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United States

WINNERS ANNOUNCED FOR HUNDREDS OF MEGAWATT

California's two largest utilities -- Pacific Gas & Electric and Southern California Edison -- have announced winning bids by US wind companies Kenetech, Zond and SeaWest under the Biennial Resource Plan Update (BRPU). The third utility in California, San Diego Gas & Electric, has also given preliminary approval to its share. SCE, however, is trying to get rid of the winning bids for its BRPU tender and go ahead with a compromise deal with Kenetech instead. If it succeeds, SCE will only buy 60% of the power it would otherwise have bought under the auction. Some of the winners have stated their disapproval of SCE 's business methods.

A battle is still under way over California's huge renewable power buying auction in which contracts for over 1000 MW of installed wind power capacity are on the table. Late in July, the state's two largest utilities -- Pacific Gas & Electric (PG&E) and Southern California Edison (SCE) -- announced winning bids by US wind companies Kenetech, Zond and SeaWest for as much as 735 MW of installed capacity. The state's third utility, San Diego Gas & Electric, has also given preliminary approval to the equivalent of 435 MW of nameplate capacity, or 65.25 effective megawatts of wind. But SCE is still trying to throw out the winning bids for its tender and go ahead with a compromise deal with Kenetech instead.

On July 22 PG&E and SCE announced 851 MW of power contracts for wind, hydro, biomass and geothermal under the controversial Biennial Resource Plan Update (BRPU). The July 22 announcements of final winners were ordered by the California Public Utilities Commission (CPUC) in a decision made in late June. Almost immediately, SCE filed an application with the CPUC to halt the auction, claiming it would cost Southern California customers $14 billion over the life of the contracts. SCE wants to proceed with a compromise deal with Kenetech, in which a smaller amount of wind would be developed under a deferred timetable between 1997 and 1999. "We're still negotiating," said SCE's Don Fellows of the Kenetech agreement on July 25. It should be finalised by September or October, he added. SCE has been objecting to the BRPU process since before late last year when it said that manipulative pricing had been adopted in some unusual bids (Windpower Monthly, January and April 1994).

Some of California's best known wind developers are included in the big winners in the utilities' announcements -- Kenetech, Zond and SeaWest. Kenetech was awarded a total of 100 MW with PG&E, or the equivalent of 15 effective megawatts, and will build its projects in Solano County. SeaWest was awarded 25 MW (or 3.75 effective megawatts) with PG&E under the name Idesia Power Associates. A Zond bid for 40 MW -- or 6 effective megawatts -- was also awarded with PG&E.

SCE issued a total of 495 MW to Kenetech, 277 MW to SeaWest -- which bid using "as available" not nameplate capacity -- and 115.7 MW to Zond. Two contracts for 5 MW were also awarded to entities named Rosebud Associates and Desert Rose Associates, unknown in the wind industry.

The third utility, San Diego Gas & Electric, will announce its winners for the 65.22 effective megawatts once wheeling studies are completed.

The auction, conducted last December, is a legacy of the state's commitment to diverse, clean energy. It is the second such purchase and is expected to unleash $1.5 billion in investment in independent power production and create around 5000 new jobs in the near term.

Sixty days to decide

With SCE seeking again to derail the auction, the CPUC has 60 days to issue a decision, says Don Fellows, SCE's manager of non-utility resources. Depending upon the outcome, the utility could then appeal to the state Supreme Court or the Federal Electricity Regulatory Commission, he says. SCE has consistently argued that the Final Standard Offer 4 solicitation is unnecessary and will amount to $800 million in unsecured interest-free loans to the winning bidders over the 17 to 30 year life of the contracts. Independent power producers have welcomed the contracts, probably the last mandated auction of electricity generated from renewable sources.

If SCE succeeds with its scheme to proceed with Kenetech alone, it will only be buying 60% of the power it would have otherwise bought under the auction, according to the Los Angeles Times. Under the preliminary agreement with Kenetech, SCE would buy the equivalent of about 100 MW of firm capacity in wind plants installed from 1997 to 1999. The first 250 MW of nameplate capacity would be bought after SCE customers approve paying higher rates for the power under a voluntary pricing agreement. Another 250 MW is optional.

But other winners are displeased with SCE's move. "We think that they're in breach of their obligation," says Jeff Ghilardi of SeaWest. He says that SCE should not now be engaged in last minute negotiations. "The time has passed to pursue other bidders," he says. "We don't know the details of that agreement [with Kenetech]. We would like to have the same opportunities to serve Edison's customers." He concludes, "We're not particularly happy. We're reviewing our options and remedies."

Al Davies of Zond issued a company statement: "Zond views the five-year long BRPU process as a valuable step in changing the relations of California regulators, utilities, independent power providers and ratepayers. It has successfully committed for a large block of future capacity at great benefit to the ratepayers and public. We are dismayed at any effort to undermine the process after the fact, see such efforts as improper, and urge all parties to now move forward in a spirit of co-operation."

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