Court Gives Green Light to Green Generator To Suspend Edison Contract, Sell Electricity Elsewhere.

Business Editors

EL CENTRO, Calif.--(BUSINESS WIRE)--March 22, 2001

A California court ruled today that a geothermal energy supplier in the Imperial Valley can temporarily sell its electricity on the open market despite its long-term contracts with Southern California Edison, because Edison has breached the contract by failing to pay for any output since Nov. 1.

CalEnergy Operating Corp. operates a complex of geothermal plants near the Salton Sea. The plants filed suit Feb. 20 in Imperial County Superior Court seeking back payment from Edison and authorization to suspend their contracts with Edison and sell power elsewhere in California during such time Edison is unable to pay for power demand.

David L. Sokol, chairman of CalEnergy, said, "We applaud this short-term solution that will provide us with a revenue lifeline and keep our clean, renewable power flowing to Californians. It is unfortunate that it took court action to provide us some relief from an intolerable situation."

Sokol noted that the ruling did nothing to assure that the plants collect approximately $140 million Edison owes them for power they have produced since Nov 1. The geothermal plants will continue to pursue legal and legislative remedies to receive back payment, he said. "That debt will continue to place a great strain on our operation."

He added that Edison has continued to collect tens of millions daily from ratepayers and has amassed approximately $2 billion in cash.

On the open market, the geothermal plants will be able to receive on the spot market higher prices than renewable generators agreed to accept in negotiations with the state, Edison and PG&E. That lower price had been incorporated in Senate Bill 47X, which stalled in the state legislature after Edison withdrew its support, and has effectively been incorporated in the California Public Utility Commission's proposed order. California taxpayers will pay the difference, because the state is buying electricity on the open market on behalf of Edison and PG&E.

"It is unfortunate that taxpayers will now be paying more for our electricity," Sokol said. "That is the result of inaction by the state and bad faith by Edison. We negotiated with the full blessing and knowledge of the governor and the legislature to arrive at long-term pricing that would assure reliable supply and save taxpayers billions. This pricing for our clean, renewable energy was less than the state is paying out-of-state fossil-fuel energy providers in long-term contracts, and less than half what we are allowed under federal law."

Sokol added that he was encouraged by the governor's March 20 announcement proposing legislation and action by the California Public Utility Commission that would require Edison and PG&E to begin paying current bills for electricity received from qualifying facilities such as CalEnergy.

But, Sokol cautioned, "While we are hopeful that this legislative and regulatory action can move forward quickly, there are many details to be worked out in the governor's proposal. Even with quick action, there is a serious question whether Edison is willing to pay any of its current bills from qualifying facilities."

He noted that, like today's court ruling, the governor's proposal provides no plan or schedule to require Edison to pay the approximately $140 million Edison owes for power CalEnergy has delivered to date.

CalEnergy's geothermal complex employs about 200 workers and produces a total of 268 megawatts -- enough to supply 268,000 homes.

Geothermal plants and other generation from renewable sources provide about 12 percent of California's electricity, enough for 5 million homes. Geothermal plants produce environmentally friendly electricity from wells that tap superheated water 5,000 to 10,000 feet underground. Magma rising in fissures in the earth's crust heats the water to 500-700 degrees Fahrenheit. The generating plants convert the water to "live" steam, the pressure of which turns turbines to produce electricity. The plants then return the slightly cooled water to the subterranean reservoir for reheating as a renewable resource.

CalEnergy is one of 10 members of the Renewable Energy Creditors Committee, a group of green power suppliers who formed the committee on Feb. 15 to explore options to collect back payments from Edison. Together, the group is owed more than $300 million by Edison.

Note to Editors: David Sokol will discuss today's ruling in a media teleconference at 2:30 p.m. PST today, March 22. Call 800/810-0924 and enter code 509085. Identify the CalEnergy conference.