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FERC investigation into withholding of power from California markets clears many companies


Aug. 6, 2003 — The Federal Energy Regulatory Commission (FERC) has cleared about 100 energy companies and utilities in its ongoing investigation of possible physical withholding of power from the California market.

The “Final Report on Price Manipulation in Western Markets,” issued in March, 2003, in Docket No. PA02-2-000 (Final Report), suggested there was a significant possibility of physical withholding of electric generation from the California market.

At the same time the Final Report was issued, FERC asked its staff to conduct an investigation into the existence of any such physical withholding of power from California.

The staff in its investigation was trying to determine whether generators located in California had physically withheld energy from the California market to affect market prices during the time period from May 1, 2000, to June 30, 2001.

At a commission meeting June 25, the staff indicated it would tell the organizations originally named in this investigation whether they would be subject to further investigation. This report, released Aug. 1, serves as that notification.

The organizations listed at the bottom of this article will not be further investigated in the instant matter unless information comes to light that would require further analyses of their actions, FERC said.

The entities who, as part of this investigation, received data requests and requests for admissions and who aren’t included in the list are still under investigation. FERC was careful to point out that this doesn’t mean its staff has found evidence of physical withholding, but that is isn’t finished with its review yet.

Discussion

In determining the scope of this investigation, the staff reviewed 129 entities that potentially control (or controlled) generation in California and sell (or sold) energy into the California market.

The staff then sent data requests and requests for admissions to about 100 of those, following the criteria described below. FERC staff also asked for an admission or denial, under oath, of whether the organization had engaged in any physical withholding of power during the relevant period.

The data requests asked for a description of the actions by each entity to find out whether any physical withholding of power had occurred, or if no review was conducted, the reasons why. The data requests also asked for a statement as to preservation of electronic record media which may have been generated with regard to such transactions.

Among the entities reviewed, including those served with data requests, were entities that own or control generating facilities in California that were not in operation during the relevant time period. Other entities reviewed made no sales into the market during this period. Those entities, all of whom are included in the list below, will not be subject to further investigation.

The staff also concluded that organizations with less than 60 MW of total capacity should not be the focus of this investigation. These entities controlled an amount of capacity that was small relative to the size of the California market.

According to data available on the California Energy Commission’s web site, peak monthly demand reached a high in the relevant period of 43,509 MW in August 2000 and a low of 29,567 MW in February 2001. Withholding a portion of 60 MW of capacity from markets of this size would be unlikely to materially affect prices. Therefore, there would be no incentive to do so, the staff assumed.

These entities are included in the list below.

The staff also concluded that entities whose entire available capacity was committed through long-term, firm contracts generally should not be further investigated. If an entity is under contract to make all its capacity available through firm sales to another entity, the selling entity is required to have that capacity available at any time for sale to the buying entity.

The selling entity may not use any of that capacity for other purposes or other sales, unless explicitly provided for by the contract. In this instance, the selling entity does not have the ability to offer sales into the market, and as such, can not withhold capacity to drive up prices.

Therefore, the organizations that FERC put in this category are also in the list below and will not be subject to further investigation, barring additional information or evidence.

Certain other investor-owned utilities and municipal energy providers were net buyers during the relevant period, which would indicate that they neither had the opportunity nor the incentive to withhold capacity from the market. These entities did not have sufficient generation of their own to serve their native load, and frequently relied on the real-time market for power to serve this load.

Nevertheless, the staff reviewed the organizations in this category, and in most cases made contact with them to further understand their situation and trading practices. Those entities that staff is satisfied had neither the opportunity nor the incentive to withhold capacity are included in the list.

In addition to those entities listed, Duke Energy North America, LLC, (Duke) will not be subject to further investigation, unless information comes to light that would require additional analysis.

Duke is a market participant with substantial generation resources in California; specifically, Duke owns and controls over 3,000 MW of generation capacity in California. The underlying reasons for any outages at facilities operated by Duke during the relevant period have been adequately explained in Duke’s response to staff’s data request.

