Features

FERC finds no abuses in market

The Associated Press
Saturday February 03, 2001

WASHINGTON — California power plants shut down during the state’s energy crisis had legitimate repair needs, federal regulators looking into allegations of market manipulation said Friday. 

Auditors found no evidence that suppliers shut down plants to try to drive up wholesale electricity prices, the Federal Regulatory Commission report said. 

Regulators blamed most of the California outages on 30- to 40-year-old power plants that need greater maintenance to generate power because of boiler leaks, turbine leaks and pump-motor failures. 

In a second report, FERC staffers attributed high electricity prices in the Northwest to a combination of cold weather, a lack of rain and snow to fuel hydroelectric plants, and the failure of plant production over the past decade to keep pace with growth. 

FERC staffers began investigating the California market last summer. They reported no misconduct from suppliers in a market they acknowledge has produced “unjust and unreasonable prices.” 

 

The report covered about 60 percent of the outages in December by interviewing generators by phone and visiting three California power plants owned by Reliant Energy Wholesale Group and Dynegy Inc., both based in Houston. 

Each plant examined produced at least 100 megawatts, enough power for about 100,000 homes. The review excluded hydro projects, municipal utilities and plants shut down due to pollution concerns. 

The three plants visited — Dynegy’s El Segundo plant near Manhattan Beach and Reliant’s Coolwater Plant in Daggett and Ormond Beach plant in Oxnard — are all in the Los Angeles area. They were chosen for their proximity. 

The companies’ older units appear to have experienced similar problems based on age and increased demand, the report said. 

Outages generally dropped during the month, from about 11,000 megawatts the first week to about 7,000 megawatts at the end, the study found. 

The statewide power demand during December was about 33,000 megawatts. One megawatt is enough electricity for about 1,000 homes. 

Against that backdrop, prices were relatively stable the first week of December at about $200 per megawatt hour, but spiked Dec. 13 and Dec. 20 at about $1,500 per megawatt hour. The spikes occurred as California outages generally were declining. 

Consumer advocates took issue with the report, calling it a “whitewash by the deregulation ideologues” at the commission and urging an investigation by prosecutors into whether power generators held back the supply to drive up prices. 

“The obvious question is what is different between this year and last year?” said Harvey Rosenfield, of the Foundation for Taxpayer and Consumer Rights. 

“In the dead of winter, when the state is using two-thirds of its total capacity, these power plants are falling off line at coincidentally the same time, provoking price increases and power outages,” he said. 

State attorneys general in California, Oregon and Washington are each investigating whether suppliers manipulated the electricity market in their states to boost wholesale prices. 

FERC and state officials have different views on what should be done to ease California’s electricity crisis. 

California Gov. Gray Davis wants the commission to impose a regional price cap on wholesale electricity to help utilities such as Pacific Gas and Electric Co. and Southern California Edison. 

The two utilities, California’s largest, say they’ve lost $12.7 billion since June to soaring wholesale electricity prices that the state’s deregulation law blocks them from recouping from customers. 

FERC officials have so far rejected the request, saying market pricing will encourage construction of new power plants. 

Plant shutdowns for scheduled and unscheduled maintenance has been among key factors in California’s daily power scrounge, along with high wholesale prices, high demand, a shortage of hydroelectricity in the region and a tight electricity supply nationally. 

“We’re very gratified by the FERC staff report because it essentially upholds everything that we have been saying about plant operations for the last six to eight months,” Reliant spokesman Richard Wheatley said. 

Other factors that could drive up prices include bad weather in neighboring states that sell electricity to California and a decline in hydropower due to a lack of rainfall. 

“Of particular note, while prices moved sharply higher between the 9th and the 13th, outages moved generally downward in the same period, including forced outages,” the report said. 

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On the Net: 

www.ferc.fed.us/electric/bulkpower.htm