Second California QF sues for release from SCE contract

The operator of the largest cogeneration plant in the western US filed suit Thursday, becoming the second so-called qualifying facility to ask to be released from an electrical supply contract with Southern California Edison Co. to sell power on the open market. Watson Cogeneration Co.operates a 420 Mw power plant which serves BP's Carson oil refinery. The facility has reduced generation by 140 Mw due to Southern California Edison's (SCE) alleged failure to pay its power bill.


By the OGJ Online Staff

HOUSTON, Mar. 30�The operator of the largest cogeneration plant in the western US filed suit Thursday, becoming the second so-called qualifying facility to ask to be released from an electrical supply contract with Southern California Edison Co. to sell power on the open market.

Watson Cogeneration Co., Carson, Calif., operates a 420 Mw power plant which serves BP PLC's Carson oil refinery, and also produces enough electricity to supply nearly 400,000 homes in southern California. The facility has reduced generation by 140 Mw due to Southern California Edison's (SCE) alleged failure to pay for power since November.

Tom Lu, Watson executive director, said the company filed suit because a rate increase regulators gave SCE Tuesday "does nothing to alleviate the $150 million owed to Watson for power already delivered" and does not provide necessary assurances needed to continue providing power to the California grid.

The California Public Utilities Commission ordered the utilities to resume payment to small generators known as qualifying facilities. Many have shut down or curtailed production because they haven't been paid in several months.

"We have no other alternative but to suspend our contract with SCE, so that we can sell our electricity on the open market to credit worthy customers that will pay us,'' Lu added. "Ironically, the cost of the power that the state is buying to replace generation lost from QFs is twice the cost of power under the QFs' contracts with the utilities."

CalEnergy Operating Corp., a geothermal operator, won permission Mar. 22 from a Imperial County Superior Court judge to temporarily sell its electricity on the open market, even though the company has a long-term contract with SCE.

CalEnergy alleged SCE, a unit of Edison International, breached the contract by failing to pay for any output since Nov. 1. The plants filed suit Feb. 20 in Imperial County Superior Court seeking back payment from SCE, authorization to suspend contracts, and permission to sell power elsewhere in California if SCE is unable to pay its bills.

CalEnergy Chairman David L. Sokol said the geothermal plants which produce 268 Mw will receive higher prices on the spot market than renewable generators agreed to accept in negotiations with the state, SCE, and Pacific Gas & Electric Co. Sokol also noted that the ruling did nothing to assure the plants will collect $140 million SCE allegedly owes CalEnergy for power produced since Nov 1.

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