Edison Deal Seeks to Avoid Power Auction

In a surprise move to stave off a disputed power-purchase auction mandated by state regulators, Southern California Edison Co. reached a separate agreement Tuesday to buy power from one of the bidders: Kenetech Corp., a wind energy company.

Edison has asked the state Public Utilities Commission, which is due to consider the controversial auction at a San Francisco meeting today, to approve its preliminary agreement to buy 500 megawatts of power from San Francisco-based Kenetech and throw out the other bids.

Under the agreement, the first 250 megawatts of power would be purchased only after Edison customers--perhaps by polling--approved paying higher rates for the energy. The second half would be bought later than the auction requires. In all, Edison would be buying just 60% of the energy that was to be purchased at the auction.

In January, Edison petitioned the commission to free it entirely from the auction, mandated under a PUC requirement that the state’s major investor-owned utilities meet part of their future needs with electricity from wind, solar, geothermal or biomass sources.

San Diego Gas & Electric Co. and Pacific Gas & Electric Co. had disputed other aspects of the bidding process. But Edison contended that it did not need the extra power--it already buys more than 23% of its electricity from renewable sources--and that buying it under the terms of the auction would increase ratepayers’ costs.

The PUC auction could cost Edison customers as much as $500 million more, said Vikram Budhraja, an Edison vice president.

Before the agreement, Kenetech was a strong critic of Edison’s position.

“What we have done is negotiated an agreement with Edison that goes beyond what we would have been awarded” under the preliminary rankings in the bidding, said Clarence Grebey, Kenetech spokesman. “The pricing is different than would be required under the (PUC) formula.”

Harold F. Koegler, president of San Rafael-based FloWind Corp, a rival wind energy firm, said his company will petition the PUC to require that FloWind be included in the negotiations. “We are shocked by this last-minute activity to try to do an end run,” he said.