PUC’s Vote Will Help Independent Energy Producers : Regulation: Action likely to provide investment capital in future. Major utilities opposed the move.

Guaranteeing a future for California’s independent electricity producers, the state Public Utilities Commission voted Wednesday to stick to the terms of a power-buying auction that had been hotly disputed by the state’s big utilities.

The independents--many of which generate electricity from wind, solar, biomass and geothermal facilities--still face uncertain long-term prospects as the PUC shifts the electric-power industry to competition.

But for now, the PUC vote to proceed with the auction will likely free up the investment capital that many independent producers say they need to survive into the next decades, whether the electricity business is deregulated or not.

“Our members hope to be signing contracts in the very near future,” said Jan Smutny-Jones, executive director of the Sacramento-based Independent Energy Producers Assn. “This will result in about $1.5 billion in new investment and 5,000 new jobs in the near term. It’s a very clear signal that California is back in business.”

The heart of Wednesday’s decision was whether the PUC would stand by the results of what most likely will be the last mandated auction of electricity generated from renewable energy sources.

The utilities being forced to buy electricity from the independent producers complain that the purchases lock them into inflexible deals that may prove uneconomic over the long term.

A legacy of the state’s commitment to diverse, environmentally benign energy sources following the 1970s oil shocks, the auction--conducted last December--was the second such purchase by the state’s big investor-owned utilities.

On Wednesday, the commissioners voted to confirm the auction results and proceed with awarding power contracts to the independent producers. The PUC ordered only slight modifications to the auction process, which began five years ago.

Disagreements over the way some producers calculated payments will be resolved by imposing a payment cap, but no other terms of the contracts will be affected. The commission withdrew an earlier proposal to defer part of the utilities’ obligation to buy electricity from the independents.

“It would be very unfair for us to go back and somehow revise the ground rules,” said Commissioner Norman D. Shumway, echoing a general concern of the commission. Continued holdup of the bid awards “would destroy any credibility we might have as a commission,” Shumway said.

The process has been stalled since December, with the utilities arguing that the procedure was skewed in favor of the independents. Southern California Edison Co. further argued that it was being forced to buy electricity that it does not yet need.

The auction was held up again in April, when the commission announced its proposal to deregulate the electric power industry. The commissioners wanted to ponder whether the entire auction should be shelved until the PUC could flesh out its ambitious deregulation plan.

One big fear was that the power contracts could become high-cost albatrosses--like many of those that resulted from the first mandated contracts in 1983--if power prices fell dramatically under some form of deregulation.

The risk could be significant; Edison alone estimates that Wednesday’s decision will oblige it to buy $16 billion worth of power over the next three decades.