Pacific Gas & Electric has called on FERC to rejectproposals that seek to give California utilities less time to paytheir ballooning generation cost obligations, and would absolvesellers of penalties for not supplying power if customers can’t paytheir bills.
The proposals are a “unilateral attempt” by Dynegy PowerMarketing Inc. to get FERC to impose “more rigorous obligations” onthe financially-strapped California utilities than those permittedunder existing tariff, PG&E said. The proposed actions couldhave “potentially disastrous consequences [for] public health,safety and welfare” in the state.
“Neither the [Cal-ISO] nor FERC have the power to imposeadditional payment obligations on a customer in excess of thepayment obligations specified in the FERC filed rate schedule,without a filing by the ISO and notice, or without a finding by theCommission that the existing tariff provisions are unjust andunreasonable,” the utility told the Commission [EL01-1-603].
Currently, there is a 75-day lag between the time sellersprovide power to the Cal-ISO and the time they are paid for theirservices, while the Cal-PX has a 30-day payment lag. Dynegyproposes that the 30-day payment lag also apply to the Cal-ISO.
Even if utilities can’t meet their payment obligations and/orcomply with certain creditworthiness standards, Dynegy should bepenalized if it fails to supply power to the California market,particularly during emergency situations, PG&E said. TheHouston-based power market is a signatory to must-run agreementswith the Cal-ISO, which require it to generate power when orderedto do so by the ISO.
Dynegy has asked FERC to confirm that sellers “should not berequired to sell, directly or indirectly, to buyers that arepublicly stating that bankruptcy is imminent and that they may notbe 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 obligationunder the emergency orders issued by Energy Secretary BillRichardson, which requires sellers to make available excess powerto California during emergencies. “The Commission has no power orjurisdiction to overrule the secretary’s orders.”
Dynegy argues that requiring it and other generators to supplypower to the flailing California market – with no prospects forrecovery of their short-run marginal costs – amounts to a “taking”of property that not only violates the Constitution, but willresult in the “complete collapse of the entire supply chain.”
In an emergency motion in December in which it outlined itsproposals, Dynegy estimated that, based on prevailing spot gasprices, it alone could incur more than $10 million a day inshort-run variable costs if it is forced to continue supplyingpower to California utilities with no assurance of payment.
Although Dynegy is concerned about the “potential impact” on itsoperations if a California utility goes bankrupt, it “cannot simplywalk away from its own obligation as a public utility,” PG&Esaid. “Should there be a bankruptcy, it is at that time that theFederal Bankruptcy Code would come into play.” But until thathappens, “Dynegy’s assertions regarding the law that should governand its impact on Dynegy’s obligation to provide service arespeculative and premature.”
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