Grid operators deny senator’s accusations of manipulation

By Jennifer Coleman The Associated Press
Saturday June 01, 2002

Asked state energy traders to buy unnecessary power at above-market rates 


SACRAMENTO – The operators of the state’s power grid said Friday a state senator’s accusation that they manipulated California’s energy market is “wholly untrue.” 

The Independent System Operator said grid operators were reacting to a transmission line problem in November 2001 when it asked state energy traders to buy unnecessary power at above-market rates, which the state later had to sell at a loss. 

State Sen. Joe Dunn, D-Santa Ana, called that a request for the state to schedule “fictitious” energy demands. 

The ISO Board of Governors has formed a special committee to review Dunn’s allegations, said Charles Robinson, ISO’s general counsel. 

Though the report released Friday was a preliminary report, Robinson said he’s “pretty confident based on, what management has been able to determine that there’s nothing to the allegation of market manipulation.” 

Robinson said the scrutiny of the grid by Dunn’s committee is justified because of the scope of the energy crisis, but added, “I would prefer a process where the conclusions are reached at the end of the investigation, rather than the beginning.” 

Dunn, chairman of the Senate Select Committee to Investigate Price Manipulation of the Wholesale Energy Market, called the preliminary report “the same-old, same-old nonsense from the ISO. It’s a lot of technical talk that doesn’t get to the core issue.” 

Dunn’s committee released a transcript of a November 2001 telephone call between ISO schedulers and state power buyers at the Department of Water Resources. 

DWR traders thought it was an “unusual request,” and asked ISO to call back on a recorded line, said DWR spokesman Oscar Hidalgo. DWR agreed to sell some power it had already purchased in order to arrange a sale directly with two generators. 

The ISO said maintenance on a major transmission line in Southern California required additional energy to be produced in both the north and south areas of the state. 

Federal regulators had required generators to keep their plants operating at a minimum level, but ISO officials were concerned that some generators weren’t obeying that order. 

In the report, ISO officials say they had three choices for dealing with the transmission glitch: buy power in the spot market, arrange ahead of time for additional power plants to be operating, or resort to rolling blackouts. 

There was no guarantee that there would be power available in the spot market, and rolling blackouts can have “health, safety and economic risks,” the report said. 

When ISO attempted to order two power plants to come online, one company, Reliant Energy, refused to comply unless it had a guarantee it would be paid, the ISO said. Another power company reported maintenance problems with its plant. 

To force the plants to come online, the ISO asked DWR to purchase energy directly from the energy producers. 

Dunn said that amounts to grid operators “gaming the gamers” in the electricity market. 

ISO chief executive officer Terry Winter should have complained to the Federal Energy Regulatory Commission, which ordered the generators to comply with ISO’s must-run orders, Dunn said.