Dynegy Proposals to Limit Cost Exposure in CA Condemned
Pacific Gas & Electric has called on FERC to reject
proposals that seek to give California utilities less time to pay
their ballooning generation cost obligations, and would absolve
sellers of penalties for not supplying power if customers can't pay
The proposals are a "unilateral attempt" by Dynegy Power
Marketing Inc. to get FERC to impose "more rigorous obligations" on
the financially-strapped California utilities than those permitted
under existing tariff, PG&E said. The proposed actions could
have "potentially disastrous consequences [for] public health,
safety and welfare" in the state.
"Neither the [Cal-ISO] nor FERC have the power to impose
additional payment obligations on a customer in excess of the
payment obligations specified in the FERC filed rate schedule,
without a filing by the ISO and notice, or without a finding by the
Commission that the existing tariff provisions are unjust and
unreasonable," the utility told the Commission [EL01-1-603].
Currently, there is a 75-day lag between the time sellers
provide power to the Cal-ISO and the time they are paid for their
services, while the Cal-PX has a 30-day payment lag. Dynegy
proposes that the 30-day payment lag also apply to the Cal-ISO.
Even if utilities can't meet their payment obligations and/or
comply with certain creditworthiness standards, Dynegy should be
penalized if it fails to supply power to the California market,
particularly during emergency situations, PG&E said. The
Houston-based power market is a signatory to must-run agreements
with the Cal-ISO, which require it to generate power when ordered
to do so by the ISO.
Dynegy has asked FERC to confirm that sellers "should not be
required to sell, directly or indirectly, to buyers that are
publicly stating that bankruptcy is imminent and that they may not
be able to pay their power bills." If the Commission agrees, this
"could turn emergencies into catastrophes," PG&E warned.
Dynegy also appears to be seeking to "sidestep" its obligation
under the emergency orders issued by Energy Secretary Bill
Richardson, which requires sellers to make available excess power
to California during emergencies. "The Commission has no power or
jurisdiction to overrule the secretary's orders."
Dynegy argues that requiring it and other generators to supply
power to the flailing California market - with no prospects for
recovery of their short-run marginal costs - amounts to a "taking"
of property that not only violates the Constitution, but will
result in the "complete collapse of the entire supply chain."
In an emergency motion in December in which it outlined its
proposals, Dynegy estimated that, based on prevailing spot gas
prices, it alone could incur more than $10 million a day in
short-run variable costs if it is forced to continue supplying
power to California utilities with no assurance of payment.
Although Dynegy is concerned about the "potential impact" on its
operations if a California utility goes bankrupt, it "cannot simply
walk away from its own obligation as a public utility," PG&E
said. "Should there be a bankruptcy, it is at that time that the
Federal Bankruptcy Code would come into play." But until that
happens, "Dynegy's assertions regarding the law that should govern
and its impact on Dynegy's obligation to provide service are
speculative and premature."