Ex-power workers allege price scheme
Probe: Duke Energy denies production shutdowns to drive up electricity prices in California
June 23, 01
Don Thompson; The Associated Press
SACRAMENTO - Former workers at Duke Energy's South Bay power plant accused the company of shutting down production units there in what they called a scheme to drive up electricity prices.
Duke officials termed the charges "baseless."
The former workers told the state Senate Select Committee to Investigate Price Manipulation Friday that officials at the San Diego-area plant ordered power units off-line for apparently unnecessary maintenance; destroyed parts that were needed for repairs; and manipulated the electricity it was feeding the statewide grid.
"This is the first smoking gun that's appeared - whistleblowers," said Lt. Gov. Cruz Bustamante, who is sitting in with the committee. "That is called market manipulation, and that, in effect, ended up costing the ratepayers of California billions of dollars."
Gov. Gray Davis said the testimony, if true, would provide "very disturbing evidence" that could help the state persuade federal regulators to order generators to refund $9 billion in power charges.
State legislators, regulators and prosecutors are investigating whether power generators illegally manipulated the power supply to drive prices to record levels, forcing the state to buy more than $8 billion worth of electricity since January for the state's three investor-owned utilities.
All three longtime San Diego Gas & Electric employees were laid off in April when Duke completed its two-year acquisition of the former SDG&E plant in Chula Vista.
Mechanics Glenn Johnson and Ed Edwards said they were ordered to shut down machinery for unneeded repairs, and to do so when they didn't have the necessary parts available to quickly repair the equipment. They said they were ordered to dispose of perfectly good parts that could have been used in those repairs.
"We were told when things were shut down that it was for 'economics,'" Johnson testified. "Sometimes a unit would be 'down for economics' for two or three days."
Duke officials said the plant's performance belies the workers' accusations. They said Duke's four California plants produced 50 percent more electricity last year than in 1999 and are on a pace to improve that performance this year.
The company was so pleased with its unanticipated windfall from soaring energy prices that it threw two prime rib-and-shrimp parties for the plant's employees, the workers said and Duke vice president Bill Hall acknowledged.
"Duke Energy is not (price) gouging," Hall said after he was denied a chance to testify at Friday's hearing. "Duke does not collude with any other entity to drive market prices up."
Operating decisions were made based on market conditions, Hall said, but he denied illegal collusion or market manipulation that could drive state or federal regulators to step in.
"Depending on the amount of supply or demand, some of our units which are in some cases not as efficient as others in the state simply aren't economic to run," Hall said.
Operators rapidly cycled the plant's electricity production "like a yo-yo - up and down, up and down," Johnson said, in a way that damaged equipment but maximized prices.
He, Edwards and assistant control room operator Jimmy Olkjer backed their testimony with copies of control room logs Johnson smuggled out of the plant.
Any fluctuations, Hall said, were ordered by the California Independent System Operator, which runs the state's power grid, or were needed to meet environmental standards.
Duke destroyed new parts, as the workers testified, Hall said, because they were obsolete or to cut the tax Duke paid on its parts inventory.