California generators complain electricity bills continue to accumulate

By the OGJ Online Staff

HOUSTON, Sept. 28, 2001 – Some California generators claim that California Independent System Operator is still not paying its bills and owes them $2 billion for power delivered in spring and summer.

Duke Energy Corp., Charlotte, NC; Reliant Energy Inc., Houston; Mirant Corp., Atlanta, Ga.; and Williams Cos. Inc., Tulsa, Okla.; filed a complaint at the Federal Energy Regulatory Commission stating the ISO is not in compliance with certain FERC tariffs and orders by withholding the money.

“Quite simply no one is paying for power delivered by suppliers,” the generators said. They said the failure to pay for power deliveries conflicts with a FERC order intended to end the so-called “credit crisis” in California.

The generators said the ISO continues to violate the creditworthiness provisions of its tariff as well as FERC orders. The California Department of Water Resources (DWR) is acting as the creditworthy buyer of power on behalf of the financially stricken utilities.

FERC ordered the ISO to provide power to parties that were creditworthy and could pay their bills, after generators, the utilities, and the state reached an impasse over who was responsible for paying for billions of dollars in unpaid bills accumulated by the utilities after electricity prices skyrocketed in the summer of 2000. The utilities couldn’t pass on the full cost of their wholesale purchases because of a retail rate freeze.

Even after the DWR stepped in to back the utility’s purchases, the new bills still weren’t being paid, generators said. Supplier exposure to unpaid invoices is growing, the complaint stated.

“We are seeing some lagging payments from the ISO,” said Reliant spokesman Richard Wheatley. “They do owe some money.” Reliant would not specify exactly how much.

The ISO notified market participants that for the third consecutive month preliminary invoices for July would be suspended. “No one can operate indefinitely without being paid. It is confiscatory, unreasonable, and unfair to require generators to do so now,” according to the complaint.

The ISO blamed the delay on lack of agreement under which the DWR, the guarantor but not the debtor, could make payments on behalf of the utilities. The ISO’s procedures for paying bills did not accommodate third-party guarantors. Settlement procedures required the utilities be invoiced, the ISO said.

The DWR said, even if it wanted to pay the suppliers, the agency couldn’t because the ISO has not provided the correct billing information. Meanwhile, the DWR reported setting aside $1 billion for payments for real time energy and ancillary services.

The ISO said it has been working for “months” with the DWR to come up with a mechanism under which the DWR could directly receive the invoices and pay the power suppliers. Both state agencies reported in filings with FERC this week that they have come up with a procedure for payment to take place.

They said the new agreement will render the generators’ concerns “moot.”


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