mall Calif Pwr Plants Shut Down Mon Due To Nonpayment Updated: Monday, March 19, 2001 02:09 PM ET LOS ANGELES (Dow Jones)--About 3,000 MW of California's small power plants are off line Monday because they haven't been paid hundreds of millions of dollars by two of the state's largest utilities and can no longer afford to buy fuel to run their units, the state's grid operator said.

The 3,000 MW of the state's so-called qualifying facilities represent 10% of the state's peak load. The outages increase the chances of rolling blackouts and a major electricity shortage this summer.

Many of the QF plants cannot easily come back online once they are shut down, said Jan Smutny-Jones, president of Independent Energy Producers Association, which represents some of the small gas-fired power plants.

"Once the plants are shut down, it's likely they will be shut down all summer," Smutny-Jones said last week. "In order to come back online, the owners need to sign contracts with the utilities and the gas has to be bought in advance. This is not only a financial problem, but a reliability problem."

The California Independent System Operator declared a stage two emergency Monday due to the loss of 11,500 MW of generation, nearly one-third of the state's total supply during this time of year.

The power the qualifying facilities produce is sold directly to PG&E Corp. (PCG, news, msgs) unit Pacific Gas & Electric and Edison International (EIX, news, msgs) unit Southern California Edison for about $170 a megawatt-hour, about $250 less than what the state Department of Water Resources and the ISO are paying in the volatile spot market to cover the shortfall.

The QFs, which represent one-third of the state's total supply, haven't been paid since November by SoCal Ed while some have received partial payments from PG&E.

Last week, Coram Energy, a small windmill farm in Tehachapi, Calif., said it would sign an involuntary bankruptcy petition that could force SoCal Ed into involuntary bankruptcy proceedings. The company is owed $350,000 by the utility. At least four other creditors said they would also sign the petition.

Bill Adams, owner of San Gorgonio Farms, another wind producer, said he has sent letters to his vendors alerting them that his company would not be making future payments because it is owed $2.2 million from SoCal Ed.

"This is a death spiral," Adams said. "If the equipment breaks we can't fix it."

The owners of the small power plants produce anywhere from 50 megwatts to 200 megawatts using solar, wind, biomass and natural gas.

The QFs are awaiting a legislative solution in Sacramento that would ensure they are paid by SoCal Ed and PG&E.

In addition, legislation authored by Assemblyman Fred Keeley, D-Boulder Creek, and Republican Sen. Jim Battin, R-Palm Desert, that would restructure the rates the QFs charge SoCal Ed and PG&E to $80/MWh from $170/MWh, stalled in the Senate Energy Committee. There are no immediate plans to take up the bill, said the chief of staff to the comittee's chairwoman, Sen. Debra Bowen, D-Redondo Beach.

-By Jason Leopold; Dow Jones Newswires; 323-658-3874; jason.leopold@dowjones.com

http://quicken.excite.com/investments/news_center/article/printer.dcg?story=/news/stories/dj/20010319/BT20010319004814.htm

-- Martin Thompson (mthom1927@aol.com), March 19, 2001

Answers

I remember reading that the main reason these little guys are shutting down is because they have contracts to supply socal and pge. So they can't sell what they make to anyone else. If they are able to dump the es contracts, and they should because of lack of payment then they could sell to the water dept.

-- (perry@ofuzzy1.com), March 19, 2001.

Here's another story on this subject: Link: http://public.wsj.com/sn/y/SB984954794489143865.html Copyright, Wall Street Journal, fair use for education/research only March 19, 2001 Small Power Firms Hold Leverage In California's Electricity Problem By John R. Emshwiller, Staff Reporter of The Wall Street Journal A group of small power producers ... the "qualifying facilities," or QFs, these are a group of relatively small power plants -- such as industrial boilers, wind machines and solar devices -- that for 20 years have been selling power to utilities under government mandate. In recent months, though, they haven't been getting paid ... So far, about 1,400 megawatts of the output produced by the state's 680 QFs, enough to power 1.4 million homes, has been shut down, with more shutdowns expected. Normally, the QFs supply as much as 30% of California's power needs. ... With demand rising toward its summer peak and the utilities' financial problems far from resolved, the state is "running out of time" to find ways to get the QFs paid and to keep them producing. ... But the state didn't take over the QF contracts. ... QF and utility officials agree that the most logical buyer would be the state DWR. Such an arrangement makes economic sense for the state. ... But the state water agency has rebuffed the idea of buying QF power.

-- Robert Riggs (rxr.999@worldnet.att.net), March 21, 2001.