Berry Petroleum ends cogen sales to utilities, seeks other customers

From The Oil and Gas Journal HOUSTON, Apr. 18 -- Heavy oil producer Berry Petroleum Co., Taft, Calif., has shut its cogeneration plants and exercised its right to stop sales to Southern California Edison Co. and Pacific Gas & Electric Co. for non-payment of $27.1 million in bills.

Jerry Hoffman, Berry CEO, said oil production is falling while the cogen facilities are not making steam to keep oil production at customary levels. Meanwhile, Berry is seeking third-party electric customers.

"We have ceased steam injection at this point. Our oil production will continue to fall until we resume injecting steam," Hoffman said in a speech Wednesday to the Independent Petroleum Association of America's Oil & Gas Investment Symposium in New York City.

In February, Berry shut four of its five turbines and it shut the fifth turbine down this month, Hoffman said (OGJ Online, Mar. 30, 2001).

In a Securities and Exchange Commission document filed Monday, Berry said that as of Mar. 31, PG&E owed it $12.1 million and Edison owed $15 million power deliveries dating as far back as November. Berry is seeking to collect those funds.

"Berry's oil production has suffered primarily due to the reduction of steam injection into the company's heavy oil reservoirs resulting from the breach (due to nonpayment) of the contracts by the utilities," the SEC document said.

Berry was producing 17,000 b/d as of Dec. 31, but that had fallen to 15,000 b/d as of Mar. 31.

"The company estimates that production may decline another 20% within the next few months," the SEC document said.

Hoffman said Berry has paid $13/Mcf in recent weeks for natural gas to fuel the turbines. He said operation of the cogen plants is critical to oil production and depends on the negotiation of new electric sale arrangements.

Hoffman said Berry is seeking to broaden its portfolio of heavy oil properties with gas reserves and possibly with light oil reserves.

Earlier Wednesday Berry announced it paid $2.1 million for a 15.83% nonoperating interest in coalbed methane leases at South Joe Creek field in Wyoming. Berry estimates the proved reserves, net to its interest, to be 2.2 bcf.

Contact Paula Dittrick at paulad@ogjonline.com

Seems the state gov't's plans are hurting more than PG&E and SCE. If all small suppliers of electricity in Cal cease production/sales because of insufficient operating funds (because of the non-payments)the summer will really be hot on the west coast.

Dennis

-- Anonymous, April 18, 2001

Answers

And the California PUC answer...

California PUC to vote on investigation of QFs

by Ann de Rouffignac
OGJ Online

HOUSTON, Apr. 18 -- The California Public Utility Commission will decide Thursday whether to investigate the state's qualifying facilities, small generators that deliver electricity to utilities under special contracts.

Many of the QFs have not been producing power because they have not been paid by Pacific Gas & Electric Co. and Southern California Edison Co. In at least one case, a judge has permitted a QF to sell power to a third party after the utility defaulted on its payments to the company.

The PUC said it wants "to identify the performance obligations of QFs, determine which QFs are failing to perform, or have announced intentions to do so, and take additional steps to ensure the availability of QF generation to California at reasonable prices," according to the draft order.

QFs were created under the auspices of Public Utility Regulatory Policies Act of 1978 (PURPA) and are governed by the Federal Energy Regulatory Commission. The PUC, however, said it has the primary role in calculating payments and in overseeing the contractual relations.

The Renewable Energy Creditors Committee representing QFs in Pacific Gas & Electric's bankruptcy protection proceedings reacted with "disbelief" to the proposed order, said spokesman Jack Raudy.

"It was the failure of the utilities to perform their payment obligations to QFs which have threatened their ability to provide energy to California," he said.

"The only lawful obligations that the commission should discuss are the obligations the utilities have to honor their contracts with renewable energy generators and other QFs by making back payments and continuing the meager payments they have begun."

Wednesday was the deadline set by the PUC for utilities to pay QFs for electricity delivered after March 27. According to Raudy, most renewable QF facilities received payment for the energy but not all received a complete capacity payment. And, he said, there was not a penny for past due bills.

The QFs have played a pivotal role in the ability of the California Independent System Operator to avoid blackouts. Together, they represent about 11,000 Mw or 22% of the state's electric generating capacity. The ISO ordinarily can count on about 6,000 Mw being available at any one time because much of the capacity is wind power and that varies.

However, about 3,000 Mw of QF production has been off line because of the owners haven't been paid since November. Owners of renewable energy facilities claimed they are owed $700 million in past due bills.

If the PUC adopts the order, each utility must submit to the PUC within 7 days a report that contains the following:

 Contractual and other legal obligations of qualifying facilities to the utility.
 Tabulation of megawatt hours delivered, not delivered, and capacity withheld in the past 12 months under each QF contract.
 Description of any declarations by QFs that intend to withhold future deliveries.

Contact Ann de Rouffignac at Annd@OGJOnline.com

-- Anonymous, April 18, 2001

Has anyone thought beyond the yuppies who will whine because their Salton peanut-butter makers can't be used and considered what a long, hot summer will do in, say, Watts?

-- Anonymous, April 19, 2001