Duke Energy and Mirant last week mounted a counterattack against a California Public Utilities Commission (CPUC) report concluding that their failure to produce or bid power during California’s energy crisis of 2000-2001 directly contributed to blackouts or service disruptions. Mirant called the report “inaccurate, misleading” and both generators said it shows a lack of understanding of basic power plant operations.

Details of the report were supplied by CPUC President Loretta Lynch last month in an appearance she made before a special state Senate committee investigating alleged wholesale energy market price manipulations during the period. Sufficient capacity was available, but not run, at merchant power plants in 2000-2001 to avoid blackouts and in most instances service interruptions, Lynch said.

The CPUC’s analysis of data from the state transmission grid operator, CAISO, and five generators, concludes that about 1,700 MW of capacity in total was available, but not generated. Based on operating data on Dynegy, Duke, Reliant, Mirant and Williams/AES, Lynch said the report found that each generator during the 38 days of blackouts or service interruptions to businesses from January through May 2001, had between 37% to 46% of its capacity unused (either for planned/unplanned maintenance or for unknown reasons).

Mirant sent a letter to California State Sen. Joseph Dunn last Thursday rebutting the CPUC report. Dunn serves as chairman of the special investigative committee that Lynch appeared before earlier this month.

Mirant said its evidence demonstrates that it “generated more power from its California plants over the course of the crisis than the previous owner had ever produced over the same period of time at any point since the plants were first built.” Mirant also provided detailed data designed to refute the allegations in the Lynch paper that charged Mirant withheld power on March 28 and May 10, 2001.

Mirant said that the report “ignores the fact” that all of Mirant’s power plants operated under “Reliability Must Run” contracts with the CAISO. Under these contracts, Mirant is required to run its available power plants under the direction of the CAISO in order to support the reliability of the electric system of California.

The generator also asserted that the report overstates the megawatts that can be produced by Mirant’s California power plants by 111 MW. Moreover, the report is “not a complete analysis,” Mirant went on to say. “Among other things, it does not contain the complete outage report promised by the CPUC verifying when and why plants were not producing power. And, it selectively addresses only 25% of the generation in the state, excluding investor-owned utilities, public power and small generators known as qualifying facilities.”

On the two dates that Mirant is accused of withholding power, March 28 and May 10, 2001, the report “ignores the fact that Mirant was dealing with major mechanical overhauls and breakdowns at its Contra Costa, Pittsburg and Portrero plants,” the supplier said. On March 28 and May 10, all generation under Mirant’s control in California was operating during the critical hours, Mirant said. The only available Mirant generation not running was under the control of the CAISO and being held in reserve by the CAISO.

“The Lynch paper ignores the fact that all of Mirant’s outages were either planned and approved by the CAISO and the CPUC far in advance of the outage date or were the result of mechanical breakdowns,” Mirant said. “And, the CPUC had inspectors at the Contra Costa, Pittsburg and Potrero plants during and after most outage periods, some of which lasted for several weeks and months.”

“Mirant’s data for March 28 and May 10, 2001 is verifiable and clear,” said Gary Morsches, a Mirant senior vice president. “We operated our facilities beyond the call of duty to keep the lights on in California and never shut down a plant or kept a unit out of service to drive up prices in the state. The Lynch paper’s conclusions to the contrary are unsubstantiated and unfounded.”

Mirant also made reference to a June 12 letter sent by J. Tom Baca, political director for Boilermakers Local 549, to Lynch. “In every instance we performed maintenance for Mirant, whether routine or extraordinary, we found that there was a real and legitimate need for the work to be performed,” Baca told Lynch. “Never did we witness any activity that would make our members suspicious that maintenance was either unneeded or a result of operator abuse.”

To validate the accuracy of its data and “further prove the errors” in the Lynch report, Mirant invited the CPUC to work with the generator and seek out a qualified independent third party to perform an inspection and review of Mirant’s data regarding generation at its California plants.