Conclusion

FERC determined that there is no credible evidence, at this time, to support further investigation of the entities listed below. However, should any such evidence come to light, FERC said its staff will pursue investigation of that evidence at that time.

COMPANIES NOT UNDER INVESTIGATION FOR PHYSICAL WITHHOLDING

Entities with less than 60 MW total capacity:

Aera Energy (Alcantar & Kahl)
Air Products & Chemicals Inc.
Alliance Power Inc.
Bay Environmental Management
Berry Petroleum Company
City of Anaheim
City of Sunnyvale
Conoco Philips Company
County Sanitation District of Los Angeles Ct.
CP Kelco U.S. Inc.
Delano Energy Company
East Bay Municipal Utility District
Energy 2001, Inc.
Foster Wheeler Martinez, Inc.
Fresno Cogeneration Partners LP
Gas Recovery Systems Inc.
GPU Solar Inc.
Green Power Partners, LLC
IMC Chemicals, Inc.
Jefferson Smurfit Container
Los Alamos Energy LLC
Madera Power LLC
Martinez Refining Company
Metropolitan Water District of Southern California
Monterey Regional Waste Management District
Mt. Poso Cogeneration Company
Phoenix Wind Power LLC
Point Arguello Pipeline Company
Ridgewood Renewable Power
Ripon Cogeneration Inc.
Riverside County WMD
Samoa Pacific Cellulose LLC
San Joaquin Cogen Ltd.
Sea West Wind Power Inc.
Sempra Energy
Soledad Energy Inc. (Yankee Energy Inc.)
Sunlaw Energy Partners I, LP
Sunrise Power Company
Utica Power Authority
Wheelabrator Technologies, Inc.

Entities with no facilities or with facilities that were not operational during the relevant period:

BP Energy Company
California Portland Cement Company
CalPeak Power, LLC
Cannon Power Corp.
Colton Power LP
Dinuba Energy Inc.
El Dorado Irrigation District
Elk Hills Power LLC
Energy Transfer – Hanover Ventures
GWF Energy LLC
GWF Power System Company Inc.
GWF Power System LP
High Desert Power Project LLC
RAMCO Inc.
Sempra Energy Trading Corp.
Wellhead Power Gates
Whitewater HillWind Partners
Wildflower Energy LLP

Entities that had no control over marketing or sales of generation:

Mountain View Power Company

Entities with all power committed through long-term contracts during the relevant period:

Crockett Cogeneration
Recot, Inc., dba Frito-Lay Inc.
Midway Sunset Cogeneration Company
Millennium Energy LLC
NEO Corporation
Nuevo Energy Company
Sierra Pacific Industries
Tri-Dam Project
Watson Cogeneration Company

Entities that made no sales into the California market during the relevant period:

Applied Energy Inc.
Cabazon Wind Partners
CE Generation, LLC
City of Redding
City of Riverside
Edison Mission Energy
FDX/Houa Station
FPB Cogeneration Partners, L.P.
Green Ridge Power LLC
Imperial Irrigation District
Kern River Cogeneration Company
Kings River Conservation District
Luz Solar Partners, Ltd. IX
Mojave 16/17/18, LLC
Nevada Irrigation District
Oroville-Wyandotte Irrigation District
Placer County Water Agency
San Francisco, City & County of
Shell Oil Company
Shell Oil Products, U.S.
Shell Wind Energy
Silicon Valley Power
Sycamore Cogeneration
Termoelectria de Mexicali
Turlock Irrigation District
U.S. Bureau of Reclamation
Union Oil Company of California
Zond Systems, Inc.

Investor-Owned Utility and Municipal Net Purchasers:

Sacramento Municipal Utility District
City of Burbank
City of Glendale
PacifiCorp

FERC’s web address is http://www.ferc.gov.