Judge Frees Small Firm From Edison Contract

http://www.latimes.com/cgi-bin/print.cgi

By KEN ELLINGWOOD and DAN MORAIN, Times Staff Writers

EL CENTRO--California's balance of electrical power shifted slightly Thursday when an Imperial County judge temporarily freed a small geothermal energy producer from its contract with Southern California Edison, allowing it to sell power on the open market.

The ruling by Superior Court Judge Donal B. Donnelly could lead to a mass exodus by hundreds of small energy producers that have been selling power to the state's financially troubled utilities for months without getting paid. At the same time, it may have staved off plans by a group of the small generators to send Edison into involuntary bankruptcy as early as today.

In Sacramento, energy legislation pushed by Gov. Gray Davis passed in the state Senate but foundered in the Assembly. The measure was intended to ensure that the state gets repaid for the electricity that it has been buying on behalf of Edison and Pacific Gas & Electric, which say they lack the cash and credit to purchase power. The bill also was supposed to guarantee that the small, alternative energy producers--which together provide nearly a third of the state's power--get paid.

But Assembly Republicans opposed it, saying it hadn't been given sufficient scrutiny. The impact of the small producers was made clear in Imperial County, where Edison's failure to pay CalEnergy, the county's biggest property taxpayer, had outsize implications. CalEnergy had put county officials on notice that it was about to miss a $3.8-million property tax payment. The uncertainty had prompted the tiny Calipatria Unified School District to postpone a bond issue for badly needed school repairs.

Among CalEnergy Chairman David Sokol's first acts after the judge's ruling Thursday was to promise Imperial County Supervisor Wally J. Leimgruber that the company would pay its property taxes on time. "That is great news," Leimgruber said.

Within hours of its court victory, CalEnergy had stopped transmitting geothermal power to Edison and begun selling it to El Paso Energy, a marketing company that purchased the energy at prevailing rates and resold it on the spot market.

Some of the more than 700 other small energy producers in the state said they were considering similar action against Edison and Pacific Gas & Electric. "We absolutely need the right to sell to third parties," said Dean Vanech, president of Delta Power, a New Jersey company that owns five small gas-fired plants in California and is owed tens of millions of dollars by Edison.

Sokol praised the Imperial County judge and said his company simply wanted the authority to sell its power "to a credit-worthy company that, in fact, pays for the power." An Edison spokesman said the company was disappointed with the ruling, but sympathized with CalEnergy and other small producers because "California's power crisis has placed [them] in financial distress, just as it has placed utilities in financial distress."

Edison expressed concern that the ruling would prompt CalEnergy and other small producers to sell their power out of state. Sokol said CalEnergy had specifically told El Paso Energy that it hoped its power would remain in California, "but if someone wants to pay a higher price out of state, we can't stop them."

Sokol said that Edison still owes CalEnergy $140 million and that the company--along with seven other small producers--had been prepared to file a petition in federal bankruptcy court in Los Angeles today forcing the utility into involuntary bankruptcy. He said his company no longer intends to do so, and he believed--but wasn't certain--that the other companies would shelve their plans.

Edison filed papers Thursday with the federal Securities and Exchange Commission showing that it owed $840 million to various small electricity producers, many of which rely on renewable energy sources such as geothermal steam, solar energy or wind.

The alternative energy producers--and utilities--strenuously objected to the legislation considered in Sacramento on Thursday. The bill, spelling out how the utilities are to pay the state and the small producers, passed the Senate on a 27-9 vote, the exact two-thirds margin required. But it stalled in the Assembly on a 46-23 party-line vote, well short of two-thirds.

"When I was a citizen back in Lancaster, I heard these stories about pieces of legislation that were cooked up late at night, that . . . were cut and pasted together and were rammed through by the Legislature," Assemblyman George Runner (R-Lancaster) said. "That's exactly what we have before us."

The alternative electricity generators, including oil companies, warned that they would lose money under the Davis proposal, while representatives of Edison and PG&E, which have amassed billions in debt in the worsening energy crisis, said the legislation would push them deeper into the hole.

"There isn't enough money," Edison attorney Ann Cohn testified at a Senate hearing on the bill Thursday. "It is a very simple question: Dollars going out cannot be greater than dollars coming in."

The bill, AB 8X, combined several proposals. First, it sought to clarify earlier legislation by spelling out that Edison and PG&E must pay the state all money collected from consumers for electricity that the state has been buying. Additionally, the bill would turn over to the California Public Utilities Commission the thorny issue of how much to pay alternative energy producers for their electricity.

Wind, solar and geothermal producers might agree to the prices offered by the administration. But most of the alternative energy producers, including Chevron and British Petroleum, use natural gas to generate electricity through "cogeneration," a process of creating steam for both electric generation and heat. With natural gas prices high, they contend, they would lose money at the prices Davis is offering. --- Ellingwood reported from El Centro, Morain from Sacramento. Times staff writers Mitchell Landsberg in Los Angeles and Jenifer Warren, Nancy Vogel and Carl Ingram in Sacramento contributed to this story.

Copyright 2001 Los Angeles Times

-- Swissrose (cellier3@mindspring.com), March 23, 2001