PUC Allegations Detailed

The head of the California Public Utilities Commission Friday provided fresh details showing that power generators scaled back electricity production and then benefited from the resulting high prices.

In sworn testimony before a state Senate committee, PUC President Loretta Lynch said the companies’ behavior helped drain so much electricity from the state’s grid that officials were forced to declare emergency alerts.

Lynch’s testimony followed her comments Thursday to The Times that state investigators have found evidence of power plants being shut down unnecessarily to create “artificial shortages,” often when the state was most desperate for electricity.

During her testimony Friday, Lynch went beyond her assertions about unnecessary plant shutdowns and accused generators of also needlessly throttling back generation.

The PUC and state Atty. Gen. Bill Lockyer are jointly investigating the exorbitant wholesale power prices that have cost California billions and brought major utilities to financial ruin.

Generators have said they never engaged in any conduct intended to manipulate wholesale electricity prices, including unnecessarily shutting down their plants or reducing supply. The facilities, they say, are aging and have run so hard during the state’s crisis that they often require extensive maintenance.

But the details released by Friday by Lynch added to the questions surrounding the generators’ activities.

Lynch displayed charts that track electricity prices and power generation at three plants on a single day last November. After the plants reduced production during the middle of the day, the graphs show, the state was forced to declare two separate power emergencies because electricity reserves had fallen seriously low.

The shortfall in supply helped cause a spike in prices. With that, the companies operating the three plants suddenly increased their electricity production to almost full capacity, allowing them to capitalize on the much higher rates.

“We certainly see a pattern,” Lynch told the committee, which is investigating alleged manipulation of the state’s wholesale power market by energy suppliers. “Many generators are playing on their experience and playing, to an extent, California.”

Maintenance records reviewed by investigators show that there were no valid reasons for the plants to cut back production, Lynch said. She declined to identify the power plants involved, saying only that they are owned by at least two companies.

Sen. Joseph Dunn (D-Santa Ana), who heads the special committee investigating alleged market manipulation, said Lynch’s information, on its face, is “very damning.”

He said his committee has uncovered additional preliminary evidence showing that several power companies have allegedly engaged in similar behavior.

“We are looking at data that is suspicious,” Dunn said.

During a break in Friday’s hearing, a spokeswoman for a trade group of major power suppliers said there have been no coordinated efforts to shrink supplies to increase profits.

“There has been no collusion,” said Jean Munoz of the Independent Energy Producers Assn.

She said many of the plants bought by out-of-state generators under California’s flawed deregulation plan are more than 30 years old. The plants have been running at high levels to help the state with its energy crunch, she said.

Munoz told reporters that the plants owned by out-of-state companies last year produced 60% more electricity than the previous year.

Although no firm has been singled out by the PUC or the attorney general’s office, Atlanta-based Mirant Corp. said inspectors have visited company plants more than 100 times this year and have found no wrongdoing. “Mirant has run its plants voluntarily and continually throughout the crisis,” the company said in a statement Friday.

But Lynch said Friday that visits to more than 80 plants by PUC investigators since December show that generators are not always producing all the power they can.

“It appears that there have been numerous instances within the past half-year where generation units were not producing the amount of electricity that they were capable of producing,” Lynch said.