Cool weather brings California energy glut, causing state to sell surplus power at a loss

KAREN GAUDETTE, Associated Press Writer

Thursday, July 19, 2001, ©2001 Associated Press

URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/news/archive/2001/07/19/financial0358EDT0024.DTL&type=news

(07-19) 00:58 PDT SAN FRANCISCO (AP) --

Unseasonably cool weather has turned the California power crisis on its head, with recent energy shortages giving way to a glut that's prompted the state to sell excess power at a loss.

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 prices. They said the sales are a blip during a long, hot summer and blackouts are still possible if the mercury soars.

"This is unusual, but it was anticipated, it is typical in the power buying operation," said Oscar Hidalgo, a spokesman for the Department of Water Resources, which is in charge of buying power for three financially ailing utilities. "It's better than doing nothing with surplus power."

The agency has spent the past few months arming the state with long-term energy contracts while weaning itself away from buying high-priced power on the last-minute electricity market.

Those contracts, along with the temperate weather and a boost in energy conservation, mean there's suddenly more power than Californians can use.

Hidalgo acknowledged the state has been trying to sell as much as 20 percent of its daily megawatts, though he would not say at what price. "We know from traders who have bought that it's gone as low as a dollar and last week we know it was as low as $5," said Gary Ackerman, executive director of the Western Power Trading Forum in San Jose.

Unlike natural gas, extra electricity cannot be stored and used later. Since Californians haven't been running their air conditioners as often as expected over the past week, the state hasn't needed the entire 38,000 megawatts it had figured it would need. A megawatt is enough electricity to power roughly 750 homes.

The surplus power sell-off 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," Ackerman said. "I just don't think many people in California truly understood what their state did when they stepped into this business."

Steve Maviglio, a spokesman for Gov. Gray Davis, said Ackerman has no evidence of California selling power for $1 a megawatt. He said a $25-per-megawatt price mentioned by California Energy Markets, a trade weekly, was "much closer to reality."

Some of the extra electricity is being sent to the Bonneville Power Administration, a power supplier in the Pacific Northwest, to repay it for power it loaned California earlier this year, Hidalgo said.

On the Net:

Western Power Trading Forum: www.wptf.org

Gov. Gray Davis: www.governor.ca.gov

©2001 Associated Press

-- Swissrose (cellier3@mindspring.com), July 19, 2001