Tucson, Arizona Thursday, 19 July 2001

Costly power sold cheap

Lack of demand forces Calif. to sell energy at a loss THE ASSOCIATED PRESS

SAN FRANCISCO - Cool July weather throughout the West has created an abundance of electricity in California, prompting the state to sell power for much less than it paid.

In some cases, traders say, energy bought at an average of $138 per megawatt is being sold for as little as $1 per megawatt.

State officials acknowledged selling excess power over the past week, but disputed the price. They also said the sales are a blip during a long, hot summer and blackouts are still possible if the mercury soars.

However, the sales could encourage criticism that the state bought too much power at too high a price in its haste to fend off blackouts.

"If the price is $138 on average for a month and you have to turn around and sell a chunk of it for a dollar, you're not going to look real good to a number of people," said Gary Ackerman, executive director of the Western Power Trading Forum. "I just don't think many people in California truly understood what their state did when they stepped into this business."

California Energy Markets, a trade weekly, said the state sold power last week at $25 per megawatt - a price that Steve Maviglio, a spokesman for Gov. Gray Davis, said was "much closer to reality" than the purported $1 quoted by Ackerman.

Unlike natural gas, extra electricity cannot be stored for later use. Since Californians haven't been running their air conditioners as often as expected during the past week, the state hasn't needed all 38,000 megawatts it had figured it would need.

The state Department of Water Resources, in charge of buying power for three financially ailing utilities, has spent the past few months arming the state with long-term energy contracts while weaning itself from buying the highest-priced power on the last-minute electricity market.

"This is unusual, but it was anticipated. It is typical in the power-buying operation," said Oscar Hidalgo, a department spokesman.

http://www.azstarnet.com/star/today/10719RPowerWoes.html

-- Martin Thompson (mthom1927@aol.com), July 19, 2001

Answers

Bankrupt Transco, Columbia Gas, and others did the same thing, they bought long term gas contracts at high prices and the gas market dropped and then the long downward spiral.

Also, PG&E bonuses where approved by the Bankrupcy Court to the tune of 17.5 million dollars. The reason given is that loss of any of these nincompoops would cause "potentially serious harm to the estate from attrition of key management employees." If they would give me 17.5 million dollars, I could bankrupt PG&E and do a better job.

-- David Williams (DAVIDWILL@prodigy.net), July 19, 2001.