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California State Agencies Accused of Driving Up Power Prices

Friday, August 31, 2001

Email this Article SAN FRANCISCO Management of California's energy crunch increasingly is falling under the purview of Gov. Gray Davis, which allows decisions affecting electric bills to be made in secret, a state official who opposes Davis said Friday.

Secretary of State Bill Jones also said managers of the state's power grid have ordered power plants to reduce their electricity output so power previously bought by the state for billions of dollars could fetch a better price.

Jones, who plans to seek the Republican nomination to challenge Davis in the 2002 gubernatorial race, said he will ask federal energy regulators to investigate such incidents. He called on the state Democratic leadership to help maintain public scrutiny of the state's energy decisions.

"The charges of market manipulation deserve an answer now," Jones said at a news conference.

Lorie O'Donley, a spokeswoman for the Independent System Operator that manages California's power grid, said that asking power plants to boost or reduce their output is a matter of course and necessary for balancing supply and demand. Unlike natural gas, extra electricity cannot be stored for later use.

"Part of balancing the system is ordering plants to increase their output or ramp down their output," O'Donley said.

The state has accused several power companies of illegally driving up electricity prices using the same methods, and has asked the Federal Energy Regulatory Commission to order those companies to refund the state $9 billion in overcharges.

A FERC administrative law judge has indicated the state might see $1 billion in refunds.

The state has committed about $43 billion to buying power over the next 15 years. Due to increased conservation, cool weather and increased output this summer, the state was forced several times to sell a sudden surplus of power for pennies on the dollar, losing millions.

Jones accused officials with the Department of Water Resources the agency which since January has spent more than $9 billion buying power for the customers of three ailing utilities of urging the ISO to order power plants to produce less power so the state's energy surplus would shrink.

Oscar Hidalgo, a DWR spokesman, said the water department follows the ISO's lead, and that the DWR had not asked generators to ramp their electricity output up or down.

Jones, along with consumer advocates, utilities and business groups are protesting an upcoming decision by the Public Utilities Commission that would allow the DWR to pass rate hikes straight through to electric bills without public review.

Davis has said such autonomy is necessary to show Wall Street the state has a dependable and adjustable inflow of ratepayer money. The state plans to issue some $12.5 billion in bonds to recoup some of its power expenses.

"We need to keep oversight and accountability within the PUC," Jones said. "Why would the people of Califorina want to lose what little oversight they have?"

Hidalgo said the DWR just wants to ensure it is reimbursed and did not want to be in this circumstance.

"We're not looking to profit here. We're looking to recover costs from a market that was completely out of control," Hidalgo said.,2933,33462,00.html

-- Martin Thompson (, September 01, 2001

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