Edison pays $105 million to CalEnergy

March 05, 2002|By DARREN SIMON

Staff Writer

In what could signal a turnaround in the troubled relationship between CalEnergy and Southern California Edison, SCE has paid $105 million in back payments to the local geothermal company.

The payment brings to a close, at least in part, two years of legal strife between the companies. One outstanding court issue remains unresolved.

However, Vince Signorotti, director of real estate for CalEnergy, said the back payment strengthens the relationship between Edison and CalEnergy.

Edison has made payments to other renewable energy providers throughout the state, ending disputes that started when the state was reeling from a power shortage. At the height of the power crisis, Edison was on the brink of bankruptcy and one other major utility in the state — Pacific Gas and Electric Co. — declared bankruptcy in March 2001.


Edison officials said the back payment was possible because the company's financial status has improved.

"While there is much work to be done, we are encouraged that paying SCE's creditors clearly establishes the utility's path toward recovery and stability,"

stated Edison chairman Al Fohrer.

Regarding the $105 million payment by Edison, CalEnergy officials said they now can focus on trying to meet the power needs of the state.

"We are gratified that this difficult issue is finally resolved for ourselves and the other providers of renewable energy in California," said David Sokol, chairman of MidAmerican Energy Holdings Co., an affiliate of CalEnergy.

"We are also pleased because with this payment, we are able to make royalty payments to our local landowners and pay vendors, who were also waiting to be compensated while Edison was withholding revenue from us."

The legal dispute between CalEnergy and Edison started in 2000 when Edison failed to make about five months of payments to CalEnergy, which has eight generating facilities near the Salton Sea.

CalEnergy filed a lawsuit against Edison in Imperial County Superior Court seeking either payment from Edison or release from its contract with Edison.

Superior Court Judge Donal Donnelly in 2001 released CalEnergy from its contract, allowing it to sell power on the open market.

In June 2001, Edison, CalEnergy and other renewable energy providers reached a settlement in which Edison agreed to pay for the power it receives from the companies on a going-forward basis. That meant Edison would cover the cost of power from the time of the settlement forward.

On the issue of the back payments, Edison agreed to make partial payments on the past-due amounts.

In November 2001, CalEnergy filed a new lawsuit against Edison, stating the utility was not living up to the terms of the June agreement.

However, that second lawsuit — like the first — was settled when Edison announced it would make back payments to CalEnergy and other energy providers in the first quarter of 2002 as it recovered from its financial difficulties and regained the credit-worthy status it lost during the energy crisis.

Soon after the second settlement, CalEnergy filed a third lawsuit against Edison over a related payment issue.

In that case, still in the courts, CalEnergy claimed Edison owes what is known as winter bonus payments of about $400,000. Edison officials have argued it does not owe the winter bonus payments because there was a period in which CalEnergy did not provide power to Edison.

That issue aside, CalEnergy officials said the $105 million payment by Edison resolves a key matter and the state will benefit.

Signorotti said as per the contract with Edison, the utility will pay 5.37 cents per kilowatt for the power it receives from renewable energy providers such as CalEnergy. That price is set for five years.

Signorotti said, "It gives us a chance to fulfill what has always been the promise of renewable energy."

He said the focus can now be on meeting the state's power needs, price stabilization and diversifying energy resources.

>> Staff Writer Darren Simon can be reached at 337-4082.

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