Surplus Power Suppliers to Get Some Relief
After losing tens of millions of dollars from uncollected bills, several alternative power suppliers in Ventura County got some relief Tuesday with a state-approved plan that requires financially strapped utilities to resume payments to the providers.
The California Public Utilities Commission endorsed a plan that requires Southern California Edison to resume payments to Procter & Gamble in Oxnard and at least 18 other facilities that produce surplus electricity for the state’s power grid.
But under the formula approved, the suppliers will probably be paid at a considerably lower rate than in past years. And there is no guarantee that they will recover from Edison the five months’ worth of unpaid bills.
Providers and consumer advocates agree that the costs will ultimately be passed on to consumers in the form of higher bills and perhaps through increased costs for companies that use alternative power.
Statewide, alternative energy providers supply close to one-third of the power to the state’s grid--a key source of electricity as long as wholesale prices remain high and supplies short.
Locally, these companies produce enough electricity to power more than 65% of the county’s households, according to data tracked by the California Energy Commission. The list of providers stretches from Ventura to Thousand Oaks and includes several large companies as well as municipal water districts, the Navy and the Cal State University campus near Camarillo.
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Some power providers said they would consider filing lawsuits if they can’t collect for past payments. Others are considering pulling out of the alternative energy business.
Still others have already been forced to shut down operations, at least for now, said Jerry Bloom, spokesman for the California Cogeneration Council.
Sithe Energies Inc., which provided power to a food processing plant in Oxnard and sold surplus electricity to the grid, has been down since early this month, Bloom said. Its natural gas suppliers cut the company off, fearing that Edison’s nonpayment would in turn affect Sithe’s ability to pay them.
Bloom said the food processing plant has since been running on boilers--”the old-fashioned, less efficient way.”
Meanwhile, Sithe’s withdrawal from the grid in Oxnard takes offline power that could have supplied 36,000 homes.
“Based on the decision from the PUC, they will not come back up,” Bloom said.
The Cal State campus had been drawing its electricity from a cogeneration system run by Delta Power. Bloom said Delta also lost the gas supply needed to run its facility.
University officials said Tuesday that the campus is now drawing most of its power from the grid. That means that its next power bill will come from Edison, and it will be subject to the rate hikes of up to 46% also approved by the PUC on Tuesday.
The Procter & Gamble paper plant in Oxnard produces enough surplus electricity each year to power at least 38,000 homes in addition to running its own operations.
That translates into more than $10 million in unpaid power bills since November, company spokesman Stacy Roscoe said.
Similarly, Willamette Industries Inc. generated $5 million worth of power for the grid from the cogeneration plant at its Oxnard paper mill and has been stung by the loss of the expected revenue.
“We’re a Fortune 500 company, so I guess we can suck it up for a while,” spokeswoman Cathy Dunn said. “I guess the question is, how long can you be patient? A compromise that doesn’t meet our costs is hardly an acceptable compromise. We’re not public servants.”
Kent Burton, a spokesman for Covanta Energy, agreed. Covanta converts methane gas collected from three closed landfills in Oxnard to electricity that goes to the grid. That power in turn is provided to homes and businesses.
“It’s better to be producing energy and getting paid than producing energy and not getting paid,” he said. “But the story’s not over.”
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The closed landfills are required by law to dispose of the methane in some manner.
“If we didn’t use it to generate electricity, we’d simply be burning it into a flare, and there’s absolutely no value in that,” said Gary Haden of the Ventura Regional Sanitation District.
Every year, the district sells $250,000 worth of methane to Covanta, which in turn converts it into enough electricity to power about 5,000 homes.
The PUC’s move was meant to stabilize the situation. Commissioner Carl W. Wood has said he thinks that alternative suppliers have long been overpaid under set rates approved by the Legislature. The rates have only seemed like a bargain in recent months, he said, because the wholesale market has shot up as a result of deregulation.
“We need their power, and they should be paid,” he said. “But I don’t think they should be overpaid.”
Bloom said the so-called compromise is too drastic. Under current conditions, he said, the new formula reduces the rates paid to alternative producers by 45%.
Roscoe of Procter & Gamble said that under that scenario, the company’s Oxnard plant will lose money because the cost of gas used to power its cogeneration facility would be less than the revenue it could collect by selling electricity.
Company officials met Tuesday to discuss what strategy to follow in the wake of the PUC decision, Roscoe said. If enough large companies stop selling electricity to the grid, he warned, rates could spike even more.
“Someone is going to provide the power at current market rates, which is two or three or four times higher than what we’d been paid,” he said. “The state risks losing this long-term lower-cost power and it’s going to be made up at a higher price by someone else.”
* RATES HIKED
The PUC approved a record increase in electricity prices--ranging as high as 46%. A1
