Utility arrears force more Kern power plants to shut down Filed: 03/02/2001

http://www.bakersfield.com/local/Story/400148p-400127c.html

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By TIM BRAGG, Californian staff writer e-mail: tbragg@bakersfield.com

More of Kern County's mid-sized electricity generating plants have shut down because of the cash crunch affecting the state's two major utilities.

At least five cogeneration plants in Kern County have either reduced their output or shut down completely because they have not received full payments from Pacific Gas & Electric or South California Edison Co. They are called cogeneration facilities because they produce electricity for the state's power grid plus steam and heat for use in local oil fields or for other industrial uses.

The shutdowns of those five plants alone have cost California's energy grid enough power to supply nearly 250,000 homes.

The utilities owe these power generators millions in back payments for the electricity they have provided during the state's energy crisis. Kern County's wind generating companies are also owed millions for power they've poured into the grid.

"We've been providing power since November but we haven't been paid for it," said Gordon W. Thomson, executive director of the Kern River Cogeneration Co. "We're incurring a fairly substantial natural gas bill, which is our biggest expense. So we made the decision to reduce our output."

The output at the Kern River plant was reduced by 50 percent Thursday. The plant normally produces 150 megawatts of power, enough for 150,000 homes.

Thomson said both the Kern River plant and the neighboring Sycamore Cogeneration Co. plant are owned by a partnership between Texaco and Edison Mission Energy, a subsidiary of Edison International. The Sycamore plant will remain at full power.

All the electricity produced goes to Southern California Edison, the regulated utility arm of Edison International.

He said Edison owes both plants $172 million in back payments.

Kern County has dozens of small, mid-sized and large power plants, 92 in all, capable of making more than 2,500 megawatts of power. That's enough for 2.5 million homes.

Many of those plants are burning natural gas, and many haven't been paid in full for the power they have produced for months. In addition, natural gas prices have more than tripled in price in the past year before dropping to about double last year's prices in the past weeks, making it extra hard for power generators who aren't getting paid to remain on the grid.

Both Edison and Pacific Gas & Electric Co. say they are paying the energy-producing companies as much as they can at this time because the payments they receive from customers are frozen under the tenets of California's utility deregulation scheme.

Jon Tremayne, a PG&E spokesman, said the utility made partial payments to cogeneration facilities throughout the state in February and March for the power it has received from them.

He said full payments cannot be made until a solution to the state's energy crisis can be found. The utility owes $437 million to cogeneration plants across the state. The utility paid $51 million to the companies that own the plants Thursday.

"We're confident that a solution to this crisis will emerge," Tremayne said.

A spokesman for Southern California Edison said the company has deferred payments to cogeneration plants until the energy crisis passes. He said the utility expects to eventually pay its bills in full.

The shutdown of the plants is having a side effect that could hurt another Kern County energy commodity: oil.

The steam produced at many of the cogeneration plants, which mainly burn natural gas, is injected into the ground, making it easier to pump the region's thick, heavy oil from the ground.

With cutbacks at the cogeneration plants, the oil firms don't have the steam to inject, which dramatically slows production over time.

This situation also has put some oil company employees in danger of losing their jobs.

Golden Bear Oil Specialities, an oil refinery on Manor Street in Oildale, plans to lay off 31 workers, largely as the result of the shutdown of its main power source, United American Energy.

That company's 40-megawatt cogeneration plant provided Golden Bear with about 90 percent of its power.

But it's not the only company being hit with the double-whammy of high gas prices and reduced steam and heat output.

Three of Taft-based Berry Petroleum Company's five Southern California cogeneration plants are located in Kern County. All three Kern County plants, located in the Midway-Sunset oil field between Maricopa and Taft, have been shut down because Berry has not received full payments from PG&E or Southern California Edison. A fourth plant near Valencia also has shut down. Normally, the five power plants together provide 100 megawatts of power, enough to power an estimated 100,000 homes.

"Our production has been off by 1,500 barrels a day because we don't have any steam available," said Jerry Hoffman, president and CEO of Berry Petroleum. "The longer we wait to inject steam into the ground, the lower our production level falls."

Hoffman said Berry's five plants are owed $30 million from both Pacific Gas & Electric and Southern California Edison.

-- Drew J. Kolosky (Kolosky@Prodigy.net), March 03, 2001