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CA ENERGY CRISIS UPDATE
Contributed by LU 1245, Walnut Creek, CA 

May 21, 2001

BANKRUPTCY JUDGE SAYS AUTHORITY TO SET RATES BELONGS TO STATE; DISALLOWS RATEPAYER COMMITTEE

Federal Judge Dennis Montali, who is overseeing the PG&E bankruptcy case, ruled May 18 that the authority to set rates belongs to state regulators, signaling that he will not raise rates to help PG&E. The Bankruptcy Code, and the bankruptcy court, were designed to resolve debtor-creditor problems, Judge Montali wrote. State agencies are where issues such as rates for electricity are handled.

Montali also ruled that PG&Es customers are not legally entitled to a separate ratepayers committee that would represent their interests in the utilitys bankruptcy case. Montali said bankruptcy law does not give ratepayers special standing in the case, saying, The Bankruptcy Code, and the Bankruptcy Court, were designed to resolve debtor-creditor problems. US Trustee Linda Ekstrom Stanley, who appointed the ratepayer committee, had argued that ratepayers need special representation because the state attorney general has failed to weigh in to protect the publics interest. The attorney generals office has been hesitant to get involved in the bankruptcy case for fear that action would compromise its right to regulate PG&E.

CPUC CHIEF SAYS GENERATORS HOLD BACK SUPPLIES

Some unregulated generators in California cut their power output at midday last fall until the resulting shortage drove up prices, allowing the generators to ramp up their production and sell at a much higher price, California Public Utilities Commission President Loretta Lynch charged Friday at a hearing before a state Senate committee investigating price manipulation. Lynch alleged that such behavior by generators has continued this spring. Sen. Joseph Dunn of Santa Ana, who heads the special committee, said his committee has uncovered additional preliminary evidence showing that several power companies have allegedly engaged in similar behavior.

WORKERS BLOW WHISTLE ON POWER GENERATORS

Whistle blowers at California power plants have provided evidence to state regulators that generators manipulated prices by deliberately withholding electricity during shortages, according to reports in the San Jose Mercury and the San Francisco Chronicle. The Chronicle reported that power plants were repeatedly powered down and back up again, which not only served to jack up prices but also wore down the plants themselves, contributing to the record levels of plant shutdowns that are worsening the states power shortages. (See Power Juggling Ramped Up Prices for the full Chronicle report, the first major published report utilizing information from power plant workers.)

RELIANT CEO EXPLAINED HOW TO GAME THE SYSTEM IN 1997 

Reliant Whole Energy CEO Charles M. Oglesby explained how to game Californias electric system way back in 1997 in an interview with Public Utilities Fortnightly:

Oglesby acknowledges that utilities might have to play a few tricks to make generation profitable, the magazine reported, quoting the power executive as saying:

When you operate on a merchant basis, and sell into a power exchange, you can watch the price climb during the day. We might decide to hold our plant off the market at 12 noon, even if the price looks favorable, because we know we can get a better price at 4 p.m.

Two weeks ago, Reliant sold some power to California on the spot market at a whopping price of $1900 megawatt/hour.

BUSINESS GROUP CALLS FOR PLANT SEIZURES

A major business groupthe San Diego Building Owners and Managers Associationon May 18 called on Gov. Gray Davis to take emergency steps to resolve Californias power crisis, including the seizure of merchant power plants.

NEW BAILOUT PLAN FOR EDISON

A bipartisan group of state legislators is promoting a plan to rescue Southern California Edison from financial ruin and serve as a model for pulling PG&E out of bankruptcy court. Under the plan being promoted by Assemblyman John Dutra:

• Edison would contribute $400 million from a federal tax refund its parent company should receive because of losses in California.
• Edison creditors, mainly power generators and banks, would take an average 25% haircut in exchange for quick payment of their debt.
• The state would loan Edison about $1 billion, to be repaid from revenue collections when the company is financially stable.
• Edison would issue $2.1 billion in bonds secured by future revenues from utility customers. Those revenues would be generated under the rate increases the CPUC approved last week.
• Edison would commit to provide the state with low-cost energy for 10 years from its Sunrise Plant, under construction in Kern County, and would provide the state with conservation easements for watershed land.
• The state would have a five-year option to buy Edisons power grid for book value, $1.2 billion, rather than the $2.8 billion called for in a deal brokered last month by Gov. Davis.

FEDS OPEN INQUIRY INTO NATURAL GAS PRICE HIKES

The Federal Energy Regulatory Commission announced May 18 that it will open a broad investigation into high natural gas prices in California, calling the prices a matter of serious concern. Last week, natural gas that sold for $4.57 per million PTUs at Texas producing basins was marked up to $13.54 at the California border. By contrast, gas selling for $4.56 per million BTU at Louisiana basins was marked up to only $5 at the New York City limits. The California Public Utilities Commission has charged that gas marketers are raising prices in the state by withholding supply.

POWER PRICES DOUBLE WITH WEATHER FORECAST

Peak power for delivery May 20-21 at the California-Oregon border rose $182.40 or 112%, to $345 a megawatt hour in over-the-counter trading May 18, responding to predictions of higher temperatures this week, according to Bloomberg Energy Service.