State Asks Pricing Curbs on 4 Firms
State officials intensified their assault on power plant owners in California on Friday by asking the federal government to ban four large companies from selling power at whatever prices the market will bear.
Mirant Corp., Duke Energy, Dynegy Corp. and Reliant Energy--owners of more than a dozen power plants in California--have charged excessive prices and manipulated the state’s market, the California Independent System Operator in alleges formal petitions to the Federal Energy Regulatory Commission.
Given evidence of abuse, Cal-ISO argues in its filings, federal regulators cannot legally allow the companies to continue selling electricity in California at market-based rates. FERC granted that privilege to the companies three years ago, when California opened its power industry to competition. That privilege is now coming up for renewal.
By refusing to renew and setting prices instead by how much it costs the companies to produce electricity, FERC could quickly control the high wholesale electricity prices that have plagued California for the last year, state officials say.
Cal-ISO, the Folsom-based agency that manages much of the state’s transmission grid, submitted a similar emergency motion to FERC on May 25, urging a revocation of the rights of AES Corp. and Williams Cos. to sell electricity at market rates. Together, the six companies that are the subject of Cal-ISO’s filings have the capacity to generate at least 17,000 megawatts--half of what California needs to meet peak summer demand.
In the flurry of petitions filed late Thursday and Friday, grid managers also asked federal regulators to force the six companies to refund money they have charged beyond the costs of operating their power plants since May 2000. Cal-ISO did not specify a refund figure, but an earlier report by the agency concluded that power sellers had overcharged the state by $6.7 billion between May 2000 and March 2001.
“I’m optimistic that in one form or another we’ll be able to get the relief we’re seeking,” said Cal-ISO general counsel Charles Robinson. He said his agency may go to court if FERC does not act by June 28.
Some company officials characterized the move as political.
“Obviously the filing is about the inference of market manipulation and we haven’t manipulated any markets,” said Thomas J. Allen, a vice president with Mirant, which owns three power plants in the San Francisco Bay Area and recently signed a 19-month contract to provide the state with power.
“Just when we’ve started to work more closely with the state,” he said, “we hate to see this whole thing continue to be politicized.”
Other generators pointed to a recent drop in wholesale power prices as a sign that the market works and that California suffers mostly from a gap between supply and demand. Power traders say prices are easing largely because of cool weather across the West and snowmelt swelling Pacific Northwest rivers that drive hydroelectric generators.
“We’re gratified that market forces are clearly at work,” said Tom Williams, spokesman for Duke Energy, which owns major power plants on the central coast.
FERC spokeswoman Celeste Miller said the agency will not comment on the Cal-ISO filings.
To continue selling electricity at market prices, the energy companies must show FERC that they each control less than 20% of California’s market. Critics argue that FERC’s standard is too simplistic to prevent manipulation of an electricity market where demand at times exceeds supply.
Robinson said Cal-ISO may file similar petitions with FERC to revoke the market-based rate authority of energy traders--who act as middlemen--and out-of-state companies that sell into California.
