SACRAMENTO – The state Public Utilities Commission issued a report yesterday suggesting that California suffered blackouts during the energy crisis last year because generators withheld power to drive up prices.
The commission report, which angered generators, said all blackouts in Southern California and most in Northern California could have been avoided if unused capacity at California power plants had been tapped.
At the time, said a PUC official, generators and others blamed the power shortage on the failure of California to build enough power plants to keep pace with demand and a drought that cut Northwest hydroelectric exports.
"This report shows that those excuses were simply untrue," said Gary Cohen, PUC general counsel. "There was enough capacity to avoid almost all of the blackouts."
A spokesman for generators, complaining that the firms were given no chance to review and respond to the report, said he believes the PUC is attempting to influence new power-market rules being designed by federal regulators.
"Putting this as crassly as possible, people don't make money in blackouts," said Jan Smutny-Jones of the Independent Energy Producers. "The prices were already high. So if you could run, there was absolutely no benefit, using their theory, of withholding power."
The PUC president, Loretta Lynch, presented the report to a state Senate committee chaired by Sen. Joseph Dunn, D-Anaheim, that has been investigating price manipulation in the wholesale power market.
Lynch did not directly accuse the generators of deliberately withholding power. She said thousands of hours of conversations between the grid operator and the generators have not been examined.
But when asked by Dunn to speculate about why generators withheld power, Cohen said "because they thought by withholding capacity from the market, they would drive prices up."
The PUC report listed some possible reasons for failure to generate at full capacity: The grid operator may not have used all bids, the generator may not have followed instructions, and local power lines may have been full.
"None of these reasons provide a justification for the generators' failure to bid in all available power on a blackout or service interruption day," the PUC report said.
The report analyzed the production of plants purchased from California utilities, under a failed deregulation plan, by five out-of-state generators: Duke, Dynegy, Mirant, Reliant and AES/Williams.
The focus was on 38 days from November 2000 to May 2001 when there were service interruptions, mostly for businesses with low-cost contracts requiring them to cut power when there is a shortage.
But the period also includes seven days last year when blackouts hit business and residential customers, disrupting commerce and compromising public safety.
The report said that even when all of the generators' claims of mechanical outages and out-of-state sales are accepted as valid, the power plants on average had available but untapped capacity averaging 37 percent to 46 percent.
If the five generators had operated at full capacity, said the report, California could have avoided:
All four days of Southern California blackouts.
65 percent of Northern California blackout hours.
81 percent of Northern service interruption hours.
51 percent of Southern interruption hours.
Importantly, the report does not conclude that any of the blackouts or service interruptions were unavoidable.
The generators said their response was limited by the failure of the PUC to give them a chance to respond as the report was being prepared, a procedure often used in critical audits by government agencies.
Smutny-Jones said some of what the PUC report regards as unused capacity may have been reserves needed for long-term contracts. He said the PUC report also may be using outdated capacity figures for some plants.
"The average age of these plants is over 36 years old," Smutny-Jones said. "Despite their age, California's power plants ran 88 percent harder in 2001 than they did in 1999, and some increased output as much as 206 percent."
Duke, which operates plants at Chula Vista and Morro Bay, said the PUC report contains "blatantly false and misleading statements," including a claim that Duke could have provided more power on three days last May.
A Duke spokesman, Patrick Mullen, said the potential additional power from Duke plants cited by the PUC was under the control of the grid operator, the Independent System Operator.
A spokesman said Mirant received a letter of praise from the ISO for using its credit to help the state buy power in January of last year and avoid blackouts.
Patrick Dorinson said Mirant's plants, which are all in the San Francisco Bay area, have received 108 visits since January 2001 from state inspectors working on a report on outages that has not been issued.
"If indeed there are outages that are being questioned," said Dorinson, "I think it's only fair that that report come out."
