Saturday, April 7, 2001

Feds: No pay, no power sales

By Don Thompson Staff Writer

SACRAMENTO -- In a move that could raise the state's power costs, federal regulators ruled Friday that electricity suppliers cannot be forced to sell to the California grid if the utilities getting the emergency power can't afford to pay for it. Lawyers for the state, the suppliers and the California Independent System Operator, keeper of the power grid, were reviewing the decision to determine whether it means the state must now back the ISO's power buys on behalf of cash-strapped Southern California Edison and Pacific Gas & Electric Co., California's two biggest utilities.

The ISO buys last-minute power on the utilities' behalf to fill gaps in the grid and avoid blackouts. But PG&E, which filed for federal bankruptcy protection Friday, and Edison haven't paid for that power for several weeks.

The Federal Energy Regulatory Commission's ruling, combined with a previous appeals court decision, likely means the state will have to pay generators any price negotiated by the ISO, said Roger Salazar, a spokesman for Gov. Gray Davis, adding that the effect would be minimal.

The state already pays for the majority of the power Edison and PG&E have to buy anyway, Salazar said.

The Davis administration did not say Friday whether it would go to court to challenge the FERC ruling.

Representatives of several generators said they couldn't immediately say whether they will stop selling power to the ISO in light of the FERC decision. The ruling affirmed a February commission opinion.

The suppliers contend a state law authorizing the Davis administration to buy power for Edison and PG&E customers also requires the state to cover the ISO's emergency purchases on the utilities' behalf.

Davis has argued it does not and accused wholesalers of trying to lock the state, already paying roughly $45 million a day to buy power for Edison, PG&E and a third investor-owned utility, San Diego Gas & Electric, into the most expensive power market they can.

"We wish that the FERC would act as quickly on a decision to cap rates as they did in this decision," Salazar said.

Davis' opposition to backing the ISO's purchases has come despite the view of the legislation's sponsor that the bill requires it.

Assemblyman Fred Keeley, D-Boulder Creek, has said the law was intended to give wholesalers a credit-worthy buyer for their electricity.

A federal judge in Sacramento ruled last month that he had no authority to force the state to back the ISO's purchases, and ordered Reliant Energy, a major generator, to keep selling to the ISO pending FERC's ruling.

However, an appeals court ruled Thursday that Reliant does not have to sell to the ISO without a guarantee it will be paid.

Several suppliers, including Reliant, had asked FERC to step into the dispute. On Friday, it affirmed its Feb. 14 ruling that the recipients of the ISO's emergency power buys must be credit-worthy, and ordered California grid officials to comply.

Duke Energy spokesman Tom Williams said the ruling may entice more generators to sell to California if they are guaranteed payment.

"I would hope that this would add to the viability of the ISO because people won't be afraid to sell to them for fear of not being paid," Williams said.

On Feb. 22, generators including Duke, Reliant, Dynegy Power Marketing Inc., Mirant, El Segundo Power, Long Beach Generation, Cabrillo Power, Duke Energy, and Williams Energy filed an emergency motion contending the ISO was failing to follow FERC's earlier order.

FERC agreed Friday, saying the ISO misinterpreted its decision and that even when acquiring emergency power to avoid blackouts, it must have credit-worthy buyers.

FERC Commissioner William Massey reluctantly concurred with the ruling, but issued a statement warning that it may prevent the ISO from maintaining the reliability of California's power grid.

http://www.dailynews.com/news/articles/0401/07/new02.asp

-- Martin Thompson (mthom1927@aol.com), April 07, 2001