Regulators Open Investigation Into Alternative Power Providers (AP) -- Hoping to prevent California's bleak power outlook from becoming even darker, state regulators Thursday launched an investigation into why alternative energy providers aren't producing more electricity.

With the action, the California Public Utilities Commission hopes to determine if legitimate business reasons or ulterior motives underlie the reduced output by an independent group of small generators that provides much of the state's energy.

These alternative generators -- known in the industry as "qualifying facilities," or QFs -- have been scaling back or shutting down as debts owed by California's two largest utilities pile up. The QFs are owed an estimated $700 million by bankrupt Pacific Gas and Electric and financially crippled Southern California Edison.

Some QFs say the unpaid bills have forced them to defer much-needed maintenance, leading to more equipment breakdowns that reduce electricity output. Other QFs say they simply can't afford to keep operating.

The PUC is worried some QFs are trying to take advantage of the California crisis to get out of long-term contracts that require them to sell electricity at prices far below the current market rate. Several QFs are suing to get out of those contracts so they can cash in on the open market, said PUC Commissioner Carl Wood.

All the QFs want is to be paid for bills that date back as far as November, said Jack Raudy, a spokesman for the Renewable Energy Creditors Committee, which consists of 10 alternative power producers owed a combined $410 million. Those 10 generators produce about 3,000 megawatts -- which Raudy said was enough electricity for 3 million homes.

"We are outraged (by the PUC's investigation)," Raudy said. "We have heard so much rhetoric over the past five months and still haven't been paid a dime. That is what we are worried about."

Raudy estimated his group is operating at about 95 percent of capacity.

After the temporary closure of several QFs contributed to rolling blackouts around the state last month, the PUC ordered PG&E and SoCal Edison to begin paying the generators for the energy purchased since March 27.

But the order has done nothing to help the QFs recover the past debts. The QFs are now in line in bankruptcy court with 30,000 creditors owed money by PG&E, which expects its unpaid bills to rise to $5.5 billion by the end of this month.

If the QFs get desperate enough, they may decide to push SoCal Edison into an involuntary bankruptcy case, Raudy said.

PUC Commissioner Geoffrey Brown defended the alternative energy providers during Thursday's hearing.

"Any QFs that are not operating right now are doing so for financial reasons, not to game the system," he said.

California will need all the power that it can get from the QFs this summer when rolling blackouts threaten to become a daily occurrence. Combined, the QFs account for about one-fourth of California's total power capacity, according to the PUC.

The QF output will become even more essential this summer because California won't be able to import as much electricity from the Pacific Northwest as it has in the past. A lack of rain has left the Pacific Northwest's hydroelectric supply at its second-lowest level ever, and it could diminish to a record low if the recent drought continues.

"We are not going to be able to look to the Pacific Northwest to meet our needs," Wood said after reviewing a new report on the hydroelectricity supply.

The looming blackouts and electricity price increases caused by California's energy crisis is exasperating businesses and households across the state. Fearing the frustration could boil over into terrorism, the PUC Thursday installed metal detectors to screen everyone attending the agency's public meetings.

4.19.01, 3:51p

-- PHO (owennos@bigfoot.com), April 19, 2001