Reliant to appeal judge's order to US Ninth Circuit Court

By Ann de Rouffignac
OGJ Online

HOUSTON, Mar. 23�Reliant Energy Inc. Friday said it will ask the US Court of Appeals for the Ninth Circuit to stay an order that forces the company to dispatch power in California without compensation.

Late Wednesday, U.S. District Judge Frank Damrell of the Eastern District of California issued an order granting the California Independent System Operator a preliminary injunction that forces Reliant to continue obeying emergency dispatch orders even though the ISO cannot guarantee payment for the power.

In granting the ISO�s request for injunction, the court sided with the ISO which argued its tariff should be enforced as written. Even if the generators don't get paid for power, there is �potential for imminent irreparable harm� to the state, according to the judge's written order.

The preliminary injunction will remain in force until the Federal Energy Regulatory Commission issues a ruling on a separate complaint filed by Reliant and other generators earlier this month about the creditworthiness provisions of the ISO tariff. Within 5 days of FERC�s ruling, the federal district court will hold a status conference. If FERC does not rule within 60 days of the order, the court will hold a status conference on May 25.

�We filed a notice of appeal yesterday at the [US Court of Appeals for the] Ninth Circuit and will file our motion to stay the judge's order later today,� said Reliant spokesman Richard Wheatley.

Reliant was selling power to California's utilities but was being paid by the California Department of Water Resources (DWR). That contract, starting Feb. 16, expired at midnight Thursday.

Negotiations ongoing
Wheatley said negotiations with DWR on short and long-term contract are ongoing. The ISO buys power in the real-time market on behalf of the electric utilities. Two of those utilities, Southern California Edison Co. and Pacific Gas and Electric Co., stopped paying the ISO for power in January. The utilities are on the verge of bankruptcy and the state is in the midst of devising a bailout for the utilities.

The shaky financial status of these companies invalidated certain covenants on the creditworthiness requirement of the ISO�s tariff as far back as December 2000. When the utilities stopped payments to the ISO, the ISO stopped paying the generators.

The generators balked at having to sell power in response to dispatch requests from the ISO to an uncreditworthy customer. Reliant has racked up $370 million worth of unpaid power bills, said Joe Bob Perkins, president of Reliant Energy�s wholesale division in a conference call Wednesday.

From Dec. 14-Feb. 7, the US Department of Energy stepped in and ordered generators to provide power to California despite the uncertain payment arrangements. On Jan. 31, the ISO anticipated the expiration of the DOE order and asked generators to sign an affidavit guaranteeing they would provide power, despite the financial difficulties of the utility purchasers.

When the generators refused to sign, Judge Damrell at the request of the ISO Feb. 6 issued a temporary restraining order forcing the generators to continue supplying power. That temporary order was extended for several times until Feb. 23 when Reliant, Dynegy Inc., and Williams agreed to comply with the emergency dispatch orders of the ISO until Mar. 19.

In a Mar. 16 status conference, Dynegy, Williams, and AES Corp. agreed to continue selling power until FERC rules on the tariff dispute. Reliant agreed only to continue selling power until Mar. 21, prompting Wednesday�s preliminary injunction.

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