San Diego Gas & Electric Co. on Wednesday asked the state Public Utilities Commission to review--and possibly nullify--a contract that the utility signed in 1983, promising to buy electricity from the proposed trash-to-energy plant in San Marcos.
The plant would generate enough electricity--by burning trash--to serve 40,000 households. State law, sparked by the Arab oil embargo 10 years ago, requires public utilities to buy electricity from alternative, non-utility sources, at a price that takes into account what the utility would otherwise pay to generate that same electricity.
Utility officials say the terms of the old contract will now cost its customers $45 million more than if the contract were renegotiated using today’s costs for generating electricity, because it is now bound to 1983 electricity prices that were twice what they are now.
The problem, SDG&E; officials acknowledge, is that they signed a contract that had no closing date--even though such contracts today normally expire in five years.
The utility’s complaint to the PUC is that the would-be developers of the controversial trash-burning power plant, North County Resource Recovery Associates, has not yet even begun to build it--even though six years have passed since SDG&E; promised to pay 7.5 cents per kilowatt-hour of electricity.
“If we were to sign a new contract today, we would pay about 3.5 cents per kilowatt-hour, or less than half (the contracted price),” said Joe Kloberdanz, regulatory affairs manager for SDG&E.;
He said the utility hopes the PUC either will nullify the contract that it earlier endorsed, or at least order NCRRA to renegotiate a new one with terms more favorable to SDG&E.;
PUC officials in San Francisco said the request was being reviewed by its legal affairs department.
NCRRA is owned by Thermo Electron Corp.'s Energy Systems Division, whose president scoffed at SDG&E;'s request.
“We made no representation when the plant would be on line and we would begin selling electricity,” said Jerry Davis. “The contract is open-ended with respect to the time requirement for our performance.
“We’ve had batteries of lawyers look at our contract, and every single one of them has said it is an absolute, iron-clad agreement by SDG&E;,” Davis said.
He argued that, although the price might seem high now, over the 30-year contract period and with built-in inflation escalators, the utility would end up with bargain-price electricity.
Kloberdanz disagreed. “It’s difficult to predict what we’d pay for electricity 20 years from now, but we wouldn’t enter that same contract today,” he said.
NCRRA planned on using the revenue from the electricity sales to subsidize the cost of processing trash, by recycling some of it, burning some and burying the rest at the San Marcos landfill, next to the planned plant.
Without SDG&E;'s income, Davis said, the cost of handling the trash would have to be increased and eventually passed on to the customers--according to county figures, $2 more a month per household.
The trash plant, first proposed in 1982, is mired in legal challenges and a demand by Thermo Electron that its initial contract with the county be renegotiated because of increasing costs.
Tom Erwin, a long-time vocal critic of the trash plant, said he is “grateful” for SDG&E;'s action. “If they’re successful,” Erwin said of SDG&E;, “it could very well mortally wound the incinerator because it will, for the first time, have to stand on its own economics, and the true cost of the plant’s operation will become visible to the public.”