WESTLEY, Calif.—A dispute over tipping fees between Oxford Tire Recycling Inc. and the Modesto Energy Limited Partnership is creating problems at the nation's first tires-to-energy facility, operated by MELP near Westley. Oxford is trying to get MELP to modify its tipping fee structure, so far to no avail. MELP is trying to find new sources of scrap tires, but still is negotiating with possible suppliers.
Oxford manages a stockpile of approximately 7 million tires next door to the MELP plant, as well as an active collection service which brings in about 6 million tires annually. The plant was constructed by the now-defunct Oxford Energy Co. with the intent of eliminating the giant tire dump.
The dispute, combined with the lapse of MELP's contract with Pacific Gas & Electric Co. next September, is creating concern over the long-term survival of the Westley plant.
California Assemblyman Brooks Firestone, a scion of the tire-making family, plans to draft legislation to ensure the MELP facility stays open and encourage scrap tire abatement and recycling.
At the heart of the fight is the tipping fee of $16 per ton MELP charges Oxford. Oxford claims this is too expensive for all the tires MELP uses.
In any case, MELP served Oxford last November with a notice of default for tipping fees left unpaid over several months. On Dec. 1, MELP stopped accepting Oxford tires at the MELP leasehold in front of its conveyor belt at Westley.
``Essentially, Oxford is behind on a significant number of payments,'' said Joe Greco of MELP, estimating the company's indebtedness at $600,000.
The $16-per-ton fee has been a burden on Oxford, according to company President Mark Kirkland.
``We could pay $16 on the tires we bring to them directly,'' Mr. Kirkland said. ``But if we bring in 300,000 tires and they need 500,000, that puts it out of our price range.
``Right now it's a standoff,'' said Mr. Kirkland. ``We've made alternate proposals, but they continue to turn us down. . . We don't have the money to pay them $16 a ton for everything they burn.''
Until the notice of default, MELP accepted tires from Oxford at both the leasehold and directly from the pile. Now, MELP is taking tires directly from the pile. The plant needs 5 million to 6 million tires a year to produce its 14,000 megawatts of electricity.
The company is taking the tires free of charge, according to Mr. Greco, as part of a general agreement it has with the California Integrated Waste Management Board to continue abatement of the tire pile.
``We're doing it in good faith, showing the board we can get the tire pile down,'' Mr. Greco said. ``We're doing it at a loss, but it's the best thing for the state of California. Still, we can't do it indefinitely for free.''
MELP has called for arbitration to settle its quarrel with Oxford. Meanwhile, the company is negotiating with possible new scrap tire suppliers.
Compounding MELP's problems is the September 1997 expiration of its 10-year contract with PG&E. Under the terms of that contract, MELP receives 10 cents per kilowatt hour for the electricity it provides the giant utility firm.
Once the contract ends, PG&E is only obliged by law to pay MELP what it would cost PG&E to generate the electricity itself. This is almost certain to be less than 10 cents per kilowatt hour. Furthermore, California is one of four states to have begun deregulation of its electric utility industry.
Deregulation is not a problem for MELP, according to Mr. Greco. ``There are provisions in (the state deregulation statute) which could actually benefit us,'' he said. ``The market should cause energy rates to increase over the next couple of years.
``The loss of the fixed-price period in our contract is an issue,'' he added. ``If we get past that cliff, we should continue to do well.''