But the remainder will go to other so-called Qualifying Facilities (QF), which are a class of smaller renewable and natural gas-fired non-utility power plants. QFs, which include a number of wind projects, provide about one-third of the electricity used by SCE customers and make up 90% of the renewable power the utility buys.
SCE says it temporarily suspended payments to QFs from November 2000 to March 2001 because the California Public Utility Commission had frozen the utility's retail rates. That, says SCE, prevented it from recovering enough from customers to pay skyrocketing wholesale electricity costs during that period. It resumed payments in late March.
Creditors such as EnXco, which sells wind power to SCE, say they are confident this new plan to pay the debt will work. "We're cautiously optimistic," says EnXco's Kelly Lloyd. "SCE has risen from the brink of bankruptcy to creditworthiness and this is largely due to us and other renewable companies holding off."
SCE's CEO, Stephen E Frank, also credits generation owners with helping the utility through its financial difficulties. "We appreciate the large number of QFs who have supported our effort to deal fairly and equitably with all creditors and not to single out one group for preferential payments," he says. "We reaffirm our effort to pay all of our past-due obligations with interest during the first quarter of 2002."
Lloyd says SCE has been making interest payments on the $7.5 million it owes EnXco since a June settlement was inked. That settlement also required SCE to pay 10% of the debt immediately and to pay the remainder once the utility adopted a plan to restore its creditworthiness. Still, Lloyd says, EnXco and others are relying mostly on the good faith of SCE to meet its payments. "We're relying on top management at Edison to keep their word and to deal with us in a straightforward manner," Lloyd says.
In its latest payment plan, SCE agreed to set the price for power produced by QFs at $0.0537/kWh for the next five years, a decision that will reduce wholesale price volatility for the utility and apparently meet the needs of generators. Lloyd says the set rate begins on May 1, 2002 and will give everyone involved better rate certainty for power produced. Northern California utility Pacific Gas & Electric had already agreed on the same price for power from QFs.