Witnesses Say Generator Cut Power Supply to Raise Price
   by Matt Richtel    SACRAMENTO, June 22 

Three former workers at a plant operated by one of the biggest power producers in California testified today
that the company shut production units in what they said was an apparent effort to drive up electricity prices.

The three men, who worked at a plant in suburban San Diego owned by Duke Energy, told a hearing in the
State Legislature that the plant's managers also threw out spare parts needed for repairs and took other measures
that  reduced its output and helped drive up prices.
 

Executives at Duke, based in Charlotte, N.C., denied the accusations, saying the company learned about them only on Thursday afternoon and was not invited by the Legislature to rebut them.
"These allegations represent just one more page in a very long chapter of misinformation disseminated by people who don't know the full story," said Bill Hall, vice president for Duke's western operations.
The employees worked for the San Diego Gas and Electric Company, which operated the South Bay plant in Chula Vista as a subcontractor for Duke starting in April 1999. The employees were let go when Duke took full control of the plant in April.

Mr. Hall noted that Duke Energy produced 50 percent more electricity in 2000 than in 1999. "The average price we sold into the market last year was $76," he said, referring to a megawatt-hour, "far less than the spot market price last year."
Duke supplies about 5 percent of California's electricity from its four in-state plants, including three bought from Pacific Gas and Electric for $501 million in 1998.

The testimony, before a select legislative committee investigating price manipulation in California's deregulated electricity market, came from two plant mechanics and a control room technician. They said they were asked to throw out new parts that could have been used for maintenance; not complete necessary maintenance; and run a more expensive emergency turbine when circumstances did not warrant its use. "In my opinion, there was price manipulation," Glenn Johnson, a certified power plant mechanic, said in an interview.

As an example of what he called questionable procedures, Mr. Johnson said the plant's output fluctuated sharply
in a way that could have damaged the turbines. "They were running the units like yo-yo's," he said.
"They would run them up, and run them down."

Mr. Johnson and Edmond Edwards Jr., another former mechanic at the plant, along with Jimmy Olkjer, an assistant control room operator, supported their testimony with copies of control-room logs Mr. Johnson smuggled out of the plant.

But Tom Williams, a Duke Energy spokesman, said the output levels fluctuated because the company was receiving orders
for different levels of power from the Independent System Operator, the agency that runs the power grid in California.
Mr. Williams said an analysis of records from the plant and the agency would prove that Duke was merely responding
to the market. The testimony today was one of the first times employees of a power producer discussed its operations
publicly, a development that the companies' critics say is essential to understand why Californians have paid such high
prices for electricity since last year.

"This is the first smoking gun that's appeared †whistle-blowers," said Lt. Gov. Cruz Bustamante, who attended the
hearings, according to The Associated Press. "That is called market manipulation, and that, in effect, ended up
costing the ratepayers of California billions."

For months, Gov. Gray Davis has asserted that power producers, most of them out of state, have earned huge profits at California's expense. This week, at a hearing in Washington, he accused federal regulators of ignoring his state's predicament. Mr. Davis and Mr. Bustamante are Democrats. The Independent System Operator concluded in March that Californians
might have been overcharged $6.7 billion for energy bought since last summer. Several state agencies, including the Public Utilities Commission and the attorney general's office are investigating whether generators have charged excessive prices.

In March, Duke Energy offered to negotiate a broad settlement. The outlines of Duke's proposal included a compromise on the money owed by California utilities, in exchange for the dropping of private lawsuits, California's
complaints to federal regulators and the state investigations. Among other accusations today, Mr. Johnson said he had been asked several times to stop maintenance in the middle of a project and to put a partly fixed piece back online.

On two occasions, Mr. Edwards said, he was asked to throw out new parts that could have been used for maintenance.
Mr. Edwards said he was told to discard them so Duke would not accrue inventory tax.
Mr. Williams of Duke said the company inherited inventory from San Diego Gas and Electric.
"We chose to keep some of it and to not keep some of it."
 
 
 

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