Pg&E In Debt To County

Source: The Press Democrat Santa Rosa, CA Publication date: 2001-02-10 Arrival time: 2001-02-11

Cash-strapped PG&E has fallen more than $800,000 behind in payments to Sonoma County for electricity generated at the county dump and Warm Springs Dam and sold to the utility in December. The unpaid balance could double if the utility is unable to pay for power it bought in January, according to Ken Wells, manager of the county's waste and landfill operations.

"They have missed the bulk of December's payment, and they have told us they would miss the bulk of January's payment," Wells said.

The Sonoma County Water Agency, which operates a small hydroelectric plant at Warm Springs Dam, expects the same scenario when its payment for January's power production is due.

"But we won't know until the payment due date, around March 5," said agency spokesman Kiergan Pegg.

"Hopefully, the Legislature will figure out a solution, and this will all be resolved by March," Wells said.

The water agency and county Public Works Department are among some 300 independent power producers in Central and Northern California from which PG&E buys electricity. The agency operates a 2.6 megawatt generator at the foot of the dam, and a generator driven by natural gas drawn from the county dump near Cotati has a capacity of 6 megawatts.

A megawatt of electricity can provide power to 1,000 residences.

The utility on Jan. 18 sent a letter to the producers saying that because of the financial crisis and its inability to pass on the high cost of electricity to its customers, it will not be able to make full payment for power purchased in December and possibly January.

PG&E spokesman Lloyd Coker said the utility is hoping the power producers will be patient.

"We have always paid, and we will pay," he said. "We're just in a little bit of a bind right now."

Coker referred to the $12 billion deficit PG&E and Southern California Edison have run up in the past several months as the cost of wholesale electricity skyrocketed and the utilities were unable to pass the costs on to consumers.

The Public Utilities Commission in January approved rate increases, but they were far short of the amounts the two utilities requested to deal with the financial crisis.

As a result, the utilities have been unable to make full payments on power purchased in the past two months.

In Sonoma County, that amounts to a balance due of about $635,000 for electricity generated at the county dump and about $174,400 for electricity generated at the dam.

Rod Dole, the county's auditor-controller, on Thursday said he is talking to PG&E representatives about the possibility of resolving the back payment by shaving it from the county's power bill.

But Coker said there is no provision in the utility's contract with the county which would allow the county to take a credit against its bill.

If Sonoma County is a victim of nonpayment by the utility, it's because the county is on the winning side of the explosive increase in power costs.

Wells said prices PG&E pays for electricity at the county dump's generator are set by the PUC and according to the cost of natural gas to fuel generators.

Until only a few months ago, Wells said, the price PG&E was required to pay the county was just 3 cents per kilowatt-hour. He said that produced about $1.9 million in revenue a year, which, after paying for operations costs, meant about $400,000 went to the county dump operation and helped keep dumping fees down.

"Then starting last July and August, natural gas rates started going up, so what PG&E had to pay us started going up, too," said Wells.

By November, he said, the rate had doubled to 6.4 cents per kilowatt-hour, generating a monthly bill to PG&E of $280,000, which the utility was able to pay in early January.

But the rates then skyrocketed to 16.5 cents per kilowatt-hour in December and 17.5 cents in January.

"So PG&E wrote us the letter on January 18 saying, `Sorry, we have no money. We'll pay some in January for December, but we will pay you the rest later,'" he said.

Wells said the county uses the money to pay for operation of the dump. Even if the utility can't immediately make payment, that should not affect the operation of the dump or the fees charged the public, he said.

But that can't last forever. Within two or three months, he said, the county would be forced to find another customer for the gas that is produced at the landfill.

Wells outlined two scenarios:

In the short term, the county would probably end up selling the electricity to the state Department of Water Resources, which the Legislature has funded to buy wholesale power to keep California's lights on during the energy crisis.

And in the long haul, he said, nearly all of the electricity generated at the landfill would be purchased by the county government itself to power the administration center and other county facilities.

Wells said that option has been in the planning stages for several years.

"The crisis of payment is just forcing the issue a lot faster than it would normally," he said.

You can reach Staff Writer Bob Klose at 521-5312 or e-mail bklose@pressdemocrat.com.

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-- Martin Thompson (mthom1927@aol.com), February 11, 2001