March 25, 2001
ROSEMEAD, Calif., Sunday, March 25, 2001--In anticipation of pending action by the California Public Utilities Commission to restructure the way qualifying facility generators (QFs) will be paid, Southern California Edison (SCE) announced today that it will resume payments to QFs on a going-forward basis.
SCE has set aside funds in a separate account and will make payments in advance of the QFs' expected April deliveries. Payment processing would begin immediately after the CPUC approves on Tuesday a proposed decision restructuring QF prices. The advance payments will be based on the QFs' historical level of production and the Commission's QF pricing order.
"While SCE continues to operate under conditions of financial distress, we want to do what we can to enable QFs to continue providing electric power for our customers in light of strained electricity supplies statewide," said SCE Chairman, President and CEO Stephen E. Frank. "We will be able to make payments only up to an aggregate amount that is available to us from rates actually received for QF payments."
SCE is taking these immediate steps despite the ongoing delays in the long-promised legislative and regulatory QF reform packages that have stalled in the California Legislature and the CPUC. During the past year, both policy-making bodies recognized the need for QF reform and began proceedings to revise the QF pricing formula.
Unfortunately this process has stalled. Faced with billions of dollars of overcharges and QF prices that had risen 500% since 1999, SCE, in its weakened financial condition, had no choice but to stop making payments to QFs and other high-priced generators.
Many QFs have continued to deliver their electricity to SCE during the past few months even while SCE was unable to pay them. In recognition of the state's need for all the electricity it can get during these times, SCE is hereby instituting a program to pay those QFs that continue to provide electricity to the utility.
QF generation represents about one-third, or 9,700 MW of the state's total power supply. Roughly 5,400 MW are produced by natural gas-fired facilities. The rest is generated by wind, solar, geothermal and biomass sources.
QFs came into existence in the 1980s as part of a regulatory program designed to encourage additional sources of electricity at a time when it was feared that oil and gas supplies would be low and prices high. Over the years, due to a flaw in the formula adopted by the CPUC to calculate the prices charged by QFs, these generators have come to be paid at prices that far exceed the costs of utilities' own generation and that far exceed the QFs' own costs.
"We have a responsibility to reduce these costs to the extent possible for our customers," Frank said. "So we are leaving it up to the discretion of the CUPC as to how the payment structure will be revamped and how we should allocate the payments to QFs."
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An Edison International company, Southern California Edison is one of the nation's largest investor-owned electric utilities, serving more than 11 million people in a 50,000-square-mile area within central, coastal and Southern California.
