FERC Waivers to Promote QF Power in CA Hit Snag

FERC's recent waivers to allow qualifying facilities (QFs) in California to sell output that isn't earmarked for the state's investor-owned utilities (IOUs) to third parties have run into a snag in the state, says a Daggett, CA-based solar electric generator.

Despite Commission action to promote QF sales, California's Department of Water Resources (DWR) and Independent System Operator (Cal-ISO) steadfastly are refusing to buy QF power without the QF first obtaining a court order or a letter of consent from the IOU that relinquishes the QF from any obligation to sell the excess supply to the utility, which the IOU generally will not provide, wrote Sunray Energy Inc. in a March 30 letter to Gov. Gray Davis.

Unless the DWR, Cal-ISO and IOUs "are directed to follow FERC's order, the recently approved waivers will not be implemented and little, if any, additional QF generation will be brought on line," Sunray Energy said in the letter, which also has been submitted to FERC (See NGI, March 19).

The California generator estimated its facilities, which also can be fueled by natural gas, could potentially generate about 300 MW of additional supply in response to FERC's waivers. "This generation is available and will be lost unless action is taken," Sunray Energy told Gov. Davis.

Currently, QFs are in a risky and uncertain environment due to high gas prices and the failure of IOUs to pay for their power purchases from QF generators. As a result, "QF companies such as ours are unlikely to take the potentially crippling financial risk of buying large quantities of expensive natural gas in order to produce electricity at maximum levels" as permitted by the waivers, without some assurance that it will be purchased by the DWR and Cal-ISO, Sunray Energy said.

"Absent purchases by the Cal-ISO and DWR, consistent with the FERC order, inadequate prices and financial risk are likely to keep many QFs either off-line or operating well below their capacity" into the summer months, the generator said.

Sunray Energy says it believes this standoff between the DWR, the Cal-ISO and IOUs over QF electricity can be easily remedied. It proposes that QFs continue to sell their seasonal average output to IOUs under their existing contracts, and then enter into new bilateral agreements with the DWR for all generation above a QF's seasonal average generation output. Under this plan, the IOU would continue to serve as the scheduling coordinator for all of a QF's generation.

"This is a quick and simple solution that could be implemented in a matter of days, and would bring on hundreds if not thousands of megawatts of electric generation," it told the governor.

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