Report: State grid operator behind plant's output swings

Sunday, July 1, 2001, ©2001 Associated Press

URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/01/state0925EDT0123.DTL&type=news

(07-01) 08:10 PDT LOS ANGELES (AP) --

The operator of the state's power grid has acknowledged that it was responsible for swings in production at a power plant that Gov. Gray Davis held as an example of price gouging by out-of-state energy companies.

The Los Angeles Times and Charlotte Observer reported Sunday that the California Independent System Operator told its oversight board that records showed Duke Energy was following orders to help balance the grid and not driving up prices.

Three former workers at Duke Energy's San Diego-area plant told state investigators June 22 that production units were shut down in what they called a scheme to drive up electricity prices. Duke responded last week by taking out full-page newspaper ads defending itself against the accusations by the former workers.

Duke officials said in the ads -- which appeared in newspapers in California, Texas, South Carolina and North Carolina -- that plant production was increased and decreased at the order of Cal-ISO, the agency that controls the state's power grid and monitors supply and demand.

The California version of Duke's advertisement specifically denied the workers' allegations, and claimed they "did not know --and were not in an operational capacity to know -- that the ISO directs output...."

Governor Davis had praised the three workers as heroes and Lt. Gov. Cruz Bustamante said they had delivered the "smoking gun" needed to prove price gouging.

Cal-ISO has not yet publicly acknowledged its role in the ramping up and down of electricity production, but gave its analysis late Friday to selected lawmakers. The move came after Charlotte, N.C.-based Duke gave the agency's confidential orders to the Times and the Charlotte Observer newspaper.

The agency's analysis found that Duke's South Bay units had accurate logs showing that the units followed Cal-ISO's dispatch orders. "It's regrettable that some people have inferred things that just weren't the case," said Duke spokesman Tom Williams.

The agency's findings may not clear Duke entirely of charges that it manipulated power supplies during three days in January when prices skyrocketed, said Gregg Fishman, an ISO spokesman. "Those facts are all correct, but they may not add up to a complete picture of what happened during those three days," Fishman told the Charlotte Observer on Saturday.

State officials cautioned that further investigation is still needed to determine if Duke used other tactics to manipulate the power market. "ISO's comments on the ramping still do not resolve the full question," said state Sen. Joe Dunn, D-Santa Ana.

Duke has been challenged for its production tactics and pricing at the state and national level. The Federal Energy Regulatory Commission last month found the company had overcharged California by millions earlier this year when it was charging $3,880 a megawatt-hour for electricity. The commission found that Duke was entitled to only $273 per megawatt-hour.

In one month, the average home in North and South Carolina uses one megawatt hour at a cost of $73.

Duke is one of several out-of-state generators that entered the California market after the state deregulated its power industry in 1998. With three plants it owns and the leased South Bay plant, Duke accounts for about 5 percent of the state's generating capacity.

On Thursday, the state Senate committee investigating Duke and others held two generators in contempt for failing to provide records of their operations in California. Duke was not held in contempt because it agreed to turn over documents by the July 10 deadline, said Ronda Paschal, a spokeswoman for Dunn, a leader of the committee.

©2001 Associated Press

-- Swissrose (cellier3@mindspring.com), July 01, 2001