Small Power Firms’ Cutbacks Contribute to Blackouts
The rolling blackouts that swept California on Monday were sparked in part by a crucial group of small energy producers that have cut supplies to the state’s utilities because they are not being paid.
California’s power supply dropped Monday when alternative producers reduced output or went offline, cutting their usual deliveries to utilities in half. The lost electricity--more than seven times the cuts the companies were making just weeks ago--could have served 3 million homes.
“I think we’re just getting at a breaking point for many of these businesses,” said Ed Tomeo, president of UAE Energy Operations Corp., a San Ramon company that operates a biomass plant and a small gas-fired plant.
Tomeo said he expects to take his gas-fired plant offline today because he’s run out of money to buy natural gas.
Tomeo’s firm is among the nearly 700 alternative energy producers that generate more than a fourth of the power consumed in California. Collectively, the group estimates it is owed $1.5 billion by the state’s two largest utilities.
Big out-of-state power producers are getting paid because the state stepped in to buy electricity for the foundering utilities.
But the California producers of solar, wind and biomass energy and, typically, smaller gas-fired generators, have received no payments since November from Southern California Edison and only partial payments from Pacific Gas & Electric Co. for December and January deliveries.
Edison’s debt to the producers is estimated at $835 million as of March 1. PG&E;’s debt to the producers was $651 million as of March 8.
Jim Detmers, director of the California Independent System Operator, the agency that operates the state’s power grid, said Monday’s shortfall from the alternative producers was mostly caused by reduced output by about a dozen companies that have been cutting back electricity deliveries for the past two months.
Detmers said he could not say whether the action was orchestrated, but it appeared to be a business decision.
The cuts have grown from about 400 megawatts a day in early February to 3,000 megawatts over the last several days, according to state officials.
Assemblyman Fred Keeley, a Boulder Creek Democrat, said he did not blame the small producers, who are formally referred to as “qualifying facilities,” for shutting down.
“Although I feel it is unfortunate for consumers, I don’t blame [them] at all,” Keeley said. “They’re the only ones generating electricity and not getting paid.”
Keeley said he will revive efforts to pass legislation that would ensure that the alternative energy producers get paid while cutting their rates. A previous effort to slash the rates paid to the group, SB 47X by Keeley and Sen. Jim Battin (R-La Quinta), appears doomed.
Gov. Gray Davis huddled for more than two hours with Democratic legislative leaders Monday, after keeping his distance for several weeks, and an agreement emerged to give small generators a choice: Take a higher price in exchange for short-term commitments to buy their power, or accept a lower price in exchange for a multiyear commitment to buy their power, sources who attended the meeting said.
And the governor and Legislature would quickly devise a way to ensure that the producers start getting paid, at least for power they continue to produce. As long as the utilities are collecting money from their customers, Davis later told a labor group, “they’re going to make the payments.”
The alternative producers’ rates are pegged to the price of natural gas, which has skyrocketed in recent months. Driving down and stabilizing their prices is a critical factor in Davis’ overall plan of buying power without imposing additional consumer rate hikes.
As a growing number of unpaid producers have dropped offline, state officials have been forced to purchase replacement supplies on the pricey spot market. A worst-case scenario materialized Monday, when a lack of electricity supplies forced state officials to order rolling blackouts.
“A number of plants are out for maintenance, but it’s very clear to me that there are a significant number that are off due to nonpayment,” said Jan Smutny-Jones, executive director of the Independent Energy Producers. “My concern is that this is a prelude to what we’ll see this summer.”
PG&E; spokesman John Nelson described the alternative producers as victims of the state’s energy meltdown. “Many of these generators are relatively small enterprises that cannot afford to continue operating on a daily basis.”
Nelson said his company’s inability to fully pay the producers it has contracts with is caused by the rate freeze that bars PG&E; from passing the true cost of electricity on to customers.
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Times staff writers Miguel Bustillo, Nancy Rivera Brooks, Dan Morain and Nancy Vogel contributed to this story.
