Power plants seek end to PG&E contracts

By Karen Gaudette The Associated Press May 11th, 2001

SAN FRANCISCO --

The owners of at least 19 small power plants scattered throughout California are now asking a bankruptcy judge -- along with state and federal power regulators and lawmakers -- to set them free from their contracts with bankrupt Pacific Gas and Electric.

The so-called qualifying facilities say that U.S. Bankruptcy Court Judge Dennis Montali should let them sell their electricity on the wholesale market instead. Critics fear that would allow the QFs to gouge California by matching high power prices that have already forced the state to spend $5.2 billion to keep the lights on.

But representatives for four QFs from the Bakersfield area at a bankruptcy hearing Thursday pointed to this week’s rolling blackouts as evidence the state needs every megawatt it can get. And until they get paid a "reasonable rate," they can’t afford to make electricity in California, they said. "If we’re paid a rate that doesn’t cover our costs we will financially fail," said Bruce Leaverton, a lawyer representing the QFs.

Attorneys for the QFs said a new pricing system recently ordered by the Public Utilities Commission lowers how much the QFs can charge for their electricity. That means many actually lose money when they run their plants because of soaring natural gas prices. Those losses, as well as millions of dollars owed to all the state’s roughly 700 QFs for past deliveries, have forced many of those plants offline, QF owners have said.

But for years QFs -- which harness solar, wind, biomass or geothermal power or use natural gas to generate electricity, steam and other energy -- have benefitted from the contracts, which allowed them to charge higher prices for their electricity.

Montali said he didn’t think setting a new pricing system was within his job description as a bankruptcy judge. "Even though your side doesn’t like the result, a lot of time and effort has gone into this decision," Montali said. He gave both sides until May 24 to debate before making a decision.

PG&E said Wednesday that only eight of the 300 QFs within its territory remain offline for nonpayment reasons. Others are down for maintenance. The Independent System Operator, which manages the state’s power grid, said only 1400 megawatts of QF power remain offline statewide. That’s an improvement over the 3,000 megawatts down last month.

The state receives about 6,000 megawatts of electricity from QF, according to ISO figures. That’s enough to power about 4.5 million homes. QF operators say the plants may be online, but they’re only generating the bare minimum of electricity to get paid.

-- PHO (owennos@bigfoot.com), May 11, 2001