California officials say wholesalers overcharged for electricity

Friday, March 2nd 2001, 12:00 am

By: News On 6

SACRAMENTO, Calif. (AP) _ California was overcharged $555 million by electricity wholesalers when it was desperately scrounging for power to keep the lights on, claim state officials who want the money back.

Though they didn't go so far as to say price gouging was involved, operators of California's power grid said in a report released Thursday the amount paid to suppliers in December and January was unreasonable.

The Independent System Operator made the last-minute power purchases on behalf of the state's two largest utilities to avoid blackouts.

Representatives of the state's major power suppliers denied any wrongdoing, saying high costs were justified by the precarious financial condition of Southern California Edison and Pacific Gas and Electric.

``There is considerable risk of selling to a party where there is a high probability that they will not pay their bill. That uncertainty contributes to high prices in the California market,'' said Karen Denne, a spokeswoman for Houston-based Enron Corp., one of the state's largest energy suppliers.

SoCal Edison and PG&E say they have lost $13 billion since last year because of high wholesale electricity costs. Energy wholesalers have been reluctant to provide power to them, expressing concerns they'll never pay for it.

To determine if wholesalers overcharged, ISO officials said they estimated reasonable costs for each power plant involved, then asked their owners to provide further information to justify the prices they charged.

That information was never provided, said Anjali Sheffrin, the ISO's director of market analysis.

``We're not saying that all generators are overcharging ... but we want more information,'' Sheffrin said.

Federal officials have 60 days to examine the wholesalers' explanations for the costs and, if not satisfied, can order refunds.

The ISO estimates it paid $240 million more than it should have for last-minute power purchases in December and $315 million in excess in January.

The report was released as things appeared to be looking up for California on the energy front, at least temporarily.

The ISO imported enough power Thursday to call off a Stage 2 alert declared a day earlier when four plants around the West shut down unexpectedly, cutting state reserves to around 5 percent. The ISO warned, however, the power situation remained ``dynamic and subject to change.''

Plant shutdowns for maintenance have been among key factors in California's daily power scrounge, along with high wholesale prices, high demand and a tight regional electricity supply.

Since early January, the state has been buying about one-third of the power PG&E and Edison customers use.

Gov. Gray Davis' administration has committed $2.7 billion _ about $45 million a day _ for power purchases. That will be repaid when the state issues an estimated $10 billion in revenue bonds in May approved for cheaper, long-term power contracts.