In an affidavit filed at FERC last week, Reliant Energy Power Generation and Reliant Energy Services acknowledged that they overscheduled small amounts of energy to delivery points in California “on some occasions” during the critical 2000-2001 period, but they said this practice was both needed and welcomed by the California Independent System Operator (Cal-ISO).

“A potentially confusing element of the Enron memoranda…is the suggestion that the power supplied in association with overscheduled load points was ‘excess,’ in the sense that it was unnecessary, or that it was not needed or wanted by the California ISO and load-serving entities [utilities] in the operation of the California electrical system. Experts understand that this is a substantive misconception,” the Reliant companies said in a seven-page response to FERC questions about its trading strategies in western markets [PA02-2].

Because this affidavit will be reviewed by a “broad lay audience,” the Reliant affiliates said, “we wish to make it clear that neither Reliant nor any other participant in the unscheduled energy market in California was ever paid for ‘excess generation.'” Suppliers “were paid only for generation actually delivered to and used by consumers in California,” they noted, adding that to be paid any more “would be impossible” under the Cal-ISO tariff.

They estimated that they scheduled about 149,849 MWh of excess load during 2000 and 2001. This represented less than 1% of the total generation that Reliant produced in California during that period. The Reliant companies are affiliates of Reliant Resources, which is at the center of the controversy involving bogus “wash” trading transactions.

“This type of load scheduling was encouraged and permitted by the market rules, and enabled Reliant to 1) increase available supply to the California market; 2) facilitate the forward commitment of that supply when load-serving entities [utilities] failed to do so; 3) reduce volatility in real-time prices; and 4) mitigate congestion within California,” they noted. “These activities were known to and accepted by the Cal-ISO and [California Power Exchange], and did not have the effect of inflating real-time costs for California because Reliant provided supply as a price taker.” Price takers could not set prices, but rather accepted whatever price was set through California’s market system, the Reliant affiliates said.

Reliant was one of nearly 150 energy suppliers to comply last Wednesday with the Commission’s May 8 directive to either “admit or deny” that they engaged in Enron-style strategies to manipulate energy prices in California and other western markets. Enron’s apparent gaming practices — such as Death Star, Fat Boy and Ricochet — were identified in three internal memos that Enron turned over to FERC and the Department of Justice earlier this month (see NGI, May 13 ).

Reliant said it “did not develop or utilize any models or forecasts that built in underscheduling projections…in the forward market.” Rather, when submitting bids to supply the California market, it “took into account publicly available data, including Cal-ISO load forecasts and day-ahead market purchases, which…confirmed the consistent pattern of underscheduling” by California utilities.

This underscheduling by the utilities lead to a greater amount of power being scheduled in the spot markets, which resulted in higher prices and increased volatility in the market, and created the so-called phantom congestion that was identified in the Enron memos, the companies said. Phantom congestion simply meant there was the appearance that California’s Path 15 would be congested, they noted, “but the load and supply actually balanced when full load appeared in real time.”

During the two-year period, the Reliant companies said, they did not purchase energy from, or sell energy to, any Enron company, including Portland General Electric, as part of a “Ricochet” or megawatt-laundering transaction. Under this strategy, Enron allegedly purchased price-capped power from the Cal-PX, sold it out of state, and then repurchased it to sell at a higher price within California.

Moreover, they denied ever selling power purchased from the Cal-PX to out-of-state markets. Reliant’s exports were made up of non-Cal-PX bilateral purchases and the company’s own generation, according to the affiliates.

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