Waste-to-Energy Plant Considers Selling on the Open Market

A waste-to-energy plant outside Modesto, Calif., has considered selling its power on the open market as one way to deal with the state's continuing energy crisis and take advantage of market fluctuations.

Selling energy on the open market also might prove useful if the plant has to renegotiate its 20-year contract with Pacific Gas and Electric, says Karen Henry, the facility's business manager.

The 22-megawatt plant, owned by Fairfield, N.J.-based Ogden Martin Systems, processes 800 tons of garbage from Stanislaus County and the city of Modesto.

Currently, eight years remain on Ogden Martin's contract with Pacific Gas and Electric, a subsidiary of San Francisco-based PG&E Corp. But because many utilities in California are unable to pay their bills, the Stanislaus County board of supervisors has authorized Ogden Martin to amend the Pacific Gas and Electric contract if the utility cannot pay.

“We're waiting to be paid by them,” Henry says, adding that she does not anticipate the need to renegotiate Pacific Gas & Electric's contract. Selling on the open market “is just an idea that hasn't been thoroughly explored.”

But a Dec. 26, 2000 article on the website of KCRA, a Modesto TV station, stated that the plant is “awaiting approval from Modesto and Stanislaus County officials that would clear the way for the plant to sell energy on the open market.”

Henry called the statement “a bit premature.”

“The county is our partner in this — they're free to look at anything they want to look at, [and] they don't always let us in on their conversations,” she says. “But I don't know of any formal proposal that was before the county.”

Selling on the open market is rare for waste-to-energy plants because most of these facilities were built under the Public Utilities Regulatory Policies Act (PURPA) of 1978. A clause in this law requires facilities that generate up to 80 megawatts of power per day to sign 20-year contracts with utilities in order to receive government funds to build the plant. The utility then is required to buy the plant's power at the current market rate.

On the open market, however, a plant no longer is protected under PURPA and therefore, “is competing with everyone else,” according to Katie Cullen, vice president of the Integrated Waste Services Association (IWSA), Washington, D.C. Although not familiar with the Modesto plant's situation, Cullen says she could understand the plant's interest in the open market, in light of California's high energy prices.

“I'd only assume they'd do well in this market,” she says. “[Waste-to-energy plants] have a very stable price because our power base is stable — we are going 24 hours per day and don't have peak or off-peak prices. And, most power marketers are looking for stable megawatts.”

Before pursuing any of its ideas, the plant is awaiting the results of pending legislation to reset the standard energy rate, Henry says.

“Things are so volatile right now I don't think [selling on the open market] even would be possible,” she says.

Only one waste-to-energy plant — in Maine — currently is selling its energy through a power marketer rather than a utility, Cullen says. This is because Maine deregulated its energy market several years ago, and once the industry is deregulated, a plant is not required to sign a long-term contract, she says.

Additionally, during the next several years, as 20-year contracts under PURPA expire, selling energy on the open market could become a trend in the waste-to-energy industry. Cullen says her association is beginning to investigate the issue and is holding a panel discussion with Maine's power marketer during the IWSA's upcoming spring conference.

Although Stanislaus County's CEO did not return Waste Age's phone calls, County Supervisor Paul Caruso says California's energy crisis has given the county “a laundry list of things to look at.” While Caruso does not rule-out the possibility of the plant selling energy on the open market, he says, “we still have several years to go with the [Pacific Gas and Electric] contract.”

Despite the power shortage, Caruso says the plant, which opened in 1986 before Caruso became a county supervisor, continues to be viable. According to the KCRA article, the plant burns enough garbage every year to power 23,000 homes.

“It was a very novel, innovative and gutsy move to put the facility here,” Caruso says. “We're very proud of it — it's one of the few around [California].”