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July - Duke Energy Employee Advocate

Deregulation - July, 2001

"Those who expect to reap the blessings of freedom must,
like men, undergo the fatigues of supporting it." - Thomas Paine

Destroying Public Scrutiny of Proposed Power Plants
Employee Advocate - - July 26, 2001

The San Jose Mercury News has reported that California may limit public opinion in reviewing new power plants. The California Energy Commission would then allow closed-door meetings between plant developers and regulators. Citizens could even be prevented from introducing evidence at proposed plant hearings!

That sounds like a plan that Duke Energy, and the other wheeler-dealers, had made to order. They just love back room meetings. There they would be unencumbered in making back-scratching deals with the “good ole boys.” Really, they would like to eliminate public opinion, employee opinion, the media, and those annoying laws. Then they could run things the way they really want them run. If the companies are successful in getting this fix in, the rest will be duck soup!

Documents Missing in Energy Investigation
The Orange County Register - By Kimberly Kindy - July 21, 2001

Orange County lawmaker Joe Dunn said Friday that critical documents sought in his investigation into possible price-fixing in the electricity market have been destroyed.

Dunn, D-Santa Ana, said he believes the documents would have proven that energy companies knew price gouging could result from the sale of key power plants to electricity producers.

The state senator said that other documents and testimony could still help him prove or disprove his suspicions about price fixing but that the destruction of documents was a setback.

Dunn is chairman of a Senate panel that is investigating possible price fixing and collusion in California's deregulated electricity market.

Dunn said the committee asked for the documents after they received a memorandum from the San Diego Port Authority -- which owns a power plant leased by Duke Energy -- that suggests the power producers that purchased a set of plants in San Diego would have market power, or the ability to drive up electricity prices. "There is deeply suspicious language in there," Dunn said of the memo. "It seems to be code language for market power."

The disputed documents -- which were created and destroyed by Morgan Stanley & Co. -- assessed the condition and value of power plants for San Diego Gas & Electric and for Pacific Gas & Electric. Morgan Stanley, which was hired by the two utilities, said that hundreds of documents have been given to Dunn and that some were destroyed years ago after the plants were sold as part of electric deregulation.

"No documents have been destroyed since the May 16 request was made by Dunn for documents," said Paul Patono, an attorney for Morgan Stanley.

The memorandum, which was obtained by The Register, refers to the "strategic location" of the plants along the grid.

Dunn said that is one of the references that makes him think they knew market power could be exercised and why he asked for all support documentation.

Duke spokesman Tom Williams said that is why his company was required to sign a "must-run" agreement with the state. The plants are located at strategic and critical locations along the state's electricity grid so Duke is required to run the plants on demand.

Any ability to exercise market power was blocked by this agreement, Williams said.

Dunn said that argument doesn't wash.

"They were designed to minimize market power, but they have not been successful," Dunn said. "That would be an incorrect argument."

Dunn said the destroyed documents include support materials -- electronic mail, notes, research documents -- in connection with the final report or memorandum that was created for the sale of each power plant for the two utilities.

Although Dunn and Morgan Stanley agreed that these documents were destroyed, the two sides disagree on the timeline.

Dunn said he believes they were intentionally destroyed to block his investigation. He said on at least two occasions he was told the documents he requested were still in existence, had been located and would be delivered to him. On Wednesday, however, Dunn said the story changed. He says this was the first time he had been told the documents had been destroyed.

Pantono, the attorney for Morgan Stanley, said he believes there has been some "confusion" between the company and Dunn's staff. "At the end of the project, they decided what they were going to keep and what they weren't going to keep, and those decisions were made years before the energy crisis and years before this committee existed," Pantono said

In a separate action, Dunn will ask the full Senate -- which is meeting today to deal with the energy crisis and budget -- to take action against Enron Corp. because it has refused to deliver documents to the committee. The sanctions could include $1,000 penalties that will double each day.

Deposing Energy Executives
Dow Jones - July 19, 2001

A California Senate committee investigating manipulation in the state's wholesale power market approved a measure late Thursday, authorizing the committee to depose the chief executives of major energy companies to provide insight into the companies' trading practices.

The Senate Select Committee to Investigate Market Manipulation voted 28-6 in favor of deposing some of the energy sector's most powerful chief executives.

The move comes a day after the committee held Reliant Energy Inc. and Enron Corp. in contempt for refusing to provide documents on its electricity trading and sales practices. The full Senate is expected to vote on the contempt charge and decide the punishment to impose.