For its part, Duke Energy asserted that the report is chalk full of errors and faulty assumptions about how power plants operate and states that it has “consistently provided” available power to the CAISO in response to emergency requests.

Duke “vigorously rejects” the conclusions of the CPUC report, said Brent Bailey, a Duke senior vice president, in a Sept. 26 letter sent to Lynch. “While we cannot comment on the operations of other generators, I can say very strongly and without qualification that Duke Energy has consistently provided available generation to the CAISO in response to emergency requests,” wrote Bailey.

Bailey said that Duke has identified a number of omissions or errors in the report “that, if corrected, tell a very different story about Duke Energy’s operations in California.”

He said that the errors in the CPUC report fall into three areas: (i) ignoring the essential role of the CAISO in plant dispatch, (ii) using data that is wrong and (iii) an “obvious misunderstanding” of power plant fundamentals. “The seriousness of these errors undermines and discredits the report’s conclusions,” wrote Bailey. “For the conclusions to be right, the facts must be right as well. We call on you to correct the public record on this important matter.”

“Your report acknowledges this practice, says it cannot account for it, and therefore ignores it,” Bailey told Lynch. “However, in several cases in your report, the CPUC appears to conclude that Duke Energy withheld available generation when in fact the plant’s output was being directed by the CAISO.” Bailey emphasized the point that CAISO’s directing power output under AGC can be very significant. For example, during some of the hours on May 8, CAISO reduced the output from Duke Energy plants by over 600 MW, he said.

According to Bailey, the CPUC report assumes that if Duke did not bid power into the market, then the CAISO could not dispatch Duke’s units. “In fact, the CAISO has the authority to order production from in-state private generators, and did so on numerous occasions. Duke Energy has consistently provided available generation to the CAISO in response to emergency requests.”

Bailey said that his company has identified “serious flaws or errors” in the outage data upon which the CPUC report is based. By way of example, he said the report’s failure to account for Morro Bay Unit 3’s outage on May 8-10, 2001, caused the CPUC to overstate Duke Energy’s aggregate available capacity by 343 MW.

“The report also assumes that plants can generate at full power instantaneously whenever the CAISO calls on them for power,” wrote Bailey. “Such an assumption is contrary to the laws of physics.” He said that shut down natural gas-fired units generally require a 9-12 hour “warm up” period before they can be connected to the grid at even minimum power levels. “After that, units are constrained at the rate they can safely ramp up before generating at full power. There is no allowance for these necessary start-up/ramp-up modes in the CPUC report.”

More broadly, Bailey told Lynch that it is “impossible to ignore the undertone of doubt” throughout the CPUC report regarding the legitimacy of plant outages. He said that Duke Energy has provided to the CPUC thousands of pages of data documenting plant operations and maintenance. “And, your CPUC inspectors have conducted more than 80 separate CPUC inspections at our plants. To date, Duke Energy has received no indication that your inspectors have found anything other than appropriate plant operations.”

Bailey said that Duke Energy has “repeatedly requested that your reports be shared with us, and have gone so far as to file a request under the Public Open Records Act for that information. Unfortunately, the CPUC has continued to deny us access to this data. Duke Energy has a vested interest in safe and efficient plant performance. If there are concerns about our plant operations, we want to know about them.

“We have cooperated with the CPUC in its investigations and have made several unsuccessful attempts to meet with you, or CPUC staff, to discuss our California operations,” Bailey went on to say. “We are available to meet at your convenience for a full and detailed review of the facts regarding our performance. The facts must be right, or the conclusions will be wrong. In your report, you’ve got it wrong about Duke Energy on both counts. Again, in the public interest, let’s set the record straight.”

The CPUC report has also come under fire from the California Independent Energy Producers (IEP). The IEP believes the report mischaracterized the generators’ operations and asserts that the state never made an attempt to get input from the five companies targeted.

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