Duke says high power prices helped offset California risk

Duke Energy Corp. said it charged $3,880/Mw-hr for electricity in California to help offset 'the significant credit risk' associated with selling power to Pacific Gas & Electric Co. and Southern California Edison Co. through the California Independent System Operator.
June 1, 2001
2 min read


By the OGJ Online Staff

HOUSTON, June 1 -- Duke Energy Corp. said it charged $3,880/Mw-hr for electricity in California to help offset "the significant credit risk" associated with selling power to Pacific Gas & Electric Co. and Southern California Edison Co. through the California Independent System Operator.

But the Charlotte, NC, based energy company said that price was for less than 1/10 of 1% of the volume sold to California by the company in first quarter 2001

"The few sales made at the highest price reflected the fact that the parties receiving the power were insolvent and would likely declare bankruptcy," the company said, after California officials released the number Thursday.

In setting the price, Duke said it took into account the likelihood the company would only be able to collect a fraction of the sales price if Pacific Gas & Electric, San Francisco, filed for bankruptcy protection. "Obviously our concerns were valid because on Apr. 6 [Pacific Gas & Electric] did file for bankruptcy protection and we still have not been paid,'' said Jim Donnell, CEO of Duke Energy North America.

He also said Duke agreed not to seek to collect the portion of the price charged for the poor credit risk, if the company is paid in full.

Duke said its average selling price in the first quarter of this year was $136/Mw-hr, up from the average price of $76/Mw-hr in 2000. Donnell said Duke offered to sell 2,000 Mw to the state for $50/Mw-hr for 5 years last year.

"The state did not act upon our offer," Donnell said. He also said Duke Energy's California power plants generated 50% more electricity in 2000, providing 15.8 million Mw-hr vs. 9.5 million in 1999.

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