Sen. Joe Dunn, D-Santa Ana, the committee chair, would have carte blanche to depose executives, such as Enron Chairman Ken Lay, who has been singled out by Attorney General Bill Lockyer for gouging consumers in the state. Representatives of the energy companies under investigation were not available for comment.

The committee has been investigating whether energy companies knowingly manipulated the state's wholesale electricity market to drive up prices and create artificial shortages.

It has yet to uncover a "smoking gun." But has secured the testimony of former Duke Energy power plant employees who told the committee that the company reduced output at a San Diego power plant during power emergencies to drive up power prices.

The state's Independent System Operator, however, conceded that it ordered the fluctuations in capacity at the power plant.

Moo Poo Power
San Diego Channel 10 News - July 22, 2001

Stung by high energy prices, California farmers may start milking their cows for more than just the white stuff.

They are increasingly eyeing the mountains of manure that the state's 1.5 million dairy cows produce as a source of energy to power their own farms or sell at a profit.

By turning to anaerobic digesters -- where lowly bacteria indulge their mighty appetites for manure and produce methane and fertilizer in the process -- farmers say they can cut water and air pollution and generate enough power to satisfy their own needs. Any excess can then be sold at a profit…

Davis Files Suit Over Attack Ads
San Diego Channel 10 News - July 20, 2001

Suit Seeks To Reveal Financial Supporters

Gov. Gray Davis filed a lawsuit Friday against those responsible the recent attack ads that have aired blaming him for California's energy crisis.

Davis' committee says that the group behind the ads, American Taxpayers Alliance, is hiding its financial supporters in violation of state disclosure laws.

"These guys don't have much of an argument, but they're entitled to make it. But we are entitled, once they make that argument, to know who funded it. Very simple, no attempt here to squelch the ads, we just want to know who paid for them," Davis attorney Jospeh Remcho said.

American Taxpayers Alliance is a non-profit group headed by Scott Reed, a Republican operative.

Reed has repeatedly refused to reveal financial supporters, and he is expected to argue that the ads don't fall under state disclosure laws because they deal with an issue and not a specific candidate.

Duke Energy Refusing to Make Key Data Public
L. A. Times - by CARL INGRAM - July 10, 2001

Senator says the energy generator needs to release documents that are crucial to the price-gouging probe. Firm says it's complying.

The chairman of a Senate committee probing suspected price gouging during the California energy crisis charged Monday that Duke Energy is refusing to allow him to make public information key to his investigation.

Sen. Joe Dunn (D-Santa Ana) said Duke has made the price bidding information from its Chula Vista plant available to committee members and staffers. But under a federal confidentiality rule, the data cannot be made public without Duke's consent.

The documents concern the Chula Vista plant, which former employees have alleged was ramped up and down to drive up power prices during three days in January. However, state records show that the agency overseeing the electricity grid ordered those gyrations to keep the power flowing throughout the state. Dunn said Duke's refusal thwarts the committee's investigation and efforts to enact possible remedial legislation because the confidential information cannot be shared with others in the Legislature or the public.

Dunn said Duke cited a rule of the Federal Energy Regulatory Commission that gives the company the authority to decide which records it makes public and which stay secret.

"The only one who can release the data is Duke. We agreed to be bound by what is provided in the FERC tariff, nothing more or less," he said.

Dunn noted that the committee is considering trying to obtain the information elsewhere and "release it over Duke's objections."

Three former workers at the Duke plant near Chula Vista testified last month under oath that the plant, among other things, was ramped up and down in what seemed to be an effort to maximize revenue during the Jan. 16-18 emergency.

But Duke countered immediately that it had merely obeyed orders of the California Independent System Operator, which keeps the state's electricity grid in balance. Duke later provided Cal-ISO documents backing up its explanation.

Duke executives insisted that the former employees failed to provide a full picture of the plant's operation during the three days.

But Dunn, chairman of the select Senate committee on alleged price gouging, said Monday that by refusing to authorize release of all the subpoenaed data, Duke was guilty of the same tactics.

"Duke is trying to draw the impression that it has [provided] the full picture. But they are fully aware that we cannot draw any final conclusions until all that data has been released. That hasn't occurred," Dunn said.

To make a determination whether the Chula Vista power was withheld to drive up prices, Dunn said, the committee must publicly examine "the bids Duke submitted from which the ISO issued orders to the plant." They include the expensive hour-ahead and day-ahead markets, he said.

Duke, a North Carolina-based wholesaler that operates several plants in California, noted that it considers the information proprietary and off-limits to legislators not on the committee.

