Feds say power plant shutdowns not plot to boost prices

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The San Diego Union-Tribune

Federal regulators say California’s record run of power plant shutdowns was legitimate and not an attempt to raise prices.

The Federal Energy Regulatory Commission study blamed most of the outages on an effort to squeeze ever more electricity out of the state’s 30- to 40-year-old plants. The result has been a growing litany of breakdowns, including boiler leaks, turbine leaks and pump motor failures, as well as routine maintenance needs, said the FERC study.

The report — based on phone interviews, three plant visits and two visits to corporate offices — was criticized by consumer advocates as superficial and a whitewash.

Power plant shutdowns have become an issue as California wrestles with an inability to meet its winter electricity needs, when many assumed there would be more than enough generation capacity.

The state’s power grid manager — the Independent System Operator — says the state has about 40,000 megawatts of generating capacity and demand in recent weeks has hovered between 28,000 and 32,000 megawatts.

But persistent shortages have eroded that hefty margin. Since early December, plant operators have reported from 7,000 to 15,000 megawatts of generating capacity shut down because of breakdowns or planned maintenance.

The shutdowns — as well as transmission problems — have kept the state scrambling for supply and paying its highest power prices yet.

FERC staffers reported no misconduct by suppliers in a market that the commission earlier declared has produced “unjust and unreasonable prices.”

At certain times, the report found, the level of outages declined as power prices in California rose, evidence of what FERC said was the effort of power plant owners to cash in on high prices.

The report also found that power company trading desks — which speculate on the price of power — play a large role in deciding if plants will run.

In one example, FERC said, traders for Reliant Energy opted to keep a plant running despite a serious problem that regulators said could have closed it for months. Critics say the converse may also be true — with plants kept out of service for business reasons. FERC cited no such examples.

The report covered about 60 percent of the outages in December and included visits to plants owned by Reliant and a partnership of NRG and Dynegy Inc.

Among the plants studied was the Carlsbad plant formerly owned by SDG&E, but all the plants visited are in the Los Angeles area.

“We’re very gratified by the FERC staff report because it essentially upholds everything that we have been saying about plant operations for the last six to eight months,” said Reliant spokesman Richard Wheatley.

Consumer advocates took issue with the report, calling it a “whitewash by the deregulation ideologues” at the commission and urging an investigation by prosecutors into whether power generators held back the supply to drive up prices.

“The obvious question is, what is different between this year and last year?” said Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights.

“When the state is using two-thirds of its total capacity, these power plants are falling off line at coincidentally the same time, provoking price increases and power outages.”

Michael Florio, an attorney with The Utility Reform Network and an ISO board member, said the FERC study leaves many questions unanswered.

“I would not expect them to find massive cases of power generators withholding power from the markets” to increase prices, he said.

Instead, he said, market manipulation would involve more subtle withholding and bidding strategies, which he continues to believe are likely to have taken place.

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