Judge Holds 4 Generators to Contracts With PG

In a setback for alternative energy generators, a federal bankruptcy judge says he will not release a group of power providers from their contracts with Pacific Gas & Electric Co. and allow them to sell the electricity for higher rates on the open market.

The tentative ruling by Judge Dennis Montali on Wednesday is the first involving about 25 generators seeking better prices or freedom from what they say are not economically viable contracts with PG&E.;

Signaling his unwillingness to undercut state regulators, Montali refused a request by Westside Cogens to increase the amount it would be paid for power above the level authorized by the California Public Utilities Commission. Westside argued that the PUC rate is below the cost of production and could drive them out of business and into bankruptcy.

PG&E; filed for Chapter 11 protection from creditors April 6. The four Central Valley power generating facilities known as the Westside Cogens claim that PG&E; owes them $58 million and that pending contracts with the utility would place them in even deeper financial straits.

Montali indicated that Westside’s claim “should be paid sooner rather than later” to avoid increasing the damage claims against PG&E; and “perhaps increasing the energy havoc already rolling through California.”

Noting that the 148 megawatts provided by the plants probably will make a difference in avoiding blackouts, the judge said some portion of PG&E;’s current $2.5-billion cash reserve should be used to “mitigate the inevitable damages being suffered” by the generators.

Montali ordered PG&E;, the generators and the PG&E; creditors committee to seek an agreement on a partial payment of the utility’s debt for past energy purchases. He suggested an appropriate amount might be at least the difference between PUC-authorized rates and what the generator could receive by selling its power on the open market.

This remedy, the judge said, would reduce the amount of the claim against PG&E; while allowing the Westside generators to operate. A hearing is scheduled May 24.

“We’ll be meeting with representatives of the Westside Cogens to try to reach resolution on the remaining issues,” said PG&E; spokesman Ron Low.

Attorneys for the Westside Cogens could not be reached for comment.

But Jerry Bloom, representing the California Cogeneration Council, said alternative energy companies hope to persuade the judge to allow the holders of PG&E; contracts to collect market rates that are now almost three times higher than the PUC-authorized rate.

PG&E; said all but eight of the 300 alternative energy facilities under contract to the company were up and running last week. Those eight deliver 106 megawatts out of the about 2,500 megawatts provided by alternative providers, including natural gas-fired cogenerators and renewable energy sources such as wind and solar power. A megawatt serves about 750 typical homes in the summer.

There are about 13 facilities down for scheduled maintenance, and they account for 82 megawatts. However, Bloom said, “a significant number of [facilities] in PG&E; territory are operating significantly below capacity” because they cannot afford to run at full capacity.