Back Scratching Time
Duke Energy Employee Advocate - July 9, 2001

When the former employees testified before California lawmakers about Duke Energy’s questionable operation of its South Bay power plant, everyone knew that there would be an attempt to discredit them. We did not have to wait very long.

Duke Energy has given Dow Jones a lot of advertising business. They have been touting their “brand.”

Well, who should happen to make an attempt to discredit them but: Dow Jones. But the problem was, they did not really have anything. When one tries to spin nothing, it comes out looking a lot like nothing.

One of the “charges” was an employee had been: “disciplined for taking too much sick time after being out for 10 months for cancer treatment.” And, this is supposed to discredit everything that the person said?

These former employees testified for hours and brought hard evidence with them. Duke Energy could not very well dispute their own log book! It is important to remember that Duke never suggested that the testimony given was untrue. Duke’s only contention was that the former employees misinterpreted the purpose of the events in question.

More former employees have come forward since that time to corroborate the testimony. It is too early to make any judgements about the case. Too many facts are still being concealed.

Ex-Staff Speaks Out Against Duke
San Francisco Chronicle - by Robert Salladay - July 6, 2001

Two more former employees at Duke Energy's Chula Vista power plant came forward yesterday with allegations that the company manipulated the energy market to drive up prices, although they offered no hard proof and little new information.

Their accusations bring to five the number of Duke plant workers who say they observed suspicious behavior, including the disappearance of parts needed for repairs, the idling of generators for no apparent reason, and continual stopping and starting that critics of Duke suspect was designed to withhold power and artificially increase prices.

E. Robert Edwards, a 50-year-old electrician, related one conversation with a Duke foreman sometime in January that prompted suspicion.

"I asked the foreman why Unit 4 wasn't running," Edwards said yesterday at a press conference. "We had a 225-megawatt generator sitting there, and he just shrugged his shoulders and said, 'I really can't tell you. I'm not privy to that information.' "

State lawmakers have been focusing on whether Duke manipulated prices during three days in January, when the company at one point offered a single megawatt of power for a record-shattering $3,880. Duke says it was following orders from the Independent System Operator, which runs the state's power grid,

when it repeatedly turned its generators on and off during those three days.

An ISO memo recently released by Duke confirms the company's contention it was under orders. But January logs from the ISO and the generators don't offer an explanation for every allegation of price manipulation, since Duke has refused to release a detailed list of the prices it offered and paid during that period.

The two workers who came forward yesterday, Edwards and 46-year-old Richard J. Connors, both worked more than 20 years in the business. They left the South Bay Plant in Chula Vista in April, two years after Duke purchased it from San Diego Gas & Electric as part of deregulation.

"It is true units were taken offline, mostly on the weekends for whatever reason," said Connors, a former auxiliary operator. "It got to the point as an operator that you were dreading working swing shifts on Sunday or graveyard Monday morning because you knew you were going to be running around putting units back online."

Edwards said he had seen a company warehouse eventually emptied of parts that are used to repair broken generators, although he didn't know where the parts went. Forcing a longer wait for repair parts was designed to dry up the power supply and push prices higher, lawmakers and other investigators suspect.

Edwards, however, admitted the warehouse was being cleaned out even when SDG&E ran the plant. Duke contends the workers weren't familiar with Duke's inventory system and couldn't possibly know why parts were being moved.

Duke and other energy companies are facing scrutiny by two legislative committees, a 19-member Sacramento County grand jury, state Attorney General Bill Lockyer, the California Public Utilities Commission and federal regulators.

Lt. Gov. Cruz Bustamante, who introduced Edwards and Connors yesterday, also is suing a variety of generators in state court for alleged price manipulation and bad business practices. He said Edwards and Connors "reiterated what we've know all along -- Duke has been gouging California consumers through its use and abuse of the South Bay Plant."

Duke offers a variety of defenses for its actions during the three days in January and throughout the energy crisis. Tom Williams, a spokesman for Duke, said Edwards and Connors had offered nothing new yesterday.

Beyond the ISO's 37 separate orders to stop and start generators during the three days in January, Williams said state air regulations required the company to shut the plant at certain times because it was running out of emissions credits that limit the amount of air pollution it can put out.

Duke, which controls about 5 percent of the state energy market, also contends the state's power transmission lines can't always handle an increase in load.

"Yes, it's true there are times when that plant is not running at full capacity, and there is a Stage Three (alert), and there may be blackouts in San Francisco," Williams said. "The reason why it's not running is the power cannot move up Path 15," the transmission line bottleneck near Los Banos.

