FYI.  David Freeman and DWR....public power working for California.
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Power delivery efficiency questioned: Output at low-cost generating plants 
has been cut while costlier ones continue to operate.
By Carrie Peyton
Bee Staff Writer
(Published July 31, 2001) 
California is sometimes deliberately cutting output from low-cost power 
plants while running more expensive ones, utility and grid officials say. 
The sporadic episodes haven't cost much yet, but they illustrate a 
potentially troubling disconnect in the system that has quickly grown between 
two agencies that help deliver electricity to a power-strapped state. 
"We seem to be building this inefficiency into the system, and it doesn't 
seem to be getting better," said Mike Florio, a consumer advocate who sits on 
the governing board of the Independent System Operator. 
The trouble is that the ISO, created in 1996 to manage the power grid in a 
deregulated electric market, tries to run the grid by auctions that -- in 
theory -- provide the cheapest electricity for the state's consumers. 
Meanwhile, the state Department of Water Resources, which in January stepped 
in to buy power on behalf of cash-strapped utilities, isn't bidding at some 
auctions because it believes it can provide cheaper power if it doesn't. 
"We have an inefficient market and an inept government entity. It's sort of 
the worst of both worlds," Florio said, criticizing his agency and the DWR. 
ISO staffers decline to discuss the situation in detail, saying it involves 
confidential bidding behavior. 
But Pete Garris, chief of operations for the power-buying arm of the 
Department of Water Resources, confirmed that the ISO has been asking his 
agency to take part in more auctions, but the state has declined. 
The state's role is to buy electricity for customers of utilities whose 
credit was no longer good enough to buy on their own, he said. 
"We're not in it to do those kinds of marketing functions," he said. "It's 
not necessarily a good fit." 
Some of the ISO auctions are used to lessen congestion on transmission lines. 
Others are used to stabilize the grid by slightly increasing or decreasing 
output when demand doesn't match forecasts. 
Generally, the highest-cost power plants should be the ones cutting back, a 
process the industry calls "decking." 
But since May, on ISO orders, Southern California Edison has repeatedly 
throttled back on the Mohave Generating Station, which produces some of the 
cheapest power available to California today, costing as little as $10 to $20 
a megawatt-hour. 
Edison, which owns a majority share of Mohave, has cut its output by 5,660 
megawatt-hours between May and July, about one-half of 1 percent, at the 
ISO's behest, according to data Edison provided to The Bee. 
The ISO could probably have saved the state's consumers $370,000 at one plant 
if it had asked a higher-cost gas-burning plant to cut back instead of 
Mohave, a coal-burning workhorse in Laughlin, Nev., Florio said. 
The amount sounds like "small potatoes," but in some ways it is more alarming 
than the $14 million the state lost recently by selling excess power for less 
than it paid, he said. 
Industry experts agree that such below-cost sales are common in a business 
where power needs fluctuate dramatically based on the weather. 
By contrast, "this is a dead weight loss. