Duke Shaped Power Market, 3 Tell Panel

Three former San Diego power plant workers on Friday accused officials of Duke Energy Co. of manipulating California’s crippled electricity market for higher profits, but records and interviews show that the company was responding partly to state instructions.

Their testimony caused a sensation among power industry critics and brought a sharp response from the company at the center of the whistle-blower allegations, which called them “baseless.”

The former employees at Duke’s South Bay facility told a legislative committee investigating alleged price gouging that the plant was ramped up and down “like a yo-yo” in an apparent gambit to drive up profits.

In support of the allegations, the workers produced logs showing Duke’s trading arm constantly increasing and decreasing generation during power emergencies over three days in mid-January.

Duke officials, who will testify in the weeks ahead, said the up and down throttling of the plant came at the direction of the state, which had paid the company to hold the disputed generation capacity in reserve.

Public records gathered in recent weeks by The Times confirm that at least part of that activity was directed by the California Independent System Operator.

Moreover, Cal-ISO, which in the past has accused power firms of withholding electricity to boost prices, stressed Friday that it regularly directs generators to adjust output to keep the grid humming.

“On a daily basis we have reserves that are set aside,” Cal-ISO spokesman Gregg Fishman said. “It’s energy that can be called upon instantly to meet a fluctuation in demand, or within 10 minutes, or within an hour. Certainly, we call on [standby] services regularly to meet these fluctuations.”

The three witnesses who testified each had worked at the plant for more than 20 years, first for San Diego Gas & Electric and later, under contract, for Duke. They were let go by Duke in April.

Former power plant mechanics Ed G. Edwards Jr. and Glenn D. Johnson accused Duke of throwing away valuable plant parts and of manipulating generation capacity beginning in 1999, leaving workers puzzled.

Managers brushed aside questions about the activity, saying they were “for economic” reasons, the workers said.

“Sometimes a unit would be down ‘for economics’ for two or three days. Sometimes, it would be down for two or three hours. It didn’t make sense,” Johnson said.

He said the phrase appeared to be “another way to explain limiting the load or curtailing the load to boost prices.”

“Instead of running two units to make the same price,” Johnson said, “you could run one unit and make three times the price.” Some energy experts argue that it is possible to increase earnings by trimming power supply in California’s tight electricity market.

The third worker, Jimmy Olkjer, an assistant control room operator, said such actions began after Duke began operating the plant.

Sen. Joe Dunn (D-Santa Ana), the committee chairman, asked Olkjer whether SDG&E; operated in the same manner. “No,” he said.

Edwards, one of the ex-mechanics, said prolonged repairs by Duke were part of the apparent gaming of the power market.

Once, he was directed to throw away 23 pallets of power plant parts, he said. “Some of it was brand new stuff” in its original packaging. “I used a forklift, took them to a dumpster and dumped the pallets,” Edwards said.

He testified that often it took weeks to find a needed spare part, which in the past would have been readily available.

Duke officials bragged about their money-making ways, Edwards said. At employee parties after the first year of operation, Duke executives boasted that “they made more money than they had expected in five years.”

Dunn and Sen. Debra Bowen (D-Marina del Rey), a committee member, said later that they were impressed with the credibility of the workers’ testimony, but that it did not constitute a “smoking gun.” Both said they would form no conclusion until hearing from Duke and other generators.

Duke officials, who will testify before the committee next month, said Cal-ISO controlled much of the ramping activity. “Our employees followed the directions” of the grid operator, said Bill Hall, who oversees Duke’s plant operations in the West.

Old or unnecessary parts were discarded as part of an upgrading of the plant’s inventory system, said Tom Williams, a Duke spokesman. Duke has decreased outages and significantly increased its production since purchasing the plant, he said. “The proof’s in the numbers,” he said.

One plant mechanic has told The Times that he was told to toss parts by the previous owner, SDG&E;, as well as by Duke.

Cal-ISO officials declined to discuss specific contracts and activities with Duke. But records show that the agency regularly buys reserve and standby power at the plant. That electricity can be ordered on and off the system to maintain balances crucial to the complex grid.

In the January period focused on at Friday’s hearing, records show that three of the four South Bay units were repeatedly called on to deliver standby power. The fourth unit was shut for servicing.

On Jan. 17, for example, records show that the agency called on one unit to increase output by 62 megawatts at 6 a.m. and reduce it by that same amount two hours later. Then at noon, the agency ordered 71 more megawatts, cutting it back to 20 at 3 p.m. By day’s end, the agency had asked for an additional 38 megawatts.

A second unit was instructed to add 50 or more megawatts four times on the same day. A third unit was ramped up or down 12 times, bouncing from zero to as high as 221 megawatts.

The records show only power that ISO actually needed. The agency refused to disclose how much reserve power it had under contract with Duke that it had not called on.

But after reviewing records for the mid-January period, Cal-ISO manager of markets Brian Rahman said, “The most viable reason why any one unit would not have been producing would have been for operating reserve.”

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Times staff writer Robert J. Lopez contributed this story.