More Whistleblowers Step Forward Against Duke
San Diego Channel 10 News - July 6, 2001

Men Claim Duke Withheld Power To Drive Up Prices

Lt. Gov. Cruz Bustamante accused South Bay power plant operator Duke Energy of price gouging and called the company's actions during an electricity shortage in January "energy terrorism."

Bustamante and Assemblywoman Barbara Matthews, D-Tracy, Thursday introduced two additional whistleblowers who say that Duke withheld electricity at its Chula Vista plant to drive up power prices.

Former Duke employees Richard J. Conners and E. Robert Edwards met with the staff of the Select Energy Price Manipulation Committee following a news conference in Sacramento.

That brings to five the number of former employees who have alleged that reductions in output at Duke's South Bay plant during the period from Jan. 16-18, 2001, were made at Duke's direction.

"These five men, with over 20 years experience each, reiterated that Duke ran the South Bay plant in a way to maximize profits over reliability and safety as part of its scheme to manipulate California's energy market," Bustamante said.

"The result is that California's consumers have been gouged, and as more individuals come forward, evidence continues to mount on what appears to be cold-blooded acts of energy terrorism."

Duke executives said on Monday that they were following orders from the California Independent System Operator -- which runs the state's power grid -- when the South Bay plant was powered up and down during the three-day period six months ago.

Filner Calls For Public Takeover Of Duke Power
San Diego Channel 10 News - July 5, 2001

Urges Port Commissioners To Break Lease With Duke

Congressman Bob Filner joined a rally in San Diego Wednesday to call for public takeover of the South Bay Power Plant in Chula Vista.

Filner, Chula Vista-D, accused Duke Energy of gouging the state in its operation of the South Bay plant.

The company runs the plant under a lease from the Port District, which is investigating whether Duke has upheld its obligation to act in the public interest.

The Port confirmed that they are asking their lawyers to review their 10-year agreement with Duke.

Port spokeswoman Diana Lucero won't specifically say that the Port wants to break its lease with Duke, but she failed to provide any other reason for going over the agreement.

One possible explanation for the Port's sudden decision to investigate its contract with Duke could be a lawsuit against Port Commissioner David Malcolm. Malcolm helped to orchestrate the deal with Duke and then went to work for the company as a consultant.

The lawsuit against him accuses him of failing to properly report his financial dealings. Filner says that people should tell the port commissioners to break the lease and give the plant back to the people.

Duke Energy Ties to Official Examined

Duke Energy Plant Sat Idle During Blackout
Associated Press - July 5, 2001

A San Diego-area power plant sat idle and two others operated at two-thirds capacity in January, while blackouts disrupted the city around them, a former plant worker said Thursday.

The plant's owner, Duke Energy, said the state's grid operator could have called the units into full production -- but at some of the highest prices charged by any generator during California's energy crisis.

"Within 20 miles of the plant, areas of San Diego were being blacked out, and we had a 225-megawatt generator just sitting there," said E. Robert Edwards, who worked until April at the South Bay plant in Chula Vista.

Two other generators that together could have produced 300 megawatts were producing about 200 megawatts, he said. The combined unused electricity from the three generators would have been enough to power about 250,000 homes.

"That's not right. That's why I came forward," Edwards said.

He and fellow former worker Richard J. Connors talked Thursday with staff of a Senate investigatory committee that heard similar testimony last month from three other former plant employees.

Their statements support market manipulation accusations by the state's electric grid operator, said Lt. Gov. Cruz Bustamante, who is suing generators on behalf of taxpayers.

The California Independent System Operator's market analysis director, Anjali Sheffrin, accused Duke in a March report of withholding power or pricing it out of the market 88 percent of the time between May and November 2000. That report didn't account for environmental restrictions that constrained the plant, particularly the unit that was shut down completely, said Duke spokesman Tom Williams.

That unit produces eight times as much air pollution as the units that were running at two-thirds capacity, Williams said. Duke was so reluctant to run it and risk running into pollution restrictions during this summer's peak demand that it charged the state $3,880 per megawatt hour in a deliberate attempt to discourage its use.

That's the highest-known price for electricity in California since deregulation was authorized in 1996.

The state purchased 5,000 megawatt hours of power from the unit anyway during January and February, at a cost of nearly $20 million, as it struggled to limit power shortages that began with the two days of blackouts Jan. 17 and 18. Last month, the Federal Energy Regulatory Commission ordered Duke to return the $20 million in charges it said "can in no way be found to be just and reasonable."

The plant received a waiver in May that allows it to exceed emissions standards, and the high-pollution unit will get new air pollution control equipment later this year, Williams said.

