Consumer advocates call power shortage a hoax; ISO disagrees

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The Associated Press

On the anniversary of last year’s rolling blackouts, consumer advocates, energy suppliers and state power officials disagreed on the causes of the energy shortage – or if a shortage even existed.

A report released Thursday by the Foundation for Taxpayer and Consumer Rights called the energy shortage a hoax manufactured by power suppliers who wanted to drive up prices.

The report came on the one-year anniversary of the first of six days of rolling blackouts ordered in California last year.

An analysis of prices and supply and demand data led foundation president Harvey Rosenfield to conclude “there never was an energy shortage,” he said. “A handful of energy companies manipulated supplies to drive up prices and reap windfall profits.”

The Independent System Operator, which oversees most of the state’s power grid, has more than 47,000 megawatts available in its territory, Rosenfield said, but the state’s demand, especially on the days when the ISO ordered blackouts, never topped 40,000 megawatts.

ISO spokesman Gregg Fishman agreed that some power companies likely manipulated the market but stressed “there was a shortage that was very real.”

The ISO operates much of California’s electricity grid and the spot market where last minute energy to balance the grid is bought.

Last year’s shortage came from years of growth in California and the West, less power produced by hydroelectric plants in the drought-stricken Northwest and a large number of power plants that were off-line for maintenance.

Fishman said several natural gas-fired plants that operated heavily during 2000 were legitimately unavailable in early 2001. Any ability to manipulate the market “was based at least partly on a real shortage.”

Jan Smutny-Jones, executive director of the Independent Energy Producers, called the foundation’s charges “fundamentally untrue.”

Many power plants were off-line for repairs because most are over 30 years old, he said. The problems last year stemmed from fundamental flaws in the state’s regulation, Smutny-Jones said, including regulators’ failure to let the utilities arrange long-term contracts for power.

But Rosenfield said the extreme electricity shortages that led to blackouts were timed to coincide with political events at the panicked state Capitol.

The first blackouts on Jan. 17 and 18, 2001, came as state lawmakers considered whether to allot $400 million of state funds to pay for energy utilities could no longer afford, Rosenfield said.

While wholesale prices hit all-time highs, the utilities incurred billions in debts because they a 1996 deregulation law capped the retail rates. Wall Street downgraded the utilities’ credit and wholesalers were reluctant to sell to them.

It came to a head just before noon on Jan. 17, when grid officials said they couldn’t find enough power to meet demand and ordered the rolling blackouts, cutting power to hospitals, ATMs, schools, homes and businesses and affecting about half a million customers in northern and central California.

“On Jan. 19, Gov. Davis signed the bill and the blackouts ended, even though we saw higher demand for electricity on either side of the blackouts,” Rosenfield said.

Consumer Watchdog
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