Subject: california update 3 / 22 / 01
executive summary :
? the as yet unnumbered rescue bill by davis made it to the senate floor
? an exemption of the gas - fired qfs from this bill ( as proposed by sen . keeley ) could further forestall an involuntary bankruptcy filing .
? if passed , the draft cpuc order would give the utilities another 15 days after rate hikes to pay the qfs
? the negotiations with the qfs are complicated by the issue of payments owed by the utilities to the dwr . senators are demanding that the utilities set up a trust fund from rate revenues to pay back the dwr .
? the calenergy ruling ( as reported by bloomberg this pm ) is an attractive option for other qfs looking to at least temporarily escape long - term supply contracts with edison .
? if neither the cpuc nor the legislature exempts the gas - fired generators from the new rate structure , an immediate involuntary bankruptcy filing is expected . however , if the exemption is implemented , then a bankruptcy filing would be delayed .
1 . " qf bill " makes it to senate floor
the " cpuc bill " ( the number is not yet known ) is in mock - up form and does the following :
* repeals puc code section 390 , which set a formula for qfs under deregulation .
* amends portions of ab lx which will ensure that dwr receives money for its power purchases , and includes provisions for the issuance of bonds .
* includes a provision for sdg & e rates since they were not covered under other legislation .
the bill passed the senate energy ( 8 - 2 ) , and also just passed the senate appropriations committee ( 8 - 2 ) and is headed to the senate floor .
2 . senator comments on the bill :
keeley ( author of bill ) presented that the bill would allow the puc to decide the qf contracts which is the proper authority to debate the issue .
most of the opposition to this portion of the bill was regarding the fact that the bill provides no guidance to the puc regarding voided costs for natural gas - fired qfs . republicans offered an amendment to not have section 390 repealed for gas - fired generators , but keeley had concerns with the amendment . keeley stated that he did not think they should limit the puc ' s flexibility and that as drafted the amendment was too broad . he also indicated that gas - fired utilities have a legitimate issue with the draft order . he said that the puc order needs to be amended , and keeley is confident that the puc has recognized that in discussion over the past 48 hours .
3 . opponents to the qf bill :
the following people testified in opposition to qf portion : turn , delta power ( qf ) , syke energy , john hancock financial , california manufacturers association , crockett cogeneration , independent energy producers , clean power campaign , pg & e , sce .
the gas - fired qfs that testified in opposition noted that they have been off - line for a couple of months and cannot come back on - line unless their issues are addressed .
in response to the qfs not getting paid , sen . bowen stated that if the utilities do not pay the qfs as directed under the draft order , then she would personally see to it that they go into bankruptcy .
4 . pg & e and sce testimony :
sen . battin asked both utilities about the draft order , which states that after the change in the rates by qfs the utilities must pay the qfs within 15 days , and whether the utilities would abide by the order .
pg the draft order would lower the qf cost to $ 140 million . pg & e was cut off at this point and asked point blank whether their answer to battin ' s question was " yes or no . " battin , bowen and murray all asked
whether it was yes or no . the pg & e rep stated that it would be " no " if the issue of the payments owed to iso and dwr is not resolved . if the iso costs of purchases were included in the dwr payments , then pg & e would not have a problem .
the sce response was that if the money coming in was less than the money going out , then it could not comply with the puc order .
5 . payments to dwr
senator sher then asked both utilities regarding a requirement under ab lx that the utilities set aside those moneys that are owed to the dwr for purchasing power that they collect from ratepayers in a trust fund those . sce responded that they are still in negotiations with dwr on the terms and conditions . several legislators responded angrily that this was not part of the bill , and that they should have a trust fund set up . pg & e noted that they are setting ' some ' money aside , but would not state how much . sen . sher ended the conversation by stating that if the utilities do not set up a trust fund by tomorrow they would either pass emergency legislation or ' go after them ' for violating the law . lx provisions :
tim gage from dept . of finance noted the governor ' s support of the entire bill , and noted that the lx provisions would ensure that dwr gets paid .
pg & e also testified in opposition to these provisions .
senator bowen made the following statements :
* senator peace has announced that he has received another notice of $ 500 million appropriation needed to purchase power and will not approve the funding unless pg & e and sce drop their challenge to the puc regarding the dwr issue .
* also stated that the puc could always raise rates as a way to resolve the issue .