Calif Senate Takes Up Bill On Deal With Small Generators
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02/23/2001 
Dow Jones Energy Service 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 
(This article was originally published Thursday.) 
   
NEW YORK -(Dow Jones)- California Republican Sen. Jim Battin on Thursday 
introduced legislation that will enable the state's electric utilities and 
small, independent generators to proceed with a new deal on pricing power 
supplies. 
The bill, if enacted, would lower the prices paid to so-called qualifying 
facilities to about 8 cents a kilowatt-hour from about 17 cents/kWh and would 
require California utility regulators to ensure that utilities could recover 
those costs from ratepayers. 
The new pricing would be retroactive to Feb. 1, 2001, and would run until 
June 30, 2006. 
"This bill is a linchpin to solving the California energy crisis," Battin 
said in a press release. 
Qualifying facilities produce almost 30% of California 's electricity. While 
the individual power plants are relatively small, some big energy companies 
own several qualifying facilities each in California . These owners include 
Calpine Corp. (CPN), FPL Group (FPL), Chevron Corp. (CHV), Ogden Corp. (OG), 
Thermo Electron (TMO) and MidAmerican Energy Holdings, which was bought out 
last year by Berkshire Hathaway Inc. (BRK.A,BRK.B). 
Passage would allow several companies to restart some 1,000 megawatts of 
gas-fired generators that have been off line for several weeks. Those 
generators shut down their gas-fired plants, because they were unable to pay 
gas suppliers after the utilities fell behind on their power payments. 
The bill, SB47X, encompasses an agreement reached among the parties and is 
expected to be enacted. The generators and PG&E Corp's (PCG) Pacific Gas & 
Electric Co. and Sempra Energy's (SRE) San Diego Gas & Electric Co. reached 
an agreement on the new prices two weeks ago. It wasn't clear Thursday if 
Edison International's (EIX) Southern California Edison had signed off on the 
agreement, according to one of the lead negotiators. 
Edison wasn't able to comment immediately. 
Under the legislation, gas-fired cogeneration plants, which account for 
two-thirds of California 's qualifying facilities, will be paid based on the 
cost of signing a five-year gas supply contract. The producers will negotiate 
five-year contracts, subject to approval by the utilities, or accept a 
benchmark five-year gas price still to be determined. 
To take effect immediately as an emergency act, the bill requires approval by 
two-thirds of both the state Senate and Assembly. If the bill is passed, a 
process for quickly determining the five-year gas price would begin. 
Most of the small power plants that run on renewable sources such as solar 
panels, windmills and hydroelectric generators, will be paid a fixed price of 
5.37 cents per kilowatt-hour, according to the bill. The non-gas plants will 
also be paid about 2 cents/kwh for having the capacity available for the 
utilities. 
Previously, qualifying facilities were paid based on the spot price of 
natural gas at the California border, or, if the generator had elected, the 
California Power Exchange daily clearing price. But generators conceded that 
the California gas spot market had risen so sharply over the past six months 
that their power prices had become insupportable. The CalPX has stopped 
operating its market. 
Both PG&E and Edison have defaulted on qualifying facility payments, but the 
bill sets up a schedule for recovery of missed payments. The utilities are to 
pay for November 2000 deliveries by April 2, for December deliveries by May 
1, and for January 2001 deliveries by June 1. PG&E paid its November bill on 
time. 
Calpine owns the most qualifying facilities in California . Of Calpine's 
4,400 MW of total U.S. operational power plants, 575 MW are qualifying 
facilities under contract with PG&E. FPL Group's FPL Energy owns a little 
more than 500 MW of the plants. 
U.S. utilities have been forced under federal law to buy power from such 
generators since the oil crisis in the 1970s. 
-By Mark Golden, Dow Jones Newswires; 201-938-4604; mark.golden@dowjones.com