Covanta Energy gets writ to 'attach' Southern California Edison assets
A California state judge granted independent power producer Covanta Energy International Inc. a writ temporarily freezing certain assets, subject to bonding requirements, of faltering Southern California Edison Co. The April 27 court action gives Fairfax, Va.-headquartered Covanta, a qualifying facility; a mechanism to recover $35 million in bills owed by the utility for power delivered but unpaid since November 2000.
By Ann de Rouffignac
HOUSTON, May 2 -- A California state judge granted independent power producer Covanta Energy International Inc. a writ temporarily attaching certain assets, subject to bonding requirements, of faltering Southern California Edison Co.
The April 27 court action gives Fairfax, Va.-headquartered Covanta, a qualifying facility, a mechanism to recover $35 million in bills owed by the utility for power delivered but unpaid since November 2000. As a QF, Covanta had a contract with Southern California Edison (SCE) to provide power from 150 Mw of geothermal facilities.
But SCE stopped paying Covanta and other QF power producers in November. It was ordered to resume payments for power going forward by the California Public Utility Commission as of April 16. But the payments do not include any compensation for past due bills and also do not include capacity payments that are supposed to be "trued up" later. Capacity payments represent return on invested capital.
Covanta filed the suit in Superior Court of California, Imperial County the second week of April seeking a judgment to force SCE to pay the past due amounts. The company subsequently filed a separate motion for a "writ of attachment" on the utility's assets, while the judge deliberates the company's motion for summary judgment ordering SCE to pay what it owes Covanta.
Th writ freezes assets pending the final ruling by the judge and any bankruptcy filing, said a Covanta official who did not want to be identified.
"My understanding is if SCE files for bankruptcy within 90 days of the issuance of the writ, it is null. But a bankruptcy filing 91 days or later means we are a protected creditor," the official said.
Covanta owns 150 Mw of geothermal facilities under contract to SCE and 100 Mw under contract to Pacific Gas & Electric Co. which has paid all but $12 million of past due power bills, according to Covanta documents filed with the Securities and Exchange Commission. Pacific Gas & Electric is now operating under bankruptcy protection.
Covanta continues to sell power to both utilities.
For the writ to be effective, it must also be bonded to insure no damage is done to SCE assets should the writ have been issued erroneously, Ted Craver, chief financial officer of Edison International, parent of SCE, said on a April 27 conference call.
Covanta has not yet obtained the required bond. "They cannot attach assets used for the public utility business," said Craver. "They (Covanta) are at risk for any damage they cause."
Contact Ann de Rouffignac at email@example.com