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CalEnergy Sues Edison Over Debts

Courts: Case illustrates growing frustration of renewable energy generators with utility's failure to repay them.


One of the state's largest renewable energy generators sued Southern California Edison Co. Wednesday to force the utility to repay $100 million in debts.

The lawsuit, filed by CalEnergy Co. in Imperial County Superior Court, illustrates the growing frustration of a group of California renewable energy generators with Edison's failure to repay them, despite what the group characterized as clear agreements to begin payments by now.

"While Edison adds $300 million every month to a cash hoard of $3.3 billion, its leadership refuses to act in good faith with those who have acted in good faith with them," the Renewable Energy Creditors Committee said in a statement Wednesday supporting the lawsuit.

The renewable energy industry, which accounts for about 12% of the state's electricity supply, includes companies that produce wind and solar power as well as generate electricity from geothermal, biomass and small hydroelectric projects.

Edison owes members of the committee about $400 million for electricity it purchased dating back to a surge in energy prices a year ago that pushed the utility to the brink of bankruptcy. CalEnergy, owed about $100 million, is one of the largest creditors in the group. CalEnergy, which operates geothermal power plants near the Salton Sea, has been discussing a repayment plan with Edison but said the talks have been unproductive.

As Edison's losses mounted over the last year, it stopped paying power providers, piling up roughly $3.5 billion in energy-related debts.

The group of renewable energy generators signed agreements with Edison this year for partial repayments to help the utility avoid filing for bankruptcy. According to the lawsuit, the agreements called for an immediate payment of 10%. The generators were to get another 10% when the state completed its plan in September to allow Edison to become credit-worthy again. The utility made the first payment but has yet to send the second.

Edison issued a statement in response to the lawsuit saying that it has not breached any agreements with CalEnergy.

The utility added that "we hope to be able to pay all of our creditors during the first quarter of 2002."

Different interpretations of Edison's agreements with the renewable energy generators have led to the current dispute.

In a Nov. 5 letter to CalEnergy, Edison contended that the agreements were valid only upon the implementation into law by the state Legislature of a "memorandum of understanding" between the utility and the state's Department of Water Resources.

The Legislature, however, never approved the agreement. Instead, Edison crafted a different deal with the California Public Utilities Commission that allowed the utility to use money collected through rate increases to repay its debts.

The lack of legislative action essentially voided the agreement the utility had reached with the renewable energy providers, Edison wrote. CalEnergy argued in its lawsuit that the utility's agreement with the PUC was a legal substitute for the memorandum of understanding and obligated Edison to the same terms.

Jonathan Weisgall, an attorney with MidAmerican Energy Co., CalEnergy's corporate parent, said Edison officials have made repeated public statements claiming they will honor the agreement but then have refused to make any payments beyond the original installment or commit to a written repayment plan.

"After waiting for a year to get paid, our patience has run out," Weisgall said. "We lived up to our side of the bargain by not putting Edison into bankruptcy, continuing to deliver energy, suspending litigation and pushing for a legislative solution."

Edison's agreement with the renewable energy providers prevents the creditors from petitioning a federal court to place the utility into an involuntary bankruptcy filing before Dec. 31.

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