Wholesalers ordered to refund $69 million to utilities

The Associated Press
Saturday March 10, 2001

SACRAMENTO — Federal regulators ordered power wholesalers Friday to refund $69 million in excessive charges to California utilities, hundreds of millions less than state officials are seeking. 

The Federal Energy Regulatory Commission found that January electricity prices wholesalers charged the California Independent System Operator, which oversees the state grid, and the Power Exchange, the state’s power trading center, exceeded “just and reasonable” amounts. 

The ISO earlier this month told FERC that suppliers should have to refund roughly $550 million they overcharged in December and January for the last-minute power it buys for utilities to fill gaps in the grid and avoid blackouts. 

FERC said it looked only at January and would address December in a later order. 

In addition, it said it could only address potentially excessive charges by private generators, not public utilities that sold to the grid and the exchange during that period.  

The public utilities accounted for $170 million of the overcharging alleged by the ISO. 

ISO spokeswoman Lorie O’Donley declined immediate comment on the federal order. 

FERC’s order requires refunds from more than a dozen major power suppliers, including Duke Energy, Dynegy, Reliant, Williams, Mirant, and Sempra, which is the parent of the San Diego Gas & Electric Co. 

Several suppliers contacted by The Associated Press, including Duke, Williams, Reliant and Dynegy, said they had not seen the order and couldn’t comment. 

“We’re reviewing it and not only want to review the conclusion, but the basis for those conclusions,” said Jeremy Dreier, a spokesman for North Carolina-based Duke Energy. 

California has been reeling under soaring wholesale power prices – driven in part by rising natural gas costs – and a tight power supply for months. 

The supply became particularly tight in December and January, as rain and snow fell short in the Pacific Northwest, straining hydroelectric production, and dozens of power plants shut down for scheduled and unplanned maintenance. 

Grid officials conducted an almost-daily scramble for power in January and February. Supplies fell short of demand on Jan. 17 and 18, causing rolling blackouts struck the northern two-thirds of the state. 

In addition, Pacific Gas and Electric Co. and Southern California Edison – the state’s two biggest utilities and the largest recipients of the last-minute power the ISO buys – are on the brink of bankruptcy. 

They say soaring wholesale prices have left them more than $13 billion in debt since June, leading suppliers to deny them credit.  

State government has been spending roughly $45 million a day since early January to buy power for the utilities’ customers.  

The ISO report to FERC said electricity wholesalers overcharged during the period, even when high natural gas prices and other problems are taken into account. 



• Federal regulators order 13 generators to refund $69 million in power charges for January. The Federal Energy Regulatory Commission required suppliers to justify prices exceeding $150 per megawatt hour. It determined that some sales were priced too high, even taking into account high natural gas prices, air quality control costs and plant maintenance. 

• The FERC staff recommends the commission repeal that $150 per megawatt hour “soft cap” it imposed in December on wholesale power prices. Instead, commissioners recommend that the Independent System Operator, keeper of the state’s power grid, overhaul the methods it uses to buy last-minute power. FERC staff recommends that during power emergencies, the cap be replaced with a set price and generators be required to sell any available power to the ISO. 

• The Power Exchange, the state’s power trading center, files for Chapter 11 bankruptcy protection. The nonprofit exchange was created as part of deregulation. It ceased operations in January after PG&E and Edison were barred from trading because they had defaulted on payments. 

In a statement, the exchange said the filing will not effect the delivery of power by the utilities, “nor does it adversely impact the efforts of elected officials and stakeholders to find a solution to the electricity crisis in California.” 

• The Davis administration continues negotiations with Edison, PG&E and San Diego Gas & Electric over the governor’s plan to buy their transmission lines to help Edison and PG&E pay their debts. 

• The Legislature considers dozens of bills to encourage energy conservation, increase alternative power and streamline power plant siting. 

• The State and Consumer Services Agency and San Francisco Mayor Willie Brown sponsor an Energy Efficiency Fair in San Francisco on Saturday to demonstrate power-saving techniques. 

• An order from Davis requiring businesses to substantially reduce outdoor lighting after business hours takes effect next week. Businesses that fail to comply face a potential fine of $1,000 a day. 

• Attorneys for three generators and the ISO return to federal court March 19, when a judge is expected to decide whether power suppliers can be forced to sell to the grid.