State Deal With Cogenerators Not Yet Finalized; Negotiators Hopeful

A critical component of the state’s effort to contract for reliable electricity without raising rates remained snagged Thursday, but negotiators were hopeful that a deal with the so-called cogenerators would soon be reached.

Cogeneration occurs when oil refineries and manufacturing plants use a single fuel source to produce multiple forms of usable energy, some of which is sold to utilities.

A gas-fired food processing facility, for example, produces large amounts of heat that can, in turn, be used to power turbines at the plant and can result in electricity being put back on the power grid.

Long-term agreements are tentatively in place between the utilities and producers of wind, thermal, solar and biomass energy.

But some members of the other main group in the alternative energy category, the cogenerators, still have not come to terms with Southern California Edison. The utilities get about one-third of their power from alternative energy sources, almost as much as they receive from private generators.

Cogenerators play a key role in the complex network of energy producers that supply California utilities. A sticking point remains, sources said, between Southern California Edison and some cogenerators regarding the method that the latter group can employ to purchase natural gas.

Leveling the rates that utilities pay the cogenerators and other alternative energy producers is a crucial element in helping Edison and Pacific Gas & Electric Co. to cope with mounting debt.

Earlier in the week, producers of renewable energies--including solar, wind and geothermal power--agreed to slash by more than half the amount that PG&E; and Edison pay for a kilowatt-hour, down from about 17 cents to roughly 7.8 cents, said state Sen. Jim Battin (R-La Quinta). Battin and Assemblyman Fred Keeley (D-Boulder Creek) have been involved in the negotiations.

Some cogenerators also agreed to the terms with the caveat that the rates they charge could fluctuate with natural gas prices.

Hundreds of existing contracts between the utilities and the producers are being modified to reflect the new rates, which cover a five- year period. The change, which requires an amendment of the state utilities code, is expected to be added to legislation previously introduced by Keeley.

Battin said that as long as Keeley’s measure stays on track, the contracts could take effect Feb. 1. Although a number of Senate Democrats fear that a deal could force some alternative energy producers out of business, Battin said he believes that won’t be the case.

Jonathan Weisgall of CalEnergy Co., which produces 300 megawatts of thermal power in Imperial County near the Salton Sea, said the completed negotiations helped bring the rates that utilities were proposing to pay much more in line with what producers feel they need to stay in business.

“It’s a trading off of the price volatility for long-term predictable payments that for most renewable companies is acceptable,” Weisgall said.