Union Tribune

August 2, 2003

Utilities cleared of withholding energy
FERC drops Duke, Sempra from probe


WASHINGTON Federal regulators yesterday cleared Duke Energy of allegations that it withheld electricity from its power plants to drive up prices during California's power crisis.

In a preliminary report on an investigation of power plant shutdowns during the 2000-01 crisis, investigators for the Federal Energy Regulatory Commission also dropped about 100 other companies from the probe, including San Diego's Sempra Energy.

Most of them, including Sempra, didn't generate enough power to measurably affect the market or didn't make sales in California during the 14 months under scrutiny May 1, 2000 to June 30, 2001.

FERC staff said it was continuing to investigate an unspecified number of other generators, whose identities were withheld.

However, the report said, "this should not be interpreted as commission staff having found conclusive evidence of physical withholding (of power) at this time, but that staff has not concluded its review of these entities."

FERC also is investigating the trading practices of many companies, including Sempra, during the crisis. State officials allege traders used a variety of schemes to drive up the cost of power during the crisis.

Duke came under fire in 2001 for allegedly operating its Chula Vista plant in a manner designed to drive up electricity prices. The Charlotte, N.C.-based company denied the allegations, which were made by several workers.

"The underlying reasons for any outages at facilities operated by Duke . . . have been adequately explained in Duke's response to staff's data request," the FERC report said.

FERC launched its probe in March, after concluding a separate yearlong investigation that uncovered widespread price manipulation during the California crisis. Wholesale electricity and natural gas prices soared during the crisis, leading to rolling blackouts and inflicting billions of dollars in damage on the state's economy.

California officials have accused several major generators including Duke, Mirant, Reliant Energy, Dynegy and AES/Williams of idling their plants to create shortages.

FERC staff has gathered data from the companies and asked for sworn admissions or denials of whether they withheld power.

Duke "will not be subject to further investigation, unless information comes to light that would require additional analysis," the FERC report said.

A spokesman for the company, Pat Mullen, said: "Obviously, we're pleased to see that recognition. As we've said all along, when the facts come out, they will show we acted appropriately in the market."

Erik Saltmarsh, general counsel for the California Electricity Oversight Board, said FERC appeared to be defining the scope of its investigation and he did not question the staff's conclusions. But he said FERC should release the data from Duke.

"While I can't tell you that the conclusion with respect to Duke is outlandish, since it is based on Duke's responses to FERC data requests, I would like to read those responses."

"I would hope that FERC was willing to publish the explanations. If they're adequate, then we'll all know," he added.

Reliant and Williams paid fines to settle earlier allegations they withheld power from plants in Long Beach and elsewhere in California in 2000.

FERC released transcripts of telephone conversations in which power traders explicitly discussed shutting down plants to boost prices, but the companies admitted no wrongdoing.

Separately, a state regulator said yesterday that FERC's segmented proceedings and unrealistic time frames are frustrating the state's effort to obtain tens of billions of dollars in refunds from the crisis.

"FERC has bent over backwards to let energy providers get more thanthey deserve and ensure that California gets less than it deserves," said Loretta Lynch, a member and former president of the California Public Utilities Commission.

The state's chances for refunds will improve when it completes the proceedings at FERC and can make its case in federal court, Lynch said.

Staff writer Craig D. Rose contributed to this report.