fyi, info from Duke responding to charges made by ex-employees...
---------------------- Forwarded by Karen Denne/Corp/Enron on 06/25/2001 
10:07 AM ---------------------------


"Thomas C Williams" <tcwillia@duke-energy.com> on 06/24/2001 11:47:11 AM
To: foothillservices@mindspring.com
cc: carol clawson <carol_clawson@fpl.com>, catherine Parochetti 
<catherine.parochetti@avistacorp.com>, Dan Pigeon <Dan_Pigeon@transalta.com>, 
Dan Douglass <douglass@energyattorney.com>, Dace Udris <dudris@smud.org>, Ed 
Mosey <efmosey@bpa.gov>, Ellen Averill <ellen.averill@williams.com>, Jan 
Mitchell <jan.mitchell@pacificorp.com>, Joe Ronan <joer@calpine.com>, John 
Fistolera <johnf@ncpa.com>, John Sousa <joso@dynegy.com>, Karen Denne 
<kdenne@enron.com>, Lynn Lednicky <LALE@dynegy.com>, Lynn Fisher 
<lfisher@apx.com>, Mark Stutz <mark.stutz@xcelenergy.com>, Toni Amendolia 
<mozart@pwrteam.com>, Mike Hansen <mshansen@bpa.gov>, Paula Hall-Collins 
<paula.hall-collins@williams.com>, Richard Wheatley 
<richard_n_wheatley@reliantenergy.com>, Sandra McDonough 
<Sandra.McDonough@neg.pge.com>, Steve Roalstad 
<steve.roalstad@xcelenergy.com> 

Subject: Re: Capital Week debate between me and Bustamonte



Gary, I just sent this to your other e-mail address.  The Lt Gov. was in on
this San Diego employee thing at the Dunn hearings, so this may come up.
The credibility of these former SDG&E employees was very weak in the
hearing and their allegations are absurd.....
________________________________________________________________________

To California news media covering electricity crisis:

As a result of the false claims by three former San Diego Gas & Electric
employees we have been in the news a bit lately. To add a bit of clarity to
the situation I am sending you our release issued Friday that goes through
each of the three claims and our response.

To more fully understand the situation, please read the attached story that
appeared in the LA Times yesterday. These reporters had the logs that were
stolen from our South Bay Power Plant in Chula Vista more than two weeks
ago.  We went through these log books line by line with these reporters.
They also obtained confidential information from the Cal-ISO during these
three days (January 16-18) that indicated that we were operating at their
instruction when ramping up an down the units.  This is because the ISO
purchased the ability to move the units up and down to help ensure the
state's supply and demand is in balance.  This is a common practice and
done every hour of every day by the ISO at plants that are able to provide
this service.

Its unfortunate that we were not allowed to respond to these charges when
they were made formally in Senator Dunn's  committee hearing Friday
(although the information was leaked way before the hearing by someone).  I
understand that Governor Gray Davis is meeting with these former SDG&E
employees tomorrow.  We had tried to personally meet with the governor last
summer to offer very inexpensive long term power contracts and 2000
megawatts of peaking plants in 2001 and 2002 and were not able to.

Tom Williams
Director of Public Affairs
Duke Energy North America
Morro Bay, CA
______________________________________________________________________________
_____


Los Angeles Times via Dow Jones
   Publication Date: Saturday June 23, 2001
   Page B-1
   Los Angeles Times (Home Edition)
   Copyright 2001 / The Times Mirror Company
   By DOUG SMITH, CARL INGRAM and RICH CONNELL
   TIMES STAFF WRITERS


SACRAMENTO -- Three former San Diego power plant workers on Friday accused
officials of Duke Energy Co. of manipulating California's crippled
electricity market for higher profits, but records and interviews show that
the company was responding partly to state instructions.


Their testimony caused a sensation among power industry critics and brought
a sharp response from the company at the center of the whistle-blower
allegations, which called them "baseless."


The former employees at Duke's South Bay facility told a legislative
committee investigating alleged price gouging that the plant was ramped up
and down "like a yo-yo" in an apparent gambit to drive up profits.


In support of the allegations, the workers produced logs showing Duke's
trading arm constantly increasing and decreasing generation during power
emergencies over three days in mid-January.


Duke officials, who will testify in the weeks ahead, said the up and down
throttling of the plant came at the direction of the state, which had paid
the company to hold the disputed generation capacity in reserve.


Public records gathered in recent weeks by The Times confirm that at least
part of that activity was directed by the California Independent System
Operator.


Moreover, Cal-ISO, which in the past has accused power firms of withholding
electricity to boost prices, stressed Friday that it regularly directs
generators to adjust output to keep the grid humming.


