Edison’s Deal Pins Down Current Renewables Price

By Published On: May 12, 2006

Several renewable energy companies with existing contracts took up Southern California Edison’s offer for a five-year fixed-price contract in what some see as a general lowering of the price tag of mainstream renewable energy. A value of 6.15 cents/kWh that increases 1 percent annually beginning in a year was the deal offered. Edison extended the offer to others through the third week of this month. “The deal provides some long-term payments and revenue certainty and mitigates the litigation risk at the California Public Utilities Commission,” said Steven Kelly, Independent Energy Producers policy director. “They can take that to the bank,” agreed Stuart Hemphill, Edison director of qualifying facility resources. The companies that signed on to the deal represent almost half of Edison’s total renewables QF purchases, according to the utility. The companies that agreed to the price include Colmac, with biomass energy; FPL, with wind; Caithness, with solar, geothermal, and wind; and Ormat, with geothermal power. “We bought ourselves five more years,” said Rany Raviv, Ormat vice-president of business development. “Companies like ours are always seeking stability. We cannot afford to live with uncertainty, with one month getting paid a lot of money and another not enough to pay our bills.” He added that the price reflects a 16 percent increase over the current contract – reflecting the higher cost of gas. If other renewables qualifying facilities don’t take up the deal, they are subject to avoided-cost pricing. That level of payment is currently under review at the state and federal levels. Avoided-cost pricing is generally perceived as high. In addition, it varies month to month. Edison is not offering the deal for new renewables contracts, but only for existing standard-offer contracts, Hemphill noted. “The price is low. But then, renewables should be a good value for the ratepayers,” V. John White, Center for Energy Efficiency and Renewable Technologies executive director, said. Some, like Gary Ackerman, Western Power Trading Forum executive director, don’t think Edison’s deal reflects lowering prices for future renewables. He added, however, that it “will help to keep existing renewable QF generation available.”

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