Calpine on the Brink
The Midwest Independent Transmission System Operator on Jan 12
asked a US Bankruptcy Court to order Calpine Corp to comply with the
grid operator's cash collateral and credit assurance requirements or
permit MISO to bar the merchant generator from participating in its
market after Jan 20.
In a filing with the US Bankruptcy Court for the Southern
District of New York, MISO argued that the court's Dec 21 interim
order, which would allow the merchant generator to provide the
regional transmission organization with a deposit equal to two weeks
of utility service, calculated as a historical average of the past
12 months, falls far short of what MISO requires of its market
participants and could force other market players to bear the costs
of a Calpine default.
Calpine is attempting to use bankruptcy "to force the Midwest ISO
to continue to open its markets to the [company] while
simultaneously attempting to fundamentally amend the payment
obligations set forth in the executory contracts that govern the
relationship among [Calpine], the Midwest ISO and other
participants," the grid operator told the court.
"In short, the debtor is proposing a post-petition breach of its
payment assurance obligations required under the executory
contracts, but yet still receive the benefits" of those contracts.
In addition, MISO said the two-week deposit is particularly
inadequate given that since April 2005, Calpine has been buying and
selling energy in the RTO's day-ahead and real-time energy markets,
transactions that MISO said "involve substantially more dollars
[than transmission services] and expose" it to "greater risk in the
event of default."
MISO said that under the terms of the interim order, it would be
prevented from requiring Calpine to increase its collateral, if the
company were, as it did in October and November, to switch from a
net seller to a net buyer of energy.
"The effect of the proposal may force Midwest ISO to extend
millions of dollars of unsecured credit to the debtor on terms and
conditions not available to other market participants," it said.
Such a result, MISO continued, is not permitted under the
bankruptcy code nor under the Federal Energy Regulatory Commission's
Order 888, which requires equal treatment of all market
participants.
Further, MISO argued, Calpine's request to substitute existing
credit and collateral requirements with the two-week deposit is
illegal under changes Congress approved to the bankruptcy law in
2005.
Those changes, the RTO told the court, require Calpine to provide
adequate assurance of payment that is "satisfactory" to the Midwest
ISO within 30 days of the petition date.
If Calpine fails to do so, then MISO "has the absolute right to
terminate service."
Jan 13, 2005
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