By Ann de Rouffignac
OGJ Online
HOUSTON, July 2--Duke Energy Corp. conceded Monday it overcharged the California Independent System Operator about $20 million for energy in January and February.
The Charlotte, NC, company said it will file documents with the Federal Energy Regulatory Commission acknowledging bids for energy were above the proxy price approved by the commission for those periods. Duke said it would provide the ISO and the now defunct California Power Exchange with revised invoices to reflect the difference in price. The company noted it has received only "pennies on the dollar" for all power sold in January and February to the ISO or the California Power Exchange.
Under a June 19 order, FERC required Duke to offset any invoiced amounts above the $273/Mw-hr proxy price it set for electricity in January and the $430/Mw-hr February proxy price.
But Duke denied allegations it withheld power from the market to prop up prices. Duke produced logs supplied by the California ISO supporting its argument electricity output was not purposely withheld by certain Duke power plants to drive up the market price.
Last month, former plant workers alleged to a California legislative committee that Duke's plants did not produce at full power during electricity emergencies. The plants are South Bay Units 1,2,3, and 4.
At the time of the hearings, the plant workers, no longer employees of Duke Energy, alleged the company withheld power from the market.
Duke refuted the withholding charges by producing for the first time "dispatch logs" from the ISO that matched its own "instruction logs," said Jeff Stokes, director of Duke Energy Trading and Marketing.
"The power output from the plants was directed by the California ISO. Records from dispatch prove this," he said.
Stokes said the plants did not run during some Stage 3 electric emergencies in January, but that was due to "grid balancing" by the ISO when the grid operator ordered units to cut back generation for voltage support or other reliability goals needed in certain areas.
He also explained that at other times, the units were completely controlled by the ISO, which automatically dispatched the power. "It's as if we turned the keys of the plant over to the ISO," he said.
Electricity supply and demand must be balanced every minute, requiring certain plants ramp off and on while others are held "idling." The plants are not producing full power but are ready to respond to a request for power in less than 10 minutes, Stokes explained.
Not invited to testify
Duke complained the company has not been given an opportunity to respond to the whistle blower allegations at the legislative hearings.
"We were disappointed that we were not invited to testify at the same time as the workers," he said.
Industry sources in California said after the workers' allegations were publicly aired, the ISO dragged its feet in producing data logs exonerating Duke on the withholding issue. The logs were supposedly given to Duke June 29 about a week after the allegations were first aired, sources said.
Stokes added dispatch orders do not originate with Duke's trading unit as the workers alleged. Dispatch orders were relayed to the plants by Duke traders but were originally given by the ISO. The trading unit must arrange for fuel in order to operate the plants.
When the units were not under "automatic control" by the ISO, the energy and reserve services offered by Duke's plants were not always accepted by the ISO, despite the energy shortage, he said. Some sources alleged Duke's offered to sell power for $3880/Mw-hr, but the ISO wasn't willing to pay the price.
Stokes defended his company's prices, explaining credit was a major problem and the ISO had only paid a few cents on the dollar. He also said the high price was meant to discourage use of power from certain units approaching emission credit limits. If the entire allotment of pollution credits were used now no megawatts would be left for the summer peak, he said.
Stokes said the high price included a credit surcharge and credit premium. But energy actually sold to the ISO from the other units was purchased for 25% of that price, he said. "We applied a credit surcharge and credit premium. We bid based on opportunity costs and our own costs," he said. "But FERC issued an order to refund prices above their established proxy prices."
In refusing to divulge prices and bidding history to the California legislature, Duke has claimed the information is proprietary.
