PUC Acts to Aid Alternative Energy Suppliers

Moving to end disputes that have threatened to increase blackouts, state regulators Wednesday took steps to stabilize prices paid to hundreds of alternative-energy producers, while encouraging them to increase the amount of power they provide to California utilities this summer and beyond.

The Public Utilities Commission gave permission for the utilities to change their contracts to make them more attractive to the generators, which supply more than a quarter of the state’s electricity.

PUC President Loretta Lynch said that such contracts would provide long-term stability and reasonable prices for generators that rely on expensive natural gas and for producers of renewable energy such as solar and wind power.

“It means the maximum amount of power will be available this summer,” she said.

The disputes between the energy producers and the utilities that owe them hundreds of millions of dollars have erupted in state courts, U.S. Bankruptcy Court, the PUC and the state Capitol. Although the vast majority of the generators are delivering power, many have said they are in financial difficulty and want out of their contracts with the utilities.

The commission specifically encouraged the utilities to adopt five-year contracts at fixed prices proposed by the Independent Energy Producers and incentive payments to induce generators to produce more power than their contracts currently require.

The PUC also unanimously ratified settlements reached Tuesday between Southern California Edison and dozens of small power producers, but the agreements are tied to Gov. Gray Davis’ controversial deal to rescue the Rosemead-based utility from near-bankruptcy.

“It is a substantial move forward,” Davis said.

Jerry Bloom of the California Cogeneration Council also praised the PUC’s action as a step forward for the state’s 600 small generators. But he cautioned that 300 of the companies providing power to Pacific Gas & Electric and San Diego Gas & Electric still do not have contracts that provide a fair return.

“That leaves half of them operating at a loss, and the possibility of severe blackouts still hovers over the state,” Bloom said.

Before the Southern California Edison agreements can be consummated, Davis said, the state Legislature must approve the complex deal he struck with the utility in April to allow it to pay off its debts and regain financial stability. The deal calls for the state to buy Edison’s transmission lines for nearly $2.8 billion and issue up to $3.5 billion in ratepayer-secured bonds to allow the utility to pay off debts from electricity purchases.

Davis’ Edison rescue plan has stalled, with virtually no support in either house, and the governor urged that lawmakers begin hearings on it. Otherwise, he warned, the Southern California utility could go bankrupt.

Senate leader John Burton (D-San Francisco) said many lawmakers from both parties are convinced that Davis is trying to place the Legislature in a position to take political heat if the Edison deal goes sour and the utility follows PG&E; into filing for bankruptcy protection.

In a filing with the PUC, Edison said its agreements with the generators will provide significant benefits to the utility and its ratepayers, the alternative-energy producers and the state “by providing for stable and reasonable . . . pricing over the next five years at a time when both pricing and supply are highly uncertain.”

The agreements--reached Tuesday after months of negotiations that were facilitated by the governor’s office--address the issues of repaying debts to generators while establishing prices for future sales.

Edison stopped paying those generators in November and resumed in late March only under orders from the PUC. PG&E;, which also resumed payments in March, had been paying 15 cents of each dollar owed its alternative producers.

By the time the PUC ordered continuing payments to the alternative energy producers, which Edison owes as much as $1.3 billion, the small companies were running out of cash and some had stopped operating, helping to cause two days of statewide rolling blackouts in March.

Under terms worked out with key representatives of the alternative-energy producers, Edison would pay 10% of what it owes the generators for electricity produced between last Nov. 1 and March 27. In addition, Edison would pay 7% annual interest on the debt.

A second 10% payment would be made when Edison is restored to credit-worthiness through approval of the rescue deal by the PUC and the state Legislature or by some other solution, Edison said. Full payment would be made to the generators five days after Edison receives funds to pay off its own debts. Edison also agreed to pay producers of renewable energy a fixed rate of $53.70 a megawatt-hour for five years.

The PUC, meanwhile, failed to meet a deadline of last Friday for acting on aspects of Davis’ deal with Edison. “I have urged them to move more quickly,” the governor said.

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Reiterman reported from San Francisco, Morain from Sacramento. Times staff writers Nancy Rivera Brooks in Los Angeles and Miguel Bustillo in Sacramento contributed to this story.