"On a daily basis we have reserves that are set aside," Cal-ISO spokesman
Gregg Fishman said. "It's energy that can be called upon instantly to meet
a fluctuation in demand, or within 10 minutes, or within an hour.
Certainly, we call on [standby] services regularly to meet these
fluctuations."


The three witnesses who testified each had worked at the plant for more
than 20 years, first for San Diego Gas & Electric and later, under
contract, for Duke. They were let go by Duke in April.


Former power plant mechanics Ed G. Edwards Jr. and Glenn D. Johnson accused
Duke of throwing away valuable plant parts and of manipulating generation
capacity beginning in 1999, leaving workers puzzled.


Managers brushed aside questions about the activity, saying they were "for
economic" reasons, the workers said.


"Sometimes a unit would be down 'for economics' for two or three days.
Sometimes, it would be down for two or three hours. It didn't make sense,"
Johnson said.


He said the phrase appeared to be "another way to explain limiting the load
or curtailing the load to boost prices."


"Instead of running two units to make the same price," Johnson said, "you
could run one unit and make three times the price." Some energy experts
argue that it is possible to increase earnings by trimming power supply in
California's tight electricity market.


The third worker, Jimmy Olkjer, an assistant control room operator, said
such actions began after Duke began operating the plant.


Sen. Joe Dunn (D-Santa Ana), the committee chairman, asked Olkjer whether
SDG&E operated in the same manner. "No," he said.


Edwards, one of the ex-mechanics, said prolonged repairs by Duke were part
of the apparent gaming of the power market.


Once, he was directed to throw away 23 pallets of power plant parts, he
said. "Some of it was brand new stuff" in its original packaging. "I used a
forklift, took them to a dumpster and dumped the pallets," Edwards said.


He testified that often it took weeks to find a needed spare part, which in
the past would have been readily available.


Duke officials bragged about their money-making ways, Edwards said. At
employee parties after the first year of operation, Duke executives boasted
that "they made more money than they had expected in five years."


Dunn and Sen. Debra Bowen (D-Marina del Rey), a committee member, said
later that they were impressed with the credibility of the workers'
testimony, but that it did not constitute a "smoking gun." Both said they
would form no conclusion until hearing from Duke and other generators.


Duke officials, who will testify before the committee next month, said
Cal-ISO controlled much of the ramping activity. "Our employees followed
the directions" of the grid operator, said Bill Hall, who oversees Duke's
plant operations in the West.


Old or unnecessary parts were discarded as part of an upgrading of the
plant's inventory system, said Tom Williams, a Duke spokesman. Duke has
decreased outages and significantly increased its production since
purchasing the plant, he said. "The proof's in the numbers," he said.


One plant mechanic has told The Times that he was told to toss parts by the
previous owner, SDG&E, as well as by Duke.


Cal-ISO officials declined to discuss specific contracts and activities
with Duke. But records show that the agency regularly buys reserve and
standby power at the plant. That electricity can be ordered on and off the
system to maintain balances crucial to the complex grid.


In the January period focused on at Friday's hearing, records show that
three of the four South Bay units were repeatedly called on to deliver
standby power. The fourth unit was shut for servicing.


On Jan. 17, for example, records show that the agency called on one unit to
increase output by 62 megawatts at 6 a.m. and reduce it by that same amount
two hours later. Then at noon, the agency ordered 71 more megawatts,
cutting it back to 20 at 3 p.m. By day's end, the agency had asked for an
additional 38 megawatts.


A second unit was instructed to add 50 or more megawatts four times on the
same day. A third unit was ramped up or down 12 times, bouncing from zero
to as high as 221 megawatts.


The records show only power that ISO actually needed. The agency refused to
disclose how much reserve power it had under contract with Duke that it had
not called on.


But after reviewing records for the mid-January period, Cal-ISO manager of
markets Brian Rahman said, "The most viable reason why any one unit would
not have been producing would have been for operating reserve."


______________________________________________________________________________
_______


Here is a link to the release below:
http://dena.duke-energy.com/california/releases/nr062201.asp



                    DUKE ENERGY REFUTES FALSE CHARGES;
               PLANT OUTPUT WAS CONTROLLED BY CALIFORNIA ISO
June 22, 2001

SACRAMENTO ? Duke Energy today said the output of its South Bay power plant
in California was directed by the California Independent System Operator
(ISO) to track fluctuations in electricity demand, and the plant operated
at top reliability. The company strongly denied allegations by three former
plant employees that power output was reduced at Duke Energy's own
direction.