Duke was asking between $1,000 and $1,500 per megawatt hour for electricity from the other two generators that were running at two-thirds capacity, Williams said, because it was uncertain it would be paid at all.

At the time California's three investor-owned utilities had run out of money because of skyrocketing electricity prices, and the state had yet to guarantee payment for the power it had started buying for them.

"The unit was always available to the ISO had they wanted to call it," Williams said. "Now, the price was high, we don't deny that."

However, he denied that what he termed a "credit premium" amounted to manipulating the market, as charged by the ISO's Sheffrin.

"The tactic of using a high price to essentially keep a plant out of the market is what Anjali in her report refers to as economic withholding" of power said ISO spokesman Gregg Fishman.

Of the 88 percent of the time that Sheffrin says Duke withheld power last year, she calculated that about 12 percent was through economic withholding -- high prices -- and the balance by limiting plants' production.

Generator Bows, Pledges to Cut Electricity Bill by $20 Million
L. A. Times - By N. BROOKS, R. CONNELL - July 3, 2001

Duke Energy had been accused by the state of price gouging. Gov. Davis insists that the company still has much to explain.

Caving to state and federal pressure, Duke Energy Corp. said Monday that it will reduce by $20 million the amount it claims it is owed for electricity sales in California.

The Charlotte, N.C., company is one of the state's largest power plant operators and, with other generators, has been flayed by politicians and regulators in recent months for alleged overcharges in the California market and for supposedly manipulating electricity supplies.

Duke also on Monday formally released internal documents of its own, as well as from the California Independent System Operator, showing that the agency was responsible for huge swings in production at a San Diego-area power plant that sparked accusations of price gouging.

In sworn testimony June 22 before a state Senate investigating panel, three former workers at Duke's Chula Vista plant offered internal operating logs for three days in January, saying they showed that the company throttled generators up and down "like a yo-yo" to boost prices during power emergencies.

The company denied the allegations, saying that the workers were not in a position to know that Cal-ISO, which operates most of the statewide power grid, was controlling the changes.

Duke has been "shocked and appalled by the accusations that have been leveled against our company," said Jeff Stokes, its executive vice president for Western gas and power. The letter from Cal-ISO acknowledging that it ordered the production gyrations in the course of maintaining grid reliability was reported Saturday by The Times. Duke said the $20-million refund for January and February will come from a "credit premium" that it had placed on electricity sales because it feared it would never be paid by Southern California Edison and Pacific Gas & Electric, the utility companies then lurching toward bankruptcy. PG&E has since filed for bankruptcy-law protection, and Edison remains financially shaky.

The Federal Energy Regulatory Commission in June said Duke was entitled to no more than $273 per megawatt-hour of electricity in January and ordered the company to pay back everything it reaped above that price for the month--including an infamous charge of $3,880 per megawatt-hour, which a spokesman for Gov. Gray Davis called "obscene." Davis said Monday that Duke still has much to explain.

"There's no doubt in my mind that there's been an effort by many of the power producers to 'game' the system," Davis said, after dedicating Calpine Corp.'s 540-megawatt Sutter Energy Center in Yuba City, the second of four major power plants to begin operation this summer.

So far, Duke executives said, the company has been paid less than 2 cents on the dollar for the power it provided the state in January and February. The federal commission is holding a settlement conference to seek agreement on possible refunds owed California by power generators and marketers.

A Cal-ISO spokesman declined to comment on the Duke revelations, citing a gag order imposed by the administrative law judge overseeing the settlement conference.

Although Cal-ISO late Friday acknowledged that the ramping at the Chula Vista plant was in response to its orders, representatives of the grid agency, the governor's office and the special state Senate committee probing alleged power gouging warned Monday that Duke's activities at the plant are still being scrutinized.

The ramping activity ordered by Cal-ISO is only part of the picture, they say. Further investigation of pricing is underway.

State officials suggest, for example, that the grid operator may have ramped down generation at times to avoid paying unreasonably high prices. Duke Energy has refused to release details of the prices it charged for power on the days at the heart of the ex-employees' allegations, and did so again Monday in a conference call with reporters.

Under questioning Monday, Duke executive Stokes did indicate that the prices charged for the power associated with the January logs were in the range of $1,000 to $1,500 per megawatt-hour, enough electricity to serve about 750 California homes for an hour.

Duke Challenges Price Gouging Accusations
San Diego Channel 10 News - July 2, 2001

The operators of the Duke power plant in Chula Vista are fighting back against accusations that they withheld electricity during a power shortage in January in order to drive up prices.

