Power Crunch’s Ripples Hit Small Supplier, Others
As he outlined his ambitious plan to bring 20,000 new megawatts of electricity online, Gov. Gray Davis stood amid a power plant being built in this farm town about 40 miles north of Sacramento.
“I believe the government has a responsibility to keep the power flowing and to keep the lights on,” Davis said during a news conference Thursday. “I’m doing everything in my power to see that we achieve both goals.”
But just five miles from where Davis was giving his speech, a small gas-fired power plant lay idle. The folks at Yuba City Cogen had halted production the week before when their natural gas suppliers cut them off.
The reason: Cash-strapped Pacific Gas & Electric Co. had only partially paid the company for power it produced for the utility in December.
“A lot of us have had our gas suppliers shut off our gas because they’re not sure we’re going to get paid,” said Hal Dittmer, president of Sacramento-based Wellhead Electric Co., parent firm of Yuba City Cogen.
Yuba City Cogen, which provides 49 megawatts to the statewide power grid, may not top the list of California’s energy problems. But its woes--and those of other companies owed hundreds of millions of dollars by PG&E; and Southern California Edison--symbolize the magnitude and complexity of the continuing crisis.
The cogenerators earn their title because they employ a single source of fuel, such as natural gas, to produce two forms of usable energy, often steam for use in industrial processes and electricity to sell to the power grid.
The halt in production at Yuba City and other small producers caught in the same vise has forced the state on occasion to turn to the high-priced spot market to make up for the lost power.
The California Independent System Operator, which oversees three-fourths of the statewide grid, pegged the daily loss of power from cogenerators last week at 300 to 500 megawatts--roughly the output of a large conventional power plant. In this case, an increase in production by wind generators was able to offset that loss.
Yuba City Cogen is among the 688 so-called qualifying facilities in California that were born out of a 1978 federal law that required PG&E;, Edison and San Diego Gas & Electric Co. to buy power from alternative-energy producers. These companies include cogenerators, along with producers of solar, wind and biomass energy, and suppliers that use other renewable resources.
They generate an estimated 9,000 megawatts, or roughly a third of the energy the three big utilities supply to customers.
In the case of Yuba City Cogen, a natural-gas-fueled airplane engine drives a generator that produces 49 megawatts. Exhaust from the engine, meanwhile, enters a boiler used to heat water-filled pipes that produce the steam used at a nearby Sunsweet plant to cook prunes and pasteurize juice.
But because the cogeneration plant is idle, not only is the power grid losing precious megawatts, but Dittmer isn’t bringing in revenue and Sunsweet has to manage without a reliable source of steam.
Situation Could Worsen
The situation could grow worse as larger cogenerators begin reducing their electricity output.
Carson-based Watson Cogeneration Co. said Friday that it would cut 60 megawatts from daily deliveries to Edison later in the evening because of $97 million in unpaid bills.
“It’s a combination of the total amount owed to us and no clear path in sight for remedying it,” said Pat King, Watson’s executive director. “We don’t want to appear as bad guys, but the amount of losses and debt is becoming overwhelming.”
Said Jerry Bloom, a lawyer who represents the California Cogeneration Council: “As many as half of my members are either reducing or seriously considering curtailing [energy] contributions altogether.”
Bloom estimates that his 14 member companies produce a combined 1,000 megawatts from 25 projects, enough to serve about 1 million typical homes.
Many of them have received only partial payments from PG&E; for December deliveries, and those under contract with Edison say they have not been paid for November deliveries.
Edison had withheld $529 million in payments to the qualifying facilities as of Jan. 31, a spokesman said. The sum owed by PG&E; as of Feb. 1, the company said, was about $387 million.
The facilities’ hopes for future payments may rest in legislation scheduled to be introduced next week by Assemblyman Fred Keeley (D-Boulder Creek) and state Sen. Jim Battin (R-La Quinta).
The measure is expected to formalize an agreement reached in principle several weeks ago by the utilities and the power producers that would slash the rates the utilities pay them from 17 cents per kilowatt-hour to about 8 cents. But rates paid to cogenerators would be allowed to fluctuate, based on longer-term prices for natural gas.
At present, rates paid to both cogenerators and renewable producers are pegged to natural gas prices, which have risen sharply in the last year. That, in turn, has caused the rates paid by utilities to rise even for solar and wind generators that do not use gas.
In exchange for agreeing to the lower rates, which are expected to save $4 billion over five years, the facilities are seeking assurances that they will be paid for future deliveries.
But it remains unclear how they will be paid the money they are already owed. Until that question is resolved, some cogenerators will be unable to come back online, and the threat remains that renewable producers could reduce production.
Keeley said he believes that the issue could resolve itself if his legislation moves ahead smoothly and is accepted by the Public Utilities Commission. At the same time, he said, negotiations over the larger problems facing the big utilities must resume in earnest. A combination of the two steps could provide the cogenerators with the level of comfort and certainty they need to resume operations, he added.
Cogeneration executives remain skeptical, noting that no mechanism currently exists for them to get paid.
“It isn’t going to work itself out,” said King of Watson Cogeneration.
Back in Yuba City, Sunsweet says a cogeneration plant operated by Calpine Corp. has been making up for most of the steam it lost when Yuba City Cogen halted production. But if the situation drags on for another month or more, Sunsweet will probably have to pay Calpine for replacement supplies.
“I’m concerned,” said Jerry Ramsey, engineering manager for Sunsweet. “But I can’t see Yuba City Cogen staying down for too long.”
Dittmer hopes he’s right. “We’re losing money right now because our income is shut off,” he said.
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Times staff writer Jenifer Warren contributed to this story.
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