Electricity Grid Chief Defends His Secretive Action

Defiant in the face of a state Senate investigation of his secretive emergency action last winter to lift price caps in California’s electricity market, the chief of the grid operating agency testified Tuesday that he acted without telling Gov. Gray Davis because he knew what the response would be.

“I thought I would get a big, resounding no, let’s discuss it for the next three weeks and decide what we’re going to do,” said Terry Winter, chief executive officer of the California Independent System Operator. “And quite honestly I already knew what I was going to do, because I couldn’t keep the system working if we didn’t get relief.”

Davis spokesman Steve Maviglio described Winter’s action last December as “throwing gasoline on fire,” saying it led to higher power prices that pushed the state’s utilities toward bankruptcy.

In a six-hour deposition Tuesday that became a chronicle of the meltdown of California’s fledgling electricity deregulation effort, Winter described the frustration of grid managers struggling to avoid massive blackouts as the market that was supposed to offer abundant power supplies imploded.

Finally, on Dec. 7, California experienced its first “Stage 3” alert, the last step before rotating blackouts must be triggered to avoid widespread collapse of the electrical grid. The next day, Winter petitioned federal regulators to lift a price cap as a way to encourage more sellers to offer electricity to California. The Federal Energy Regulatory Commission had been planning to do so anyway in January, and Winter asked it to act immediately.

He didn’t tell Davis’ advisors at the Electricity Oversight Board or even the 26-member Cal-ISO board of governors, he said, because he had already made up his mind about what had to be done. Winter said he didn’t want to trigger lengthy debate while his employees were calling all over the West trying to scare up megawatts to stabilize the grid that spans three-quarters of the state.

Speaking about the oversight board, whose members are appointed by the governor and Legislature, he said: “They had no concept of what it meant for people to have to make 50 phone calls in 10 minutes. They had no consequence of what it would mean to black out a few thousand megawatts. All the operating things I deal with daily, they don’t have a clue what that means.”

Winter testified before Senate investigators Tuesday in an unusual inquiry that includes subpoenas and secret depositions. The select committee to investigate price manipulation of the wholesale energy market is probing alleged malfeasance under the 1998 deregulation plan, which resulted in nearly a year of soaring wholesale electricity prices. Winter and other Cal-ISO employees have asked that their depositions be open to the public.

State Sen. Joe Dunn (D-Santa Ana), chairman of the committee conducting the investigation, said Winter’s petition to FERC “raises suspicion.”

“This was the first time at any point that the chief executive officer of ISO took such an extraordinary step without even advising the board,” Dunn said. “If we find that there was more than meets the eye in the Dec. 8 action, we may have to take legislative action.”

That could include revamping the Cal-ISO board, he said.

In questioning Winter, the committee’s special counsel, Larry Drivon, focused on whether the private companies that own power plants in California unduly influenced Winter. Many of those companies had representatives on the Cal-ISO board at that time.

Cal-ISO attorneys say Winter had authority to petition FERC without consulting board members. And Winter said that three days after FERC eased price caps, electricity prices began to fall in tandem with the price of natural gas, the fuel burned in most power plants.

But Winter’s move stunned and angered the governor, who says it triggered a run-up in power prices that pushed utilities more rapidly toward bankruptcy.

“The notion that the [Electricity Oversight Board] and governor’s office weren’t acutely aware of the situation and weren’t contributing to the solution is a mistaken recollection,” said Michael Kahn, the former chairman of that board and current chairman of a newly remade Cal-ISO board.