Executives at Duke Energy, have released a memo from the manager of the state electricity grid which says that the company was under state orders to reduce production during three days in January, 10News reported.

Accusations that Duke engaged in price gouging arose last month at a series of public hearings in which three former workers at the Chula Vista facility said that the company raised and lowered the production of electricity in order to manipulate prices.

Duke executives maintain that the accusations are without merit and that the three employees had no knowledge of the reason electricity at the plant was powered up and down.

Duke executives also said that plant managers were following orders from the Independent System Operator, the statewide manager of the power grid, when the company decreased output at the plant during a Stage 3 alert on Jan. 16.

The company Monday held a press conference via a Webcast and released a memo from the ISO grid manager Sunday confirming that from Jan. 16 through Jan. 18, Duke followed ISO directions to power down electricity production.

According to Duke spokesperson Tom Williams, the January power reduction was ordered to keep the electricity grid in balance. He said that the reduction was ordered to make sure that supply was equal to demand.

But Duke executives have refused to reveal how the company charged the state for electricity during the three-day period in January.

According to 10News, Duke set a California record at one point in January when it sought $3,880 per megawatt-hour for power. That compares to a price of about $30 per megawatt-hour for power sold in the first half of 2000. "The ISO frequently orders plants to ramp down because the plant is charging high prices," ISO spokesperson Stephanie McCorkle told the San Diego Union-Tribune. "Output will certainly fluctuate if the price is so astronomical we can't afford it."

Lt. Gov. Cruz Bustamante accused the company of trying to explain away its price gouging by releasing the ISO memo Sunday. "Duke should stop trying to manipulate the media the way it has California's energy market," he said.

Gov. Gray Davis has asked that Duke and other power suppliers refund nearly $9 billion which they earned after the state deregulated the electricity system and wholesale prices rose dramatically.

Energy Crisis a Journalistic Invention
San Francisco Chronicle - by Harley Sorensen - July 2, 2001

There is no energy crisis in California, and I wish the media and the politicians would quit pretending there is.

What we have here (besides a failure to communicate) is an integrity crisis, an honesty crisis, a competency crisis, a decency crisis, and, not least, a journalism crisis.

Before I get into all that, let me tell you two stories from my active newspaper days.

Back in the early 1970s, some of you may recall, bad weather destroyed the wheat crop in the Soviet Union. It was so bad that people were starving. The Soviets were in such bad shape that -- even though the Cold War was in full swing -- they asked for our help.

We, of course, had an excess of wheat, so, generous souls that we are, we decided to sell the Soviets about one-fourth of our wheat crop. This had the effect of ending the Soviet famine and just about doubling the price of American wheat. It was a good time for wheat farmers.

Enter now a huge American company, one of the world's foremost distributors, marketers, and processors of food products, a company that stood to make tons and tons of money from what is now known in history books as "The Russian Wheat Deal."

This company got in touch with the business editor of my newspaper and summoned him for the purpose of sharing with him some stunning information. In spite of appearances, the company spokesmen told our editor, the company was actually losing money on perhaps one of the biggest deals in history.

Uh-huh. And if you believe that, you're a candidate to buy the Brooklyn Bridge.

But that's what they said and that's the story our editor wrote and my newspaper published. We were so proud of the story that we even put a special copyright line above it. All of our stories were copyrighted, but, when we were especially proud of one, we emphasized the copyright with a special line.

Nobody at our newspaper had the decency to be embarrassed by that malarky, and I'll bet to this day that business editor believes he scooped the world with his inside knowledge.

Moral of the story: Journalists try desperately to be worldly wise and sophisticated, but it's quite easy to con them. If you're a big and important company, all you have to do is lead them to believe you're sharing very hush-hush information with them, and you'll have them eating out of your hand . . . no matter how outlandish the lies you feed them.

My second story is shorter, but along the same lines.

We had a hotshot reporter who thought he was going to save the world. He was a classic Type A, always in a hurry, always on a mission. You know the type.

Anyway, during the "gasoline shortage" of the early 1970s, this guy somehow got fed a line of crap that the world was about to run out of natural gas. How soon? It'd all be gone within two years!

We ran that goofy story, as I recall, with a banner headline across the front page on a Sunday. Copyrighted, by gum!

You will note, I hope, that natural gas is still with us, even though it sometimes gets in short supply when the price drops too low.

The point of my two stories is that reporters and their editors will believe just about anything if it's told to them by someone in authority. And that's what's happened during California's bogus "energy crisis."

There was a line in the 1941 Humphrey Bogart movie, "High Sierra," that fits the situation here. The female lead, Ida Lupino, says to her father, "The police say he's dangerous," in a reference to the fugitive she's helping.

