Reliant Discusses Earnings, Calls State’s Refund Claim ‘Absurd’
Reliant Energy Inc., calling California’s claim that the state is due $9 billion in electricity refunds “absurd,” on Friday detailed for the first time what it has earned in the state’s volatile energy market.
A report, called “Myths Debunked: The Real Story of Wholesale Power Costs in California,” is part of the high-stakes wrestling match being played out in front of the Federal Energy Regulatory Commission.
FERC is trying to broker a settlement between energy companies and California officials who say the state and its investor-owned utilities are owed $9 billion in overcharges by the companies--at least $750 million of that from Reliant--since May of last year.
California’s expenditures on electricity have risen from $7 billion in 1999 to $27 billion in 2000 and $18 billion so far this year.
But Reliant’s operating margins were only slightly higher from October 2000 to May than they were in 1998, the first year California operated an electricity market under a deregulation plan, according to the report.
The Houston-based company--which controls about 5% of the power production capacity in California--said it posted a net operating margin of $127 million from October 2000 through May, the report said. The operating margin, the company said, accounts for fuel expenses, emission costs and variable operations and maintenance costs, but not other costs such as taxes, interest expenses, fixed costs and return on capital.
“The wholesale power costs were not driven by increased margins by companies like Reliant,” company President Joe Bob Perkins said.
Instead, he said, the costs were driven by rising natural gas prices and California’s need to run its gas-fired plants longer to make up for a drought-driven lack of hydroelectric power.
Reliant’s operating margins increased slightly more than 10% from 1998 to 2001, while costs increased sevenfold, the report said.
In 2000, Reliant’s California electricity revenue jumped to $1.1 billion from $227 million in 1998. Sales volume more than quadrupled because a drought in the Pacific Northwest sharply reduced hydroelectric imports.
Perkins said he included company-specific information in the report to make the point as clearly as possible that California’s rising wholesale power costs were not driven by increased profits for a handful of energy companies.
The report will be delivered to FERC and was included in a filing Friday with the Securities and Exchange Commission.
“More importantly,” Perkins said of the report, “we want it in the hands of certain politicians across the country.”
A spokesman for Southern California Edison said utility executives would not comment because they have not reviewed the report.
The Reliant filing came after the close of markets. Its shares rose 86 cents to close at $32.40 on the New York Stock Exchange.
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