Generator Bows, Pledges to Cut Electricity Bill by $20 Million

Caving to state and federal pressure, Duke Energy Corp. said Monday that it will reduce by $20 million the amount it claims it is owed for electricity sales in California.

The Charlotte, N.C., company is one of the state’s largest power plant operators and, with other generators, has been flayed by politicians and regulators in recent months for alleged overcharges in the California market and for supposedly manipulating electricity supplies.

Duke also on Monday formally released internal documents of its own, as well as from the California Independent System Operator, showing that the agency was responsible for huge swings in production at a San Diego-area power plant that sparked accusations of price gouging.

In sworn testimony June 22 before a state Senate investigating panel, three former workers at Duke’s Chula Vista plant offered internal operating logs for three days in January, saying they showed that the company throttled generators up and down “like a yo-yo” to boost prices during power emergencies.

The company denied the allegations, saying that the workers were not in a position to know that Cal-ISO, which operates most of the statewide power grid, was controlling the changes.

Duke has been “shocked and appalled by the accusations that have been leveled against our company,” said Jeff Stokes, its executive vice president for Western gas and power. The letter from Cal-ISO acknowledging that it ordered the production gyrations in the course of maintaining grid reliability was reported Saturday by The Times.

Duke said the $20-million refund for January and February will come from a “credit premium” that it had placed on electricity sales because it feared it would never be paid by Southern California Edison and Pacific Gas & Electric, the utility companies then lurching toward bankruptcy. PG&E; has since filed for bankruptcy-law protection, and Edison remains financially shaky.

The Federal Energy Regulatory Commission in June said Duke was entitled to no more than $273 per megawatt-hour of electricity in January and ordered the company to pay back everything it reaped above that price for the month--including an infamous charge of $3,880 per megawatt-hour, which a spokesman for Gov. Gray Davis called “obscene.”

Davis said Monday that Duke still has much to explain.

“There’s no doubt in my mind that there’s been an effort by many of the power producers to ‘game’ the system,” Davis said, after dedicating Calpine Corp.’s 540-megawatt Sutter Energy Center in Yuba City, the second of four major power plants to begin operation this summer.

So far, Duke executives said, the company has been paid less than 2 cents on the dollar for the power it provided the state in January and February. The federal commission is holding a settlement conference to seek agreement on possible refunds owed California by power generators and marketers.

A Cal-ISO spokesman declined to comment on the Duke revelations, citing a gag order imposed by the administrative law judge overseeing the settlement conference.

Although Cal-ISO late Friday acknowledged that the ramping at the Chula Vista plant was in response to its orders, representatives of the grid agency, the governor’s office and the special state Senate committee probing alleged power gouging warned Monday that Duke’s activities at the plant are still being scrutinized.

The ramping activity ordered by Cal-ISO is only part of the picture, they say. Further investigation of pricing is underway.

State officials suggest, for example, that the grid operator may have ramped down generation at times to avoid paying unreasonably high prices. Duke Energy has refused to release details of the prices it charged for power on the days at the heart of the ex-employees’ allegations, and did so again Monday in a conference call with reporters.

Under questioning Monday, Duke executive Stokes did indicate that the prices charged for the power associated with the January logs were in the range of $1,000 to $1,500 per megawatt-hour, enough electricity to serve about 750 California homes for an hour.

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Times staff writer Eric Bailey in Yuba City contributed to this story.