"Of course they say he's dangerous," her father replies. "How can they be heroes if he's not dangerous."

I won't guarantee you I have the quote exactly right, but you get the idea.

The same applies to journalists. Most of the time, we are boring little people that nobody gives a fig about. But in times of crisis, we come into our own. Then we become important. Give us a flood, an earthquake, a war, whatever, and suddenly we have status. Suddenly, people care what we say and write.

We'll deny it, but we journalists love disasters.

That's a good share of the reason we have an energy "crisis." If all we have is a little problem that can easily be fixed, who cares what we say? But when we're on the tube or in print talking about a "Stage 3 Emergency," people sit up and take notice.

This is especially true of television these days, because of the intense competition brought on by cable and its multiplicity of channels.

So what has happened with electricity in California?

First of all, you should know that the mismanagers at PG&E, the ones forced into bankruptcy, haven't dealt squarely with us for a long time. Proof? The vast number of energy-producing windmills that are always shut down.

I've never figured out what their little game is, but it's clear something has been in the wind when they consistently shut down a dependable source of renewable, non-polluting power.

Whenever anyone has asked about those windmills, the answer is always "maintenance." Nobody consistently shuts down a large percentage of his operation for maintenance -- and then, to boot, has no maintenance people in sight.

I think they’re trying to "prove" that wind-generated power isn't effective.

Beyond that, deregulation was sought by PG&E at a time when everything was going well in California. We had plenty of dependable power at the time and PG&E made a consistent profit. Why deregulate?

I don't know, but I'm told that the power companies wrote the deregulation act passed by our legislators, who, in their defense, probably had no idea what was going on. They should have found out, of course, but there's a natural instinct by those guys to not ask too many questions of the people showering them with money.

Deregulation might have worked just fine except that a funny thing happened last November: George W. Bush was elected (selected?) president.

Democrats and independents believed all along that energy costs would shoot sky high if Bush got elected, and guess what: the spot market for a megawatt of electricity jumped as high as 200 times. (Not 200 percent, mind you, but 200 times, from a low around $19 to about $3,800.)

The thing about modern business in America is that neither conspiracies nor outright bribes are any longer necessary. You no longer need a squadron of private jets winging down to the Bahamas for a secret meeting. There are so few suppliers these days that they can work things out amongst themselves without ever meeting or exchanging a single word.

A good example of that is airline prices. As soon as one airline deviates from what the others are doing, all the others follow suit. Northwest lowers its prices, everybody else does too. Delta raises its prices, so does everybody else.

Everybody knew last fall that George W. Bush was in the pockets of the energy people who propped him up, so it was a certainty after he got elected that they could get away with anything and the federal government would look the other way.

Hence, the unbelievable cost of wholesale energy in California at the onset of the new administration.

And the press went along with the game. "The sky is falling," we were told. "Listen up, folks, this is important news. We are important, too, so pay attention to what we say."

A few smart reporters, like Scott Winokur of the Chronicle, wrote articles outlining some of the skulduggery of the politicians and the energy people, but they were small voices in the wilderness. The daily drumbeat was crisis, crisis, crisis.

(The problem with good reporters like Winokur is that they're hamstrung by journalistic rules. They can only report the facts and only hope that you can figure out from the facts what's going on. They don't have the liberty that a columnist like me has.)

We've lost power a few times in California (once, for an hour, where I live), mostly because too many power plants are shut down "for maintenance" at the same time. But it hasn't been a disaster and it certainly isn't a crisis.

Trust me, it's safe for tourists to come here.

Our power bills are going up to pay off the people who have ripped us off. That in itself is a problem, but it's not a "crisis." Not an energy crisis, anyway. Don't believe everything you see on television or read in newspapers or magazines.

We may, as I said at the beginning of this column, have a crisis of honesty, decency and integrity, but we're in good shape as far as electricity goes.

Power Manager Backs Duke Assertion on Production
The Charlotte Observer - By STELLA M. HOPKINS - July 1, 2001

But agency says only `half the story' known, as price data hasn't been divulged

A memo from the agency running California's power system says Duke Energy followed its orders during three days in January when the Charlotte company is accused of manipulating power supplies to maximize profits.

The memo Thursday from the California Independent System Operator, or ISO, sheds new light on allegations made by three former employees of Duke's South Bay Plant near San Diego.

Using plant logs as evidence, the workers testified June 22 before a state Senate committee that Duke manipulated energy production to drive up profits.

