Message-ID: <25546243.1075860455445.JavaMail.evans@thyme> Date: Thu, 22 Mar 2001 01:51:00 -0800 (PST) From: rcarroll@bracepatt.com To: berry@apx.com, douglass@arterhadden.com, gfergus@brobeck.com, mmilner@coral-energy.com, rreilley@coral-energy.com, acomnes@enron.com, jdasovic@enron.com, jhartso@enron.com, jsteffe@enron.com, mary.hain@enron.com, rsanders@enron.com, smara@enron.com, mday@gmssr.com, gackerman@wptf.org Subject: Fwd: Another Story About the ISO Report on Overcharging Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: "Ronald Carroll" X-To: , , , , , , , , , , , , , X-cc: X-bcc: X-Folder: \Mary_Hain_Aug2000_Jul2001\Notes Folders\Notes inbox X-Origin: Hain-M X-FileName: mary-hain.nsf Content-Transfer-Encoding: quoted-printable Date: Thu, 22 Mar 2001 09:44:04 -0600 From: "Tracey Bradley" To: "Paul Fox" Cc: "Aryeh Fishman" , "Andrea Settanni" , "Deanna King" , "Jeffrey Watkiss" , "Justin Long" , "Kimberly Curry" , "Ronald Carroll" Subject: Another Story About the ISO Report on Overcharging Mime-Version: 1.0 Content-Type: text/plain; charset=US-ASCII Content-Disposition: inline Apparently the ISO gave the LA Times a copy of the study being filed with FERC today. The LA Times published it. Thursday March 22 6:05 AM ET Report: Calif Overcharged for Power By DON THOMPSON, Associated Press Writer SACRAMENTO, Calif. (AP) - Electricity wholesalers overcharged California $5.5 billion over the past 10 months, according to a report by managers of the state's power grid. The five companies, among other things, frequently offered electricity at prices double what it cost them to produce, concludes the California Independent System Operator (news - web sites) study, which was published Thursday in the Los Angeles Times. ``All overcharged, but some excessively and some by moderate amounts,'' said Anjali Sheffrin, the ISO's director of market analysis. The Times said the ISO planned to file the study with federal regulators Thursday and are demanding that the money be paid back. The companies denied the allegations, adding they expect the Federal Energy Regulatory Commission (news - web sites) will determine their prices were justified. The commission has recently stepped up its scrutiny of power companies' behavior during California's power crisis, asking suppliers to justify $124 million in sales during the first two months of the year or refund the money. Critics claim thousands of additional questionable sales are not being challenged. The ISO study alleges the wholesalers manipulated the market by bidding at excessive prices, effectively withholding supplies, or by not bidding at all when they had generation capability available. California has been spending about $45 million a day - $4.2 billion since January - to purchase power for Pacific Gas and Electric Co. (news - web sites) and Southern California Edison (news - web sites). Both utilities, the state's largest, have been cut off by electricity wholesalers because their credit is almost worthless. State Controller Kathleen Connell said Wednesday that the state's power-buying is gutting its budget surplus. Since the state started making emergency power buys, the surplus has fallen from $8.5 billion to about $3.2 billion, she said. A federal judge issued a preliminary injunction Wednesday ordering a major electricity wholesaler, Reliant Energy Services, to continue selling to California despite its fear that it will not be paid. U.S. District Judge Frank C. Damrell Jr. said Californians were at risk of irreparable harm if Reliant stopped selling power to the ISO, which buys it at the last minute on behalf of utilities to bolster supplies and try to fend off rolling blackouts. Such blackouts hit the state twice this week. On Wednesday, cooling temperatures and the completion of repairs at several power plants allowed the state to avoid blackouts. Standard & Poor's has put the state on a credit watch due to its power purchases and chastised Gov. Gray Davis (news - web sites), the Legislature and state regulators for not taking more aggressive steps to make sure the utilities can pay their bills. Edison and PG&E say they are nearly $14 billion in debt due to soaring wholesale power costs. The state's deregulation law blocks them from recovering the costs from customers. Connell ordered an audit of the state's power-buying, saying Davis is withholding key financial information from her office and the Legislature. She said she would refuse to transfer $5.6 billion into a ``rainy day fund'' she said was set up to impress Wall Street as the state prepares to issue $10 billion in revenue bonds to cover its power buys. Transferring the money would leave the state general fund $2.4 billion in debt, Connell said. She called the scope of the proposed transfer unprecedented and said it amounted to a ``shell game'' that disguises the power purchases' effect on the state budget. Sandy Harrison, spokesman for the state Department of Finance, and Keely Bosler, of the Legislative Analyst's Office, said such transfers are routine and required by law. They put the state's budget surplus at $5.6 billion. ``The law says she has to do it. The law does not give her the power to demand that kind of audit information,'' Harrison said. Harrison said the state's budget isn't in danger because it will be repaid with the revenue bonds. Connell's criticism of Davis, a fellow Democrat, won support from Assembly Republicans and Secretary of State Bill Jones, a Republican who may challenge Davis next year. Jones said he wants to announce his own plan to solve the state's energy woes, but can't unless Davis releases more financial details. Davis spokesman Steve Maviglio dismissed the criticism. ``Political grandstanding doesn't generate one more kilowatt of energy for California in this time of emergency,'' he said. Maviglio said the administration has released the financial information it can without jeopardizing negotiations for long-term power contracts with wholesalers.