Williams right to sell at market prices assailed by California agencies

By Ann de Rouffignac
OGJ Online

HOUSTON, Apr. 5, 2001—Already under fire for allegedly manipulating the California electricity market, Williams’s right to sell power at market prices in California is under challenge by state agencies and utilities.

The company said it will respond fully to support continuation of its authority to charge market-based rates.

Southern California Edison Co., Pacific Gas & Electric Co., the California Independent System Operator (ISO), the California Public Utilities Commission (PUC), and the California Electricity Oversight Board opposed Williams’s petition filed with the Federal Energy Regulatory Commission to continue selling power at market rates.

Agency rules require its renewal every 3 years. The state agencies maintain Williams should be barred from selling power at market rates not only in California but throughout the Western Systems Coordinating Council (WSCC), a region that includes Oregon, Utah, Arizona, Colorado, Wyoming, Nevada, Idaho, and part of New Mexico and Montana.

“Williams has failed to provide any meaningful data or analysis to carry its burden of demonstrating that it does not have market power. Under existing FERC decisions and federal law, Williams cannot sell power at market based rates,” the PUC argued in its filing.

The PUC disputed Williams’s alleged contention that a 3-year-old FERC finding Williams did not have market power is sufficient for renewal. Williams said it markets about 10% of the 40,000 MW of the electric generation located in California. Most of the power is sold under long-term contracts.

“This ludicrous. Williams has not even bothered to file a Generation Market Dominance analysis. Such an analysis is a required element of obtaining market-based rate authority,” the PUC filing stated.

Williams responded the intervention in such a routine matter is “opportunistic and fundamentally flawed. In this highly emotional environment, we understand the growing temptation to find fault outside of one’s own backyard,” said Steve Malcolm, Williams executive vice-president.

Williams also is defending itself in a case involving the alleged exercise of market power. On March 14, FERC accused units of Williams and AES Corp. of withholding electricity from two California power plants during April-May 2000 and running more profitable plants instead.

The agency ordered Williams Energy Marketing & Trading Co. and AES Southland to explain why they shouldn’t return $10 million in profits from the alleged scheme to withhold power from units designated reliability must-run (RMR) plants.

Williams said it is confident once all the facts are on the table, it will be clear “Williams conducts business legally, within the terms of our contracts and tariff obligations.”

Tuesday Williams upped its 2001 earnings estimate to $1.75-$1.95/share from its original estimate of $1.60-$1.80/share. The revision is driven by the ongoing strength of its energy marketing and trading segment fueled by high level of pricing and volatility in the national natural gas and power market, according to a recent report by UBS Warburg LLC in New York.

Separately, legislation introduced Wednesday in the California State Assembly would impose a “windfall profits tax” on electric power generation companies. While the exact percentage hasn’t been laid out, the tax would be levied against generators’ gross receipts on the sale of power in California.

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