I think we're about to see a lot of these articles. CA pushed it to far, and it's about to due a 180 and backfire on the morons for blaming everyone in the world except themselves. If I were FERC, I would not give them one cent. I think a lot of investors who were sitting on the sidelines due to CA, will now start to invest sector.
By MARK GOLDEN
A Dow Jones Newswires Column
NEW YORK -- California public authorities lost all credibility this week when they
blamed the 2000-2001 energy crisis on almost every power company in the western
U.S. - except California's two main investor-owned utilities.
After the California Public Utilities Commission, the state's attorney general, Southern
California Edison and Pacific Gas & Electric got the companies that sold power to the
state during the energy crisis to turn over some 200 million pages of documents, they
accused 70 out of some 75 California market participants of manipulating the market.
Gov. Gray Davis, in a press conference on Monday, unveiled "an industrywide
pattern of cheating and stealing from California ratepayers. More than a pattern, it
was an epidemic."
"Essentially the whole market was involved," according to Erik Saltmarsh, chief
counsel for the state's Electricity Oversight Board.
The Federal Energy Regulatory Commission plans to make the company-specific
evidence public later this month. Based on what state authorities have said publicly
and interviews with representatives of the companies, most of the evidence seems to
be a rehash of some bad behavior by Enron Corp. (ENRNQ) and Reliant Resources
(RRI) already made public.
"I haven't heard of anything new and horrible, but never say never," said Gary
Ackerman, executive director of the Western Power Trading Forum, a
power-traders' industry group.
Any seller that disclosed egregious behavior to the state of California likely would
have quickly told the FERC as well, as Reliant did in December, and it would already
be public, Ackerman figures.
What's new is that the state is now lashing out at tiny California municipal utilities like
those in Glendale, Vernon and Azusa.
Maybe It's The System
As the industry points out, if everyone acted the same way, then maybe the blame
belongs to the system that the CPUC and state's utilities designed. Sellers probably
responded rationally within the rules of California's market to an imbalance of supply
and demand. The few instances of rule-breaking should be punished, as they have
been, but those infractions accounted for a miniscule amount of California's problem.
"At some point, you just end up looking a little silly when you blame everybody but
yourself," said Thomas McAndrew, former head of energy trading for Calpine Corp.
(CPN), which was an insignificant power seller in the state's spot markets at the time
and isn't among the accused.
It's odd that the state specifically cleared Edison International's (EIX) Southern
California Edison and PG&E Corp.'s (PCG) Pacific Gas & Electric, both of which
worked with the state utilities commission on the investigation. Together, the two
utilities accounted for about 80% of the demand side of the California market and
30% of supply.
Plus, Edison's attorneys drafted the state's disastrous deregulation legislation, and
Edison basically dictated implementation of that legislation at the Public Utilities
Commission, the Independent System Operator and the California Power Exchange.
But state authorities destroyed any remaining appearance of fairness when PG&E's
and Edison's unregulated energy trading subsidiaries, both of which were very
involved in the California market, didn't make Monday's list of the accused.
"If FERC decides to lift the protective order, we will be able to present the clearest
picture yet of why the California energy crisis occurred," Edison International
Chairman and Chief Executive John Bryson said Monday in a press release.
Edison's taking such a public role in the accusations left many of the accused appalled.
"Having John Bryson play Eddie Haskell - 'Gee, Mr. Cleaver, I had nothing to do
with it' - is a bit hard to take," said Jan Smutny-Jones, executive director of the
Independent Energy Producers Association. "I think he stepped over the line."
Other Guilty Parties
During the past 100 days of discovery, the sellers also obtained the right to request
information from the utilities on their role in the crisis. Most of what they found will be
made public, too.
"After we see what came out of the sellers' discovery, I think the number of parties
blamed will increase from 70 by at least two," said Smutny-Jones, who was chairman
of the ISO at the time of the crisis.
There's also no question that the CPUC's refusal to let the utilities buy power supplies
months or years in advance turned what should have been a small problem into a
never-ending fight over tens of billions of dollars.
Last week, power prices in Texas soared to $990 a megawatt-hour, about four times
the California average during the crisis, but nobody seemed to care. Why? Because
Texas utilities buy only a small amount of their supplies on the volatile spot market.
The CPUC required California utilities to buy all their electricity there.
So California authorities insist FERC should break the long-term contracts signed in
2001 and raise the refund on spot purchases made during the crisis to a total of some
$7.5 billion from the $1.8 billion that a FERC judge recommended. How do they get
this figure? By insisting that all utilities throughout the West and into Canada are
obliged to offer all their power to California every hour of every day at marginal cost,
and that they failed to do so. The $7.5 billion refund is based on where prices would
have been if all western utilities and Canada had, in fact, lived to serve California.
Well, Canadians don't live to serve California, and the presumably fine people of
Azusa don't live to serve Southern California Edison. It's hard to believe that FERC,
in a decision expected later this month, will find otherwise.
But, hey, if Davis' unveiling of a vast conspiracy can distract attention for a few days
from California's $34 billion budget deficit and a recall petition, who can blame him?
-By Mark Golden, Dow Jones Newswires; 201-938-4604; mark.golden@dowjones |