The workers making the allegations were employees of San Diego Gas &
Electric (SDG&E) who were not hired as part of the new operating team when
Duke Energy assumed full control of the South Bay power plant in April.

Bill Hall, vice president of Duke Energy's western operations, said, "These
allegations represent just one more page in a very long chapter of
misinformation disseminated by people who don't know the full story."

Hall reviewed the charges and the facts:

Charge: Output from South Bay was ramped up and down to manipulate prices
during times when energy supplies were short.
The facts:
?    The units were operated under the direction of the California ISO to
meet system reliability       and Duke Energy's contractual commitments.
?    While the three ex-workers allude to log books from the plant control
room with notations      from Duke Energy Trading & Marketing (DETM), the
former SDG&E South Bay employees         apparently did not know that that
the ISO directs output through the DETM coordinator. Our     records of ISO
directions match up perfectly with the logbook notations.

Charge: The most expensive unit was run at South Bay to drive up ISO
prices.
The facts:
?    South Bay's 15-megawatt, jet-fueled unit was designed principally to
provide start-up power   to the station's steam units. This unit has been
made available to provide as much energy as   possible to California during
the state's energy crisis.
?    During the period in question, the jet-fueled unit was being operated
because the price of jet      fuel was substantially less than the cost of
natural gas. This resulted in lower marginal costs. ?   The 15-megawatt
unit was being run to provide electricity to cover Duke Energy's California
     contractual commitments. This electricity was not being bid into the
ISO market, so there     was no way it could have influenced ISO market
prices.

Charge: Inventory management (including "throwing out spare parts") at
South Bay resulted in increased outage time to accomplish repairs.
The facts:
?    At no time did lack of inventory result in a unit being unavailable
for service.
?    The inventory management practices at South Bay represent standard
industry practices.      Duke Energy purchased the entire inventory for
South Bay when we assumed operations for      the plant in 1998. We
retained the parts and tools we deemed useful and disposed of
inventory that was damaged or obsolete.
?    Duke Energy employees have taken extraordinary actions to keep our
power plants operating   during California's energy crisis.

Duke Energy continues to deliver real solutions to the state's energy needs
and to operate its business with integrity.

Duke Energy will hold a media briefing immediately following the state
Senate hearing at approximately 4 p.m. (ET). Reporters not in Sacramento
can call-in at: 888/664-9965, passcode DUKE.

For additional information, please visit our Web site at
www.duke-energy.com/california



                    Gary Ackerman
                    <foothillservices@minds        To:     Dan Douglass
                    pring.com>                     
<douglass@energyattorney.com>, Lynn Lednicky
                                                   <LALE@dynegy.com>, Sandra 
McDonough
                    06/24/01 12:45 PM              
<Sandra.McDonough@neg.pge.com>, Dan Pigeon
                    Please respond to              
<Dan_Pigeon@transalta.com>, Lynn Fisher
                    foothillservices               <lfisher@apx.com>, Karen 
Denne
                                                   <kdenne@enron.com>, 
Richard Wheatley
                                                   
<richard_n_wheatley@reliantenergy.com>, Paula
                                                   Hall-Collins 
<paula.hall-collins@williams.com>,
                                                   Joe Ronan 
<joer@calpine.com>, Tom Williams
                                                   
<tcwillia@duke-energy.com>, Ed Mosey
                                                   <efmosey@bpa.gov>, Mike 
Hansen
                                                   <mshansen@bpa.gov>, Jan 
Mitchell
                                                   
<jan.mitchell@pacificorp.com>, Toni Amendolia
                                                   <mozart@pwrteam.com>, Mark 
Stutz
                                                   
<mark.stutz@xcelenergy.com>, Steve Roalstad
                                                   
<steve.roalstad@xcelenergy.com>, John Sousa
                                                   <joso@dynegy.com>, John 
Fistolera
                                                   <johnf@ncpa.com>, Dace 
Udris <dudris@smud.org>,
                                                   carol clawson 
<carol_clawson@fpl.com>, catherine
                                                   Parochetti
                                                   
<catherine.parochetti@avistacorp.com>, Ellen
                                                   Averill 
<ellen.averill@williams.com>
                                                   cc:
                                                   bcc:
                                                   Subject:     Capital Week 
debate between me and
                                                   
Bustamonte                                       





This Thursday I will be a guest along with our favorite Lt Gov on
California Capital Week.  I can't think of a worse time to have this,
since Bustamonte is the point man on fhe three witnesses that
participated in last Friday's public Senate Hearing on price
manipulation.  So feed me your advice.  I am trying to take the high
road, but I will warn you right now that if Bustamonte makes any of his
outrageous statements in front of me, I will boldly correct him in no
short order.

gba