Contrary to the charges of price gouging in the California market, Duke Energy said Friday its average rates for wholesale power sales over the last 15 months were only $76/MWh, and in the first quarter of 2001 rose to only $136/MWh, both well below average spot market prices for the same periods.

“Clearly, by selling the vast majority of our electricity into the forward markets through long-term contracts we have demonstrated that low average prices can be achieved for California’s consumers,” said Duke Energy North America CEO Jim Donnell.

“The way for California to stabilize prices is to enter into long-term contracts at fixed prices. We continue to work with the California Department of Water Resources to negotiate long-term contracts to help the state avoid purchasing power on the volatile spot market. Just last July, we offered to sell 2,000 MW to the state at a fixed price of $50/MWh for five years. The state did not act upon our offer,” Donnell said.

Duke also reported that the highest price charged during first quarter 2001 was $3,880/MWh. That price was for less than 1/10 of 1% of the volume sold to California by the company in first quarter 2001 and reflected the significant credit risks associated with selling power through the California Independent System Operator (ISO) to Pacific Gas & Electric and Southern California Edison at that time.

“The few sales made at the highest price reflected the fact that the parties receiving the power were insolvent and would likely declare bankruptcy. In determining the price to charge, we took into account the likelihood that we would only be able to collect a fraction of the sales price if PG&E filed for bankruptcy protection. Obviously, our concerns were valid because on April 6 PG&E did file for bankruptcy protection and we still have not been paid,” Donnell said. “On March 26 we said that if we are paid, we will not seek to collect the portion of the price charged for the poor credit risk,” Donnell added.

Duke currently has under construction in the state a 1,060 MW plant and its new generation could grow to 1,500 MW. Its existing four California power plants generated 50% more electricity in 2000, providing 15.8 million MWh versus 9.5 million in 1999. The company supplies about 5% of the state’s electricity from plants with a total capacity of 3,351 MW.

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