Thursday March 22 12:15 PM ET

http://dailynews.yahoo.com/htx/ap/20010322/us/power_woes_49.html

Calif. Overcharged $5B for Power

By DON THOMPSON, Associated Press Writer

SACRAMENTO, Calif. (AP) - Electricity wholesalers have overcharged California more than $5 billion since May by manipulating the energy market, according to a report prepared for power grid managers.

The Independent System Operator will file the findings with federal regulators and ask for a refund, ISO spokesman Patrick Dorinson said Thursday.

Five wholesalers, among other things, frequently offered electricity at prices double what it cost them to produce - effectively withholding supplies - or didn't bid at all when they were able to generate power, according to the study.

ISO Director of Market Analysis Anjali Sheffrin presented the findings at a conference in Berkeley last week. The companies have denied overcharging California and have said they expect the Federal Energy Regulatory Commission will determine their prices were justified.

The commission has recently stepped up scrutiny of power companies' behavior during California's power crisis, asking suppliers to justify $124 million in sales during the first two months of the year or refund the money. Critics claim thousands of additional questionable sales are not being challenged.

California has been spending about $45 million a day - $4.2 billion since January - to purchase power for Pacific Gas and Electric Co. and Southern California Edison. Both utilities, the state's largest, have been cut off by electricity wholesalers because their credit is almost worthless.

Edison and PG&E say they are nearly $14 billion in debt due to soaring wholesale power costs. The state's deregulation law blocks them from recovering the costs from customers.

State Controller Kathleen Connell said Wednesday that the state's power-buying is gutting its budget surplus. Since the state started making emergency power buys, the surplus has fallen from $8.5 billion to about $3.2 billion, she said.

Connell ordered an audit of the power buys, saying Gov. Gray Davis is withholding key financial information from her office and the Legislature. She said she would refuse to transfer $5.6 billion into a ``rainy day fund'' she said was set up to impress Wall Street as the state prepares to issue $10 billion in revenue bonds to cover its power buys.

Transferring the money would leave the state general fund $2.4 billion in debt, Connell said.

Sandy Harrison, spokesman for the state Department of Finance, and Keely Bosler, of the Legislative Analyst's Office, said such transfers are routine and required by law.``The law says she has to do it. The law does not give her the power to demand that kind of audit information,'' Harrison said.

Davis spokesman Steve Maviglio said the administration has released the financial information it can without jeopardizing negotiations for long-term power contracts with wholesalers. Also Wednesday, a federal judge ordered a major wholesaler, Reliant Energy Services, to continue selling power to California despite its fear that it will not be paid.

The ISO buys power from companies like Reliant on behalf of utilities in attempts to fend off rolling blackouts like those that hit the state this week and during two days in January.

On the Net:

California ISO: http://www.caiso.com

State controller: http://www.sco.ca.gov

-- Swissrose (cellier3@mindspring.com), March 22, 2001