Responding to a motion from the California parties, FERC Thursday agreed to temporarily suspend its procedural schedule established in an interim guidance order it released last week. The federal regulatory process will wait for a ruling from a federal district court in New York City that has scheduled a hearing for Jan. 26 on the issue of Calpine Corp.'s bankruptcy court request to set aside eight of its power supply contracts because they are unprofitable for the Chapter 11-protected company.
The move by California's attorney general, Electricity Oversight Board, and major investor-owned utilities was not opposed by Calpine or its major creditors, the Federal Energy Regulatory Commission said.
FERC has been faced with a temporary restraining order (TRO) first from the bankruptcy court in New York City, and subsequently that court's punting to a general federal district court to sort out bankruptcy and non-bankruptcy legal issues. On Jan. 3, however, FERC outlined "standards that will be applied in this case," acknowledging at the time it was not requiring any action by Calpine (see Power Market Today, Jan. 5).
Ultimately, in the federal regulatory proceeding on the issue, FERC said it seeks "to develop a record" that can be used to make a determination that would be passed on to the court outlining the potential impacts if the contracts are set aside.
Immediately after filing for Chapter 11 Dec. 20, Calpine asked the bankruptcy court to set aside certain "nonperforming" contracts, maintaining they are all under market prices and over their remaining lives would cost the struggling power plant operator in excess of $1 billion, based on current market rates. It used the example of its 1,000 MW contract with California's Department of Water Resources (DWR) at a fixed price of $59.50/MWh through 2009, compared with a current market price of $78.50/MWh.
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