San Diego Union-Tribune

Page A-14

24-Feb-2001 Saturday 

Out-of-state firms bend on power prices |
They agree to fill California emergency orders temporarily 

Bill Ainsworth | Toby Eckert 

SACRAMENTO -- Three power-generating companies that had argued they didn't have to respond to emergency orders forcing them to sell power to the state have now agreed to do so until March 19.

The out-of-state generating companies had contended that uncertainty about getting paid meant they no longer had to fulfill their obligation to supply power in emergencies.

Officials from the Independent System Operator, which operates most of the state's power grid, convinced a federal judge that emergency orders played a critical role in helping the state avoid the chaos of rolling blackouts.

On Feb. 6, Judge Frank Damrell Jr. issued an order forcing the companies to respond to the ISO's emergency calls. His order expired yesterday, but the companies' agreement means it's no longer needed.

Vickie Whitney, a deputy attorney general who represents the state, praised the settlement.

"It's a cooperative effort by the parties to keep energy flowing into the state," she said.

During the time the settlement is in place, officials from Reliant, Dynegy and AES are likely to negotiate with California government leaders over payments for their power.

Officials from these three power companies had argued in court that the state was abusing the emergency orders to keep the costs of buying power lower.

The crisis has forced the state Department of Water Resources to buy about 40 percent of the state's daily electricity needs on the expensive spot market. Even then, the department's buying isn't covering all of the state's needs, leaving the ISO to buy the rest on an emergency basis.

On Thursday, the Public Utilities Commission ruled that the state is responsible for paying for the emergency power, potentially handing California taxpayers an even larger bill than the $2.6 billion they are already scheduled to spend on electricity through next month.

In Washington, several major power providers have asked federal regulators to force the Independent System Operator to financially back its emergency power acquisitions.

The power companies -- including Reliant, Duke and El Segundo Power -- contend the ISO is violating a Feb. 14 order by the Federal Energy Regulatory Commission, or FERC. They argue that the order said the companies couldn't be forced to supply power to the ISO without some guarantee of payment.

"In an extraordinary display of chutzpah, the ISO has failed to take any action to comply with the February 14 order. . . . As a result, large and small third-party suppliers remain exposed to the risk of non-payment, contrary to the plain intent of the order," the companies said in their request, filed Thursday.

The ISO's intransigence "further undermines the increasingly fragile California (power) market," the companies charged.

A spokesman for the ISO could not be reached for comment. But, in the past, ISO officials have provided a starkly different interpretation of the FERC order, saying it affirmed their authority to order the emergency power supplies.