Geothermal Company Sues California Utility

Geothermal power plants in California have filed a legal suit against Southern California Edison, alleging the utility did not pay for US$100 million in renewable power that was supplied during the California energy crisis.

EL CENTRO, California, US, 2001-12-06 [] “Our patience, and our ability to carry Edison’s past-due debt has run out,” says David Sokol, chairman of the parent company for CalEnergy Operating Corp. “It has been a year since Edison first stopped making payments to CalEnergy and other renewable energy producers. We entered into a settlement with Edison for payment six months ago. It now is reneging on its agreements with renewable energy producers.” “Edison protects its shareholders while little players across the state, including vendors and landowners in Imperial County, suffer,” he explains. “Putting us last in line to receive payment is the final insult.” Edison has accumulated $3.3 billion, which is growing by $10 million a day, explains Sokol. He accuses the utility of repeatedly breaking agreements, despite assistance from renewable generators to keep it out of bankruptcy. Edison’s refusal to pay CalEnergy under a written agreement reached in June, casts doubt on the utility’s ability or intent to live up to a settlement reached in October with the California Public Utility Commission, adds Sokol. The suit demands payment and calls on Edison to begin paying the agreed fixed price for CalEnergy’s geothermal electricity. Every month of delay produces a windfall to Edison of millions of dollars from renewable energy providers, and Sokol says “it is doubtful that the CPUC anticipated Edison reneging on its past debts and getting this windfall through its settlement agreement.” Last November, Edison stopped paying for electricity provided by CalEnergy under contract for customers in California. Renewable generators continued to generate power without being paid, which Sokol says helped to stabilize energy supply in California while the state paid millions of dollars a day for out-of-state, fossil-fueled electricity during the period of high natural-gas prices. In March, affiliates of CalEnergy won a judgment in Superior Court to release them from their contract with Edison, and they started to sell their geothermal energy on the open market. In June, Edison agreed to pay alternative energy generators for future energy deliveries, and agreed to make immediate partial payment on past-due amounts and to pay the balance once steps were taken to make it creditworthy. That agreement encouraged CalEnergy to resume selling its power to Edison at a rate pegged to natural gas prices. Early last month, Edison reached an agreement with the CPUC that restored the utility to creditworthiness, but Sokol says no payments have been made to CalEnergy for past debt and he says the utility has refused to acknowledge that it will live up to its agreement. Edison says it will pay in-state renewable energy generators after the banks and out-of-state fossil-fuel generators, explains Sokol. “We wanted to avoid this litigation, but Edison’s outrageous behavior has left us no choice,” he adds. “By failing to keep its promise to honor its agreement with us and other renewable suppliers, Edison has prevented CalEnergy from catching up on payments to its creditors,” including $4 million to local landowners who receive royalties for geothermal rights. Although it received no payment for five months, CalEnergy continued to provide renewable energy and continued to pay its taxes, and Sokol adds that his company refrained from taking legal action that would have forced Edison into bankruptcy. “Edison was happy with our support and assured us it would live up to its promises during its protracted fight to avoid bankruptcy,” he says. “We are owed more than $100 million and deserve to be paid.” Edison has denied the charges and says it wants to pay all creditors in one lump payment by the end of March. Officials say it is important to “deal fairly and equitably with all creditors and not to single out one group for preferential payments.” They expressed surprise that CalEnergy would comment publicly “while negotiations are under way that both parties agreed would be confidential.” “We categorically reject as untrue the claim that SCE breached any settlement agreement with CalEnergy or otherwise acted inappropriately,” they explained. CalEnergy manages the Salton Sea geothermal plants in southern California. The company is a unit of CE Generation, which is half-owned by MidAmerican Energy Holdings which is majority owned by billionaire investor Warren Buffett’s Berkshire Hathaway. The Renewable Energy Creditors Committee supports the suit and says its members are owed a total of $400 million by Edison.
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