Regulators blame mechanical wear for off-line California plants

HOUSTON, Feb. 2, 2001—Federal regulators who inspected out-of-service California electric plants did not find any evidence the audited companies scheduled maintenance or outages to influence prices, says a report released Friday.

The staff of the Federal Energy Regulatory Commission (FERC) reviewed about 60% of December outages after questions were raised about the high number of plants taken out-of-service in the midst of continuing threats of rolling blackouts, complaints about high prices, and fear the state’s investor-owned utilities would not be able to pay their bills.

Rather than manipulation, the regulators said the audit determined the outages occurred at generating plants that were 30-40 years old which were being operated at much higher rates than in previous years. The report attributed most of the problems to mechanical wear, including tube leaks and casing problems, turbine seal leaks and turbine blade wear, value failure, pump, and pump motor failures.

Rather than deliberately keeping the plants out of service, auditors said the owners appeared to have taken whatever steps necessary to put the units back in service as soon as possible “by accelerating maintenance and incurring additional expenses.” Moreover, inspectors said the outages and price movements didn’t necessarily correlate.

FERC auditors found Southern Energy Inc., now Mirant Corp., continued to run plants with boiler tube leaks at reduced capacity during the period. The company told inspectors units are taken out of service, if leaks become severe enough to create an environmental or safety hazard.

With the generating plants running hard, maintenance needs and costs have also risen. At Reliant Energy Inc.’s Coolwater plant, auditors said maintenance costs rose to $23.1 million in 2000, up from $1.2 million in 1999, and $1 million in 1998.

“This confirms what we’ve been saying from the very start—that the power producers have been working around-the-clock to help keep the lights on in California,” said Jan Smutny-Jones, executive director of the California Independent Energy Producers.

“Hopefully, today’s FERC report will quiet those who have tried to blame the producers for the crisis, when in fact we have been and continue to be an important part of the solution to California’s energy woes.”

He noted member companies have invested billions of dollars buying, modernizing, and building power plants in California, and are preparing to spend billions more to ensure that California can keep pace with the growing demand for electricity.