Content-Transfer-Encoding: quoted-printable
Date: Thu, 22 Mar 2001 09:44:04 -0600
From: "Tracey Bradley" <tbradley@bracepatt.com>
To: "Paul Fox" <pfox@bracepatt.com>
Cc: "Aryeh Fishman" <afishman@bracepatt.com>, "Andrea Settanni" 
<asettanni@bracepatt.com>, "Deanna King" <dking@bracepatt.com>, "Jeffrey 
Watkiss" <dwatkiss@bracepatt.com>, "Justin Long" <jlong@bracepatt.com>, 
"Kimberly Curry" <kcurry@bracepatt.com>, "Ronald Carroll" 
<rcarroll@bracepatt.com>
Subject: Another Story About the ISO Report on Overcharging
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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.