Ruling Shields Generators From Risk

In a victory for California’s private power plant owners, federal regulators ruled Wednesday that power suppliers cannot be forced to bear the risk that they won’t get paid when grid operators order them to supply emergency power.

The ruling by the Federal Energy Regulatory Commission in Washington D.C. hinders the state’s effort to hold down emergency electricity costs, and it could bolster the power generators’ case in federal lawsuits against California grid operators.

Gary Ackerman, executive director of the Western Power Trading Forum, praised the FERC order for validating the arguments of power plant owners that they are essentially being robbed when grid managers at the California Independent System Operator order them to supply electricity but do not guarantee payment with state taxpayer funds.

“You can’t make them bear unreasonable risk,” Ackerman said.

But Sen. Steve Peace (D-El Cajon), after reading the FERC order Wednesday, accused federal energy regulators of abandoning California consumers in favor of energy firms, many of them based in Texas, the home state of President Bush.

“Bush is going to have to decide whether he wants to be the president of Texas or the president of the United States,” Peace said.

The ruling comes in response to a Jan. 4 Cal-ISO request that federal regulators waive requirements that buyers in California’s electricity market be credit-worthy.

Cal-ISO asked for the change after the credit rating of the two biggest buyers in the market, Southern California Edison and Pacific Gas & Electric, plummeted.

The two utilities have been driven to near bankruptcy by high wholesale electricity prices that they cannot pass on to customers protected by a rate freeze imposed by the Legislature in 1996 as part of the state’s deregulation plan.

In January, when power producers began refusing to sell to the utilities for fear of not getting paid, the state stepped in to keep power flowing to utility customers.

Power buyers working for the California Department of Water Resources have sometimes refused to pay for emergency power ordered to stabilize the state’s transmission system. Such last-minute supplies can be extremely expensive, at times more than $3,000 per megawatt-hour, or more than 100 times the typical prices before prices skyrocketed last May in California’s power market.

On Tuesday, Charlotte-based Duke Energy North America sued Cal-ISO in federal court in Los Angeles, arguing that it has delivered $32 million worth of power since December to the Cal-ISO with no promise of payment.

“Every single day,” states the suit, “suppliers such as [Duke] provide millions of dollars of energy . . . without compensation.”

The Duke suit is similar to one filed by Reliant Energy, another power plant owner in California, last month.

Also Wednesday:

* The state’s power grid struggled through its 31st day in a Stage 3 power alert, with only a late infusion of power from the Pacific Northwest and British Columbia keeping the agency that runs the grid from ordering rolling blackouts.

* U.S. Rep. Brad Sherman (D-Sherman Oaks) introduced legislation to allow western states to set their own daylight savings schedules, which would permit California to adopt year-round daylight savings or other time measures to minimize power use during peak energy-use periods. States can’t change their time schedules without federal approval.

* Five environmental groups sent a letter to Davis urging him to resist suggestions by industry and the Bush administration that California ease air quality and public health standards as it adopts solutions to the energy crisis.

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Times staff writers Nancy Rivera Brooks, Margaret Talev and Jenifer Warren contributed to this story.