Duke charged up to $3,880 a megawatt

By Myra P. Saefong, CBS.MarketWatch.com Last Update: 12:48 PM ET June 1, 2001

CHARLOTTE, N.C. (CBS.MW) - Duke Energy said Friday that it charged as much as $3,880 per megawatt-hour for electricity in power-starved California in the first quarter of this year.

FRONT PAGE NEWS U.S. shares recover Job market weak in May DuPont sees higher-than-anticipated job cuts Vivendi paying $2.2 billion for Houghton Mifflin Market news and more! Sign up to receive FREE email newsletters Get the latest news 24 hours a day from our 100-person news team. The price topped the $2,000 per megawatt-hour the state's Gov. Gray Davis said California paid another energy provider, Reliant (REI: news, msgs, alerts) , for power on May 9 in order to avoid rolling blackouts that day.

Duke's (DUK: news, msgs, alerts) Chief Executive Officer Jim Donnell said in a statement the highest price charged reflected the fact that "the parties receiving the power (Pacific Gas & Electric and Southern California Edison) were insolvent and would likely declare bankruptcy." The price was charged for 1/10 of 1 percent of power sold into the state by the company during the first quarter, Duke said.

The average price of power the company sold into the state during the period was $136 per megawatt-hour, vs. $76 in the year earlier period.

Duke and other power generators have come under attack by California Gov. Gray Davis for "price gouging" during the state's electrical crisis.

Davis this week threatened to sue federal regulators who oversee the interstate wholesale electricity market to force imposition of "just and reasonable" rates.

President Bush, who met with Davis earlier this week in Los Angeles to discuss the state's power woes, opposes rate caps, arguing that they will do nothing to increase supply or reduce demand.

Donnell said the high prices took into account the likelihood that it would only be able to collect a fraction of the price if PG&E (PCG: news, msgs, alerts) filed for bankruptcy protection.

"Obviously our concerns were valid because on April 6 PG&E did file for bankruptcy protection and we still have not been paid," Donnell said in the statement.

Duke said that if it was paid for the electricity it provided, it would not seek to collect the portion of the price charged for the poor credit risk. However the company did not break out what portion of the price represented the risk factor.

The California Department of Water Resources has been buying electricity in place of the state's two largest utilities, owned by Edison International (EIX: news, msgs, alerts) and PG&E Corp., since January.

The two utilities have lacked the credit and cash to buy enough power for their customers because they've been unable to pass on rising wholesale electricity costs to their customers under a state law that capped retail rates.

Duke supplies just over 5 percent of California's electricity from four power plants that have a capacity of 3,351 megawatts, enough energy to serve about 3.4 million households.

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-- Martin Thompson (mthom1927@aol.com), June 01, 2001

Answers

Just when I think things are bad enough . . . I hope the Guv didn't sign any long term contracts at that price. At the rate we're going, it might be time for the State of California to join PG&E in bankruptcy court.

Blackouts are looking better and better.

-- Margaret J (mjans01@yahoo.com), June 01, 2001.