Edison Reaches Accord With Alternative Generators


Southern California Edison reached an agreement Tuesday to stabilize prices and pay part of its debts to alternative power producers, an important source of electricity that could help California avoid blackouts this summer.

The deal, reached with key representatives of the power producers, calls for an end to litigation by those small companies that produce power from alternative sources such as wind, solar, geothermal, biomass and at gas-fired cogeneration facilities.

Edison owes those generators millions of dollars for electricity, and 33 lawsuits have been filed against the Rosemead utility to recover debts, attach assets and get out of the contracts. The small generators have been viewed as some of Edison's most dangerous creditors because they would be more likely than large financial institutions to force Edison into Bankruptcy Court.

"We hope this agreement will help bring stability back to this segment of California's energy market," said Brian Bennett, Edison vice president of external affairs.

About 700 of the small producers generate more than one-fourth of the state's electricity. Rolling blackouts in March were caused in part by the alternative generators, many of which cut production because they weren't being paid by Edison and Pacific Gas & Electric.

The PUC ordered the utilities to begin paying the generators in late March, and most are again producing power.

Edison did not release details of the agreement, which it filed with the California Public Utilities Commission late Tuesday, other than to say that it deals with payment to the producers, pricing of power purchased from the generators and settlement of litigation.

"I hear it's a good deal," said Joe Ronan, chairman of the Independent Energy Producers Assn., which has been involved in the negotiations.

Ronan, a Calpine vice president, said he learned the deal calls for a multiyear contract that would pay generators $53.70 per megawatt-hour. Even though the prices are lower than historic highs of $200 or more for alternative energy, Ronan said the multiyear deals will bring much needed stability.

Gas-fired plants, he said, would be protected from volatility in the natural gas market because the price they receive will go up if a wholesale price index does.

The PUC is scheduled to consider a proposal for resolving the issue today at a special meeting.

An earlier proposal called for Edison and PG&E; to make payments of 15% of the amount due to the small energy providers that demonstrate a need for the money to keep operating.

The PUC recently deferred taking action on the order because the commission wanted to make sure that its order was in line with a court ruling in PG&E;'s bankruptcy case and to provide added time for negotiations conducted by the governor's office to succeed, President Loretta Lynch said.

The alternative producers have been meeting recently with the utilities and Davis energy czar David Freeman in hopes of resolving their differences over past payments. But Davis spokesman Roger Salazar said late Tuesday that he was unaware of the settlement and noted that Freeman was in Washington on Tuesday.

"I don't know if they have done something on their own," he said.

PUC Commissioner Carl Wood, a key player in the controversy, said he heard an agreement had been reached but had not yet received the details.

"I hope this will settle [the issue], and we can get everyone back online," he said. "We can put this piece of the [energy crisis] puzzle in the box."

Wood said most of the alternative energy providers are operating but it is not clear that all are operating at full capacity, which will be needed this summer.

PG&E; spokesman Jon Tremayne said that the utility, which serves Northern and Central California, is not part of the settlement.

PG&E;, he said, had been paying energy providers about 15 cents on the dollar as the utility plunged toward bankruptcy. He said the company, which still owes hundreds of millions to the alternative generators, was continuing to talk with them. "All of ours are online, except for those down for maintenance," he said.

About two dozen alternative energy providers have filed motions in PG&E;'s Chapter 11 bankruptcy case in San Francisco, generally seeking back payments and to be released from their contracts so they can sell power at higher prices on the open market.

The bankruptcy judge in the case recently ordered PG&E; to pay at least 20% of its past debt over the next four months to several of the energy producers and said the order would serve as a template for resolving the disputes with the other ones. He declined to release the cogenerating plants and other producers from their contracts with the utility.

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