Mirant defends power sales in California

When Mirant Corp. was highlighted by California state officials for alleged price gouging yesterday, the company attempted to set the record straight. California Controller Kathleen Connell held up an enlargement of a check paid to Mirant for $500 million for power delivered in April at a press conference yesterday. Mirant stated the check was not just for Mirant's power but included third-party transactions made at the request of the California Department of Water Resources.


By Ann de Rouffignac
OGJ Online

HOUSTON, May 22 -- When Mirant Corp. was highlighted by California state officials for alleged price gouging yesterday, the company attempted to set the record straight.

California Controller Kathleen Connell held up an enlargement of a check paid to Mirant for $500 million for power delivered in April at a press conference yesterday.

"If the intent was to somehow attack Mirant for its role in the California market in April, then I'd have to say that the state has apparently decided to bite a helping hand," said Randy Harrison, CEO of Mirant's western operations.

Mirant stated that the check was not just for power generated by Mirant but also for power bought from third parties and resold to the California Department of Water Resources (DWR) at the DWR's request. Mirant produced 1.377 million Mw-hr of power in April 2001 and sold 2.077 million Mw-hr. Mirant bought the electricity at an average price of $455/Mw-hr.

"In some cases we bought the electricity from sellers unwilling to sell to the state and then turned around and sold that power to the state, helping to keep the lights on in California at critical times," said Harrison. Averaging all power transactions to the state in April, Mirant sold power at an average price of $256/Mw-hr, below the April proxy price of $318/Mw-hr set by the Federal Energy Regulatory Commission, he said.

Besides accusations about price gouging, Mirant responded to earlier statements in another press conference by Commissioner Carl Wood of the Public Utilities Commission concerning withholding of power. Wood did not name individual companies.

"There is available capacity that doesn't come online," said Wood. "It is deliberately held back to provoke higher prices and provoke rolling blackouts."

Mirant said the PUC and the California ISO could not produce data that showed it deliberately held back power during March and April of this year.

"We have operational data that show our equipment ran nonstop, the only exception being when units had to be offline for scheduled or emergency maintenance," said Harrison.

Harrison explained that it takes about 24 hours to bring one of the units on or offline. The units cannot be turned off and on quickly to manipulate prices.

Mirant said that state officials have visited its facilities 65 times since January and found each time that Mirant was in full compliance.

"The CPUC and California Independent System Operator have a responsibility to set the record straight on this issue," he said.

At the press conference, one reporter asked if it wasn't time to stop the name-calling and finger pointing and get on with solutions to the energy crisis.

Wood responded to that comment that in order to get out of the crisis, the state must understand how it got into it.

Wood said that the cause of the energy crisis in California was flawed deregulation and allowing generators to sell into a market that was "presumed competitive."

"There are five players that control all of the generating units in the state," said Wood on a conference call yesterday. "There is a current PUC general council's investigation into [generator] withholding and market manipulation."

Reliant Energy Inc.'s Richard Wheatley called all of that "nonsense."

The 3 utilities still have 57% of the total generation resources in the ISO's control area. Other owners include: AES Corp. with 10%; Reliant 9%; Duke Energy Corp. 8%; Mirant 7%; Dynegy Inc. 7%, and Calpine Corp. 2%, he said.

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