Sat, Dec 10 2011 12:00 PM Posted By: Allison K. Sampité
For the last several months, the San Diego Unified Port has been working with Houston-based power company Dynegy to begin the process of removing Chula Vista’s 51-year-old power plant by the end of 2014.
As a part of the port’s overall strategy to keep things going, it sent a letter from its outside counsel last month to Dynegy South Bay, Dynegy Inc. and Duke, with a list of demands stating Dynegy’s obligations to decommission, dismantle and remove the South Bay power plant.
In a report to the City Council Tuesday, Chula Vista Port Commissioner Ann Moore reviewed the list of demands, stating that the approximate $32 million in reliability must run (RMR) or ratepayer monies be delivered to a payment escrow account along with the $8,555,984 in revenues it received by the end of January.
The port also demanded that Dynegy South Bay provide it with further assurances of its ability to perform by providing a detailed balance of its financial condition, a profit and loss or income statement for 2007 to present and a copy of any guarantee of its indebtedness of Dynegy, Dynegy Holdings LLC or any subsidiaries.
The escrow created under the property escrow agreement dated April 1999, which contains funds segregated for the specific purpose of carrying out its end of term actions, has only slightly more than $18 million (as of Nov. 14), even though Dynegy South Bay’s current cost obligation projections exceed $60 million.
Dynegy South Bay previously acknowledged to the port in August 2010 that it has been collecting revenues from San Diego area ratepayers and received “substantial contributions to cover its cost obligations including approximately $21.5 million held in escrow and $32 million in RMR payments.
Dynegy said it required approximately $8.5 million in demolition and remediation costs from the Federal Energy Regulatory Commission (FERC) settlement when it filed its initial information in October 2009. However, the final settlement amount provided Dynegy South Bay with $36,016,106, which was far beyond its previously identified cost obligations.
As a result of recent developments with Dynegy Inc., Dynegy Holdings LLC and various subsidiaries, the port said its expectations of due performance have been “materially impaired.”
In addition, the port believes that Dynegy South Bay continues to receive ongoing revenues although it is no longer providing services.
In May, Moore said the San Diego Unified Port made the South Bay power plant’s demolition a top priority.
However, Dynegy’s actions, or lack there of, are leaving any progress at a standstill.
In March, the city of Chula Vista made a decision to cease negotiations with Dynegy to remove the power plant, following rumors of the company’s bankruptcy and in May, Moore said there was no indication to the port that Dynegy would be unable to perform its obligation.
Moore said that Dynegy is obligated to use the approximately $21 million first for cost obligations and provide a receipt to the port, which the port then approves or denies. If it is approved, the escrow account pays them. The port has approved the majority of the expenses thus far.
However, Moore said that if there is a disagreement, Dynegy can go to an arbitrator.
Currently, the port has some issues with the way money is being spent.
“The port is objecting to a number of requests that Dynegy made,” Moore said Tuesday.
Councilwoman Pamela Bensoussan mentioned that there is approximately $3 million in ongoing monies for the power plant.
“Wouldn’t it be prudent to put those monies aside as a contingency fund in case there is a shortage or bankruptcy?” she asked Moore.
Moore said she did ask this of Dynegy but it has not been done.
Deputy Mayor Rudy Ramirez suggested the formation of an ad hoc committee to review the issues as they occur at the port for the South Bay’s interest by bringing some port members and South Bay cities together to collaborate.
City Council members requested their staff to go to FERC to make sure the funds that were collected from the ratepayers are used for demolition and remediation.
“They have a role and responsibility,” he said. “The transparency and expenditures are important.”
Port staff will give a presentation to the wcouncil Dec. 13.
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