Generators deny California charges; ISO in Stage 2 alert

With the California Independent System Operator operating under its 31st Stage 2 electricity emergency called just after midnight Thursday, state regulators said they would reconsider calls by California utilities to lift a rate freeze that is edging them toward insolvency. Southern Energy and Dynegy denied withholding power from the California market. Calif. Gov. Gray Davis Wednesday alleged certain out-of-state generators declined to sell power in the state out of fear they might not be paid.


With the California Independent System Operator operating under its 31st Stage 2 electricity emergency declared just after midnight Thursday, state regulators said they would reconsider calls by California utilities to lift a rate freeze that is edging them toward insolvency.

Meanwhile, Southern Energy Inc. and Dynegy Inc. denied withholding power from the California market. Calif. Gov. Gray Davis Wednesday alleged certain out-of-state generators declined to sell power in the state out of fear they might not be paid.

Wednesday US Energy Sec. Bill Richardson said he would require power plant owners who were alleged to be withholding power from the market to sell electricity to the California ISO at a price to be determined by the Energy Department.

Generators responded quickly. In a statement, Dynegy said it was "inadvertently" included on a list of generators unwilling to sell electricity.

"We have been and will continue to produce every megawatt of electricity that the California Independent System Operator has asked us to produce," the company said, noting it has accelerated scheduled maintenance to generate more power to meet the state's needs.

Southern "will do everything we can to help keep the power flowing in California during this critical time, as we have intended to do all along,'' Randy Harrison, chief executive officer of Southern Energy's US West Region said in a statement. ``We also have been assured by Terry Winter, president and CEO of the California ISO, that our inclusion on such a list was a mistake.''

Puget Sound Energy, which also appeared on the list, has been in and out of the wholesale market throughout the fourth quarter, a decision that is made on a daily basis, said Grant Ringel, spokesman, depending on the company's own needs.

He said the company has received no specific instructions from Energy Sec. Richardson on "actions he and the department intend to take. We really have to plan ahead in Pacific Northwest when the toughest part of the winter hits here." With supplies also tight in the Northwest, water resources have to be managed very carefully, he explained.

PG&E Corp. Pres. Robert D. Glynn Jr. said the company is gratified Gov. Gray Davis and US Sen. Dianne Feinstein underscored the "irreplaceable" role California's utilities have in powering the state's economy in discussions with Richardson.

In other response to the continuing crisis:

� Taking note of the utilities' precarious financial conditon, California Public Utilities Commission (PUC) Pres. Loretta Lynch said the PUC would reconsider requests by Pacific Gas and Electric Co, a unit of PG&E Corp., and Southern California Edison Co., a unit of Edison International, to address a rate freeze under which utilities buy power at wholesale prices and sell to their customers at a loss. At its Dec. 8 meeting, the PUC refused to lift the freeze, claiming it was premature. Together PG&E and Edison have racked up losses of $7.2 billion.

� Gray and Feinstein urged the Federal Energy Regulatory Commission to impose a region-wide price cap on wholesale electricity prices and to mandate "reasonable" long-term contracts between privately owned electricity generators and utilities. In calling for a regional price cap, they said California is having trouble attracting electricity because energy producers are receiving much higher rates for their energy in nearby states without caps.

� Edison International Chairman John E. Bryson called for reregulation of the California electric markets, noting it sold power from the plants it previously owned at an average of $31/Mw-hr during previous Decembers. He said Southern California Edison paid more than $1,000/Mw-hr Wednesay, more than can be defended on the basis of increased costs of production. As a result, since May 2000, he said, Edison has paid more than $3.5 billion above current PUC-established rates and is having to borrow money as unsustainable rates to pay for wholesale power.

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