of energy resources.

Henneberry said he doubts that Edison plans to pay EF Oxnard because the new rate arrangement covers only deliveries made in April and beyond.

An Edison spokesman said his company sent payments totaling $206 million to small producers Friday, but said he did not know whether checks were sent to producers that have gone offline. A spokesman for PG&E estimates that the monthly bill to small producers will total $200 million to $400 million.

Ridgewood, Oxnard and Sierra Pacific generate a total of 140 megawatts of electricity, or enough power to serve more than 105,000 typical homes. State officials have at times been forced to replace the lost deliveries by purchasing power on the pricey wholesale and spot markets.

The California Independent System Operator, which oversees the state's power grid, said it received about 3,800 megawatts of power Friday from small producers, compared to the 6,000 megawatts the small producers usually deliver. In recent weeks the group's output has dipped as low as 3,000 megawatts.

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