2 Firms Start Repaying State for Power Buys
For the first time since California began buying electricity in mid-January on behalf of the state’s two biggest utilities, money is coming back to the state.
Under order by state regulators, Southern California Edison and Pacific Gas & Electric began making payments this week to reimburse the state for the billions it has spent on power. Edison paid $43.5 million and PG&E; paid $61.8 million for electricity supplied between Jan. 19 and Feb. 11, with more money on the way, officials said Thursday.
California taxpayers became the biggest buyers of power in the West after electricity suppliers began refusing to sell to the utilities, which had depleted their cash reserves and tarnished their credit ratings when the cost of electricity soared above their selling price last year.
Since then, the state has spent or appropriated $3.8 billion on behalf of the utilities, which together serve 24 million people. The repayments began Wednesday, the day after the state Public Utilities Commission approved consumer rate hikes of as much as 46%.
While the PUC action was intended to put the brakes on a runaway energy crisis, there were new signs of disarray Thursday.
A group of Republican lawmakers sued Gov. Gray Davis for keeping secret the details of long-term power contracts signed by the state.
One of the largest alternative power producers in the West went to court to suspend its contract with Edison.
And operators of the state’s electricity grid predicted that in June, California could fall 7% short of the power it needs to avoid blackouts.
“California is facing an electricity shortage of unprecedented proportions,” wrote the staff of the California Independent System Operator in an assessment of summer power supplies.
The court action against Edison came from Carson-based Watson Cogeneration Co., one of nearly 700 firms contracted to supply electricity to the state’s private utilities. Watson filed a complaint in Los Angeles County Superior Court seeking to suspend its contract.
Watson has not been paid by Edison since November and is at least the third company seeking court release from its utility contract. One such firm, geothermal producer CalEnergy, was granted the right to sell its power on the open market.
Watson’s complaint comes on the heels of an order by the PUC earlier this week that Edison and PG&E; begin fully paying small alternative energy producers, which together supply more than a quarter of the electricity used by California consumers. Shutdowns by some of these small producers contributed to the state’s blackouts last week.
Tom Lu, Watson’s executive director, said the PUC order failed to provide the assurances his company needs that it will get paid. Many small producers have complained that the order slashes the rates that utilities must pay the producers to a level that makes it impossible for them to turn a profit.
“What we’re looking for is the capability to be able to sell to a third party so that we can get paid for our power deliveries,” Lu said.
Edison sent a letter to the small producers Thursday, promising to begin paying them by April 16 for power supplied in April. The utility added that it expects all the alternative generators that shut down their operations to resume deliveries by Sunday.
The lawsuit filed by the GOP legislators demanding that Davis open the books on the state’s long-term energy contracts came on the heels of a similar suit filed last week by a coalition of news organizations, including The Times.
Led by Assemblyman Tony Strickland (R-Moorpark), the suit argues that under the California Public Records Act, the details of the power buys should be made public.
Republican lawmakers, who plan to raise money to finance their suit, said Davis’ withholding of the information prevented them from voting responsibly on the state budget and other important financial matters. California is spending between $45 million and $55 million a day on electricity on the expensive wholesale spot market.
“The governor is asking the people in this building to drive down a dark tunnel with the lights off,” Assemblyman John Campbell (R-Irvine) said in a news conference outside the Capitol.
Davis administration officials contend that release of the information now would jeopardize their efforts to enter into inexpensive, long-term contracts to purchase electricity because bidders would know what their counterparts were offering, and would not offer a lower price. They say they will release the information at a future date.
The administration position received a boost this week when Atty. Gen. Bill Lockyer issued a legal opinion saying that maintaining the integrity of power-buying negotiations outweighed public disclosure.
In other developments Thursday:
* U.S. Energy Secretary Spencer Abraham met in Washington, D.C., with power suppliers to discuss ways to help California avert blackouts this summer.
Abraham asked the energy companies to prepare a list of potential problems, including maintenance schedules for generating units, that could reduce electricity supplies this summer, an administration official said.
* A state energy panel recommended the speedy restart of two gas-fired generators owned by AES Corp. in Huntington Beach, on several conditions. Power would have to be sold in California, and the company would have to pay $1 million for an independent study into whether its plant is causing ocean and beach pollution.
The generators could be online by July, according to California Energy Commission staff, but area residents would have to endure construction noise 20 hours a day. The Energy Commission must still vote on the recommendations.
* An executive with Southern California Gas Co. adamantly denied explosive allegations, contained in a series of lawsuits, that it conspired with a Texas energy firm to limit natural gas deliveries to California.
Testifying before an Assembly oversight committee in Sacramento, Rick Morrow, a vice president with the gas company, said “there was absolutely no mystery” to a meeting at which several of Morrow’s employees and representatives of El Paso Natural Gas Co. are alleged to have struck an anti-competitive deal.
The two companies are alleged to have violated the state’s anti-trust law, and caused prices to spike, by agreeing not to compete with one another on pipeline projects that would have brought additional natural gas supplies into California.
Most power plants in California consume natural gas, and the cost of the fuel accounts for as much as 60% of the cost of electricity.
* In an analysis of summer power supplies, state grid operators forecast that imports to California from the Pacific Northwest will be halved because severe drought has stressed the region’s ability to supply even its own needs from hydroelectric reservoirs.
The report, to be reviewed by the Cal-ISO board of governors today, warns that the state’s most severe shortfall of power could occur in June, before several new power plants are expected to begin operation in July and August.
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Times staff writers Richard Simon, Nancy Vogel and Christine Hanley contributed to this story.
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Power Points
Daily Developments
Southern California Edison and Pacific Gas & Electric began making payments this week to reimburse the state for the billions it has spent on power.
A group of Republican lawmakers sued Gov. Gray Davis for keeping secret the details of long-term power contracts signed by the state.
Operators of the state’s electricity grid predicted that in June, supplies could fall 7% short of the amount needed to avoid blackouts.
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Verbatim “All the experts agree that reducing demand through conservation is the least expensive, most effective way we can get control quickly over the energy market.”
-- State Sen. Byron Sher (D-Stanford)
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Complete package and updates at www.latimes.com/power