The allegations go to the heart of multiple investigations, including a coming state grand jury inquiry, into how Duke and other generators do business in California, where skyrocketing power prices have cost the state billions of dollars.

In its memo to the state's Electricity Oversight Board, the ISO says Duke's orders to its South Bay plant were "in accordance" with ISO regulations. The memo also says Duke followed agency orders to increase and decrease power production during the three days.

The ISO memo - and other documents Duke provided to The Observer in Sacramento and Salt Lake City last week - provide a behind-the-scenes glimpse into a complicated and contentious system. The documents are among those subpoenaed in investigations, but not previously made public.

"Duke had been waiting for the appropriate time (to release the information), but the level of allegations makes it necessary to do this," said Jeff Stokes, who heads the Western operations for Duke Energy Trading and Marketing, Duke's gas and power trading unit. "These are extraordinary circumstances we have here."

While the memo says Duke's logs are accurate, ISO spokesman Gregg Fishman said Saturday morning:

"Those facts are all correct, but they may not add up to a complete picture of what happened during those three days."

Despite Duke's written and oral requests that the ISO talk with The Observer about plant-production orders and Duke's offers to sell power, ISO spokeswoman Stephanie McCorkle refused to do so during a Friday afternoon interview at the agency's Sacramento headquarters.

She cited ongoing investigations, other demands for the information, inadequate time and legal concerns. McCorkle said the documents provided by Duke told only "half the story" because the company didn't release prices for power it sold and offered to sell. Duke, like other generators, has refused to supply prices, citing competitive pressures. McCorkle said that without that information, accurate conclusions can't be drawn about Duke's business practices.

She and Fishman said the agency is not ready to provide additional information.

Duke is battling a public relations disaster in California. The company contends the three ex-workers didn't have a complete view of how energy selling and production works in the state's troubled market and could easily have misinterpreted plant operations.

Jimmy Olkjer, who worked 21 years at the plant, and lost his job in an April reorganization, said Saturday that he "might not see the whole big picture.

"I don't think anybody in the electric system understands the system and the complications. I think I have enough working knowledge to say something smells fishy."

An Observer analysis found that handwritten logs from Duke's San Diego plant generally matched the corresponding ISO orders. Those orders called for the plant to increase and decrease power, sometimes in a span of minutes. Several times during the three-day period, the ISO managed the plant's production using a kind of autopilot operation that bypasses Duke personnel - a common procedure during extreme shortages.

The ISO contracts for the right to direct power production at this and other plants to keep the power supply balanced with demand. In the Carolinas, Duke Power also increases and decreases production to balance its system.

Duke's documents also show the company offered all available power from the plant to the ISO. Sometimes, the agency bought the right to generating capacity but did not - even under threat of imminent blackouts - exercise that right by asking Duke to produce the power.

ISO's memo does not address Duke's assertions of how much power it made available to the ISO or how much power the agency bought and didn't buy.

The three-day period includes times when an earlier Observer analysis found Duke sold power to the ISO for $3,880 per megawatt hour - the highest known price during the California energy crisis. In one month, the average Carolinas home uses one megawatt hour at a cost of $73.

Federal regulators have ordered Duke to refund much of that charge. Duke has said it will refund a substantial portion when it is paid. Regulators and generators have met in Washington to devise a settlement for overcharges California says total nearly $9 billion.

During a May interview with The Observer at ISO headquarters, Jim McIntosh, director of grid operations, called Duke "more reliable, more cooperative" than other generators.

McIntosh, an industry veteran, said Duke "is one of the first to come through with an offer to sell" power.

McIntosh, who said he sees all the power pricing at the ISO, also said Duke "made a lot of profit" in California - a point Duke doesn't dispute. Duke's business unit that includes its power and natural gas trading had first-quarter earnings of $348 million - more than triple what it earned in the first three months of 2000.

Duke is one of several out-of-state generators that entered the California market after the state deregulated its power industry in 1998. With three plants it owns and the leased South Bay plant, Duke accounts for about 5percent of the state's generating capacity.

On Thursday, the state Senate committee investigating Duke and others held two generators in contempt for failing to provide records of their operations in California. Duke was not held in contempt because it agreed to turn over documents by the July 10 deadline, said Ronda Paschal, a spokeswoman for state Sen. Joe Dunn, a committee leader.

The oversight board sent the ISO memo and documents to Dunn and other committee members late Friday.

Earlier in the day, Paschal said Dunn would need time to review the information before commenting.

"Duke's spin is that they were following ISO's directions," she said. "We're looking for information that would confirm or contradict that."

Deregulation - June 2001 - Page 3