California Public Utilities Commission Chief Alleges Plot to Raise Prices : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

The Y2K Bug "cover up" could seriously hamper the investigation mentioned in the story below. Are these peculiar power plant outages deliberate, or are at least some caused by Y2K, and in particular the second "Y2K+1" Leap Year Date Bug of (no) day 366 year 00?


Friday, May 18, 2001

PUC Chief Alleges Plot to Raise Prices

Power: She cites evidence that plants were shut down to create 'artificial shortages.' An industry spokesman calls the accusation 'idiocy.'


State investigators have uncovered evidence that a "cartel" of power companies shut down plants for unnecessary maintenance to ratchet up prices, the head of the California Public Utilities Commission asserted Thursday. PUC President Loretta Lynch said her agency, working with the state attorney general's office, is probing patterns of plant outages that have created "artificial shortages," particularly when the state has issued emergency alerts because of seriously low levels of electricity. "There are instances where plants could have produced, and they chose not to," Lynch said in an interview at The Times. "And it is clear that there are instances that plants, when called to produce, chose not to produce," even when they were obligated to do so under special contracts with the state and utility companies. Lynch said the ongoing investigation has already produced enough information for the PUC and attorney general's office to take legal action against the generators next month. The exact nature of that action, she said, is still under review. Lynch, who is an attorney, did not name specific suppliers or provide documentation of her assertions. She said that information will remain confidential until court proceedings are undertaken. Generators have long denied any attempt at manipulating the power market in any unlawful way, including orchestrating plant shutdowns. They say the facilities are so old and have been run so hard during the power crisis that breakdowns are a recurring problem. Lynch and Gov. Gray Davis, who has been particularly critical of out-of-state generators, have not suggested that every plant shutdown has been unwarranted. In fact, the governor's top advisor on power plants released a statement last week saying inspectors determined that a Bay Area plant shutdown was justified and that the company's officials were "accommodating." State Atty. Gen. Bill Lockyer was not available for comment on his joint investigation with the PUC. A spokesman would only confirm that Lockyer's office is investigating plant shutdowns as part of a wide-ranging probe of possible civil and criminal violations. So far, the attorney general's office has subpoenaed documents in 91 categories from generators, including records of plant operations, pricing practices and information the merchants may have shared with one another about California's power market. "We're looking for behavior that would violate antitrust or unfair business practice laws," Lockyer has told The Times. Although he has not provided details of his office's findings, he recently said the inquiry is "beginning to get interesting." Lynch said evidence of allegedly unnecessary plant shutdowns was amassed during interviews by investigators and in a review of the voluminous subpoenaed records, obtained after intense legal battles with the power companies. In addition, investigators have been entering plants where unplanned shutdowns have occurred to examine operations and maintenance records, Lynch said. At times, the investigators have been denied access and have had to exert legal pressure to get in, she said. The plant shutdowns are a key factor in the soaring power prices, which have gone from $200 a megawatt-hour in December to as high as $1,900 last week. "I would argue it's no accident," Lynch said of the high prices. "That in fact it's [due to] the coordinated behavior of a cartel." The power generators have repeatedly said they have acted within the rules of California's flawed deregulation program, which allowed them to buy power plants formerly run by the state's three largest utilities. Gary Ackerman, a spokesman for a trade association of large power producers, said Lynch's allegations were "the height of idiocy." The reason many plants have been down in recent months, he said, is that power producers must perform maintenance now in anticipation of heavy summer demand. He said he doubted that state investigators could prove wrongdoing because there was no conspiracy to turn off supplies. "My members do not make money by shutting down their plants so their competitors can make money," said Ackerman, executive director of the Western Power Trading Forum. State analysts have argued, however, that power traders can reap extraordinary profits by withholding power because the prices for the power that is sold are so high. According to Lynch, investigators have found that some companies were more aggressive than others in allegedly using plant shutdowns to manipulate the state's power market. She said investigators have also found a suspicious pattern: When operators of the state electricity grid declare a Stage 1 alert--meaning that electricity reserves have dropped below 7%--plants that do not need repairs suddenly are yanked offline. That, she said, aggravates the shortages, and the cost of wholesale electricity soars. Before December, state analysts alleged that power traders had driven up prices primarily through bidding. At the time, the market was designed to pay all power suppliers the highest amount accepted by the state's grid operator. That changed in December, when new federal regulations restructured California's wholesale power market to loosen price controls, Lynch said. Since then, a new pattern of plant shutdowns has emerged--"not coincidentally in my view," she said. Now, she added, the state has endured "historically high levels of unplanned plant outages." The investigation is not focusing on power plants still operated by utility companies because they have not been "going off [line] at record levels," Lynch said. The California Energy Commission reported last week that the state's electrical grid has been sorely tested by plant shutdowns at a rate several times higher than in the last two years. A Times analysis of state data found that, throughout the last two months, about 12,000 megawatts of production was offline, more than a third of the peak power used in California on a typical day. That has been about evenly divided between scheduled and sudden plant shutdowns. By contrast, shutdowns in the same period of 1999 and 2000 took only 3,300 to 5,700 megawatts offline. Last month, the Federal Energy Regulatory Commission ordered electricity supplier Williams Energy Marketing and Trading to pay $8 million in connection with allegations that plants were improperly shut down to raise prices. The company agreed to settle the case without admitting any wrongdoing. However, FERC released a study in February of closures at three other California plants that it concluded were not undertaken to create a scarcity of power. After talking to plant operators by telephone, reviewing documents and visiting the three plants, federal inspectors concluded that "the companies appeared to have taken whatever steps were necessary to bring the generating facilities back online as soon as possible by accelerating maintenance and incurring additional expenses."

Times staff writer Nancy Vogel in Sacramento contributed to this story.

Copyright 2001 Los Angeles Times, Fair Use for Education and Research Purposes Only

-- Robert Riggs (, May 18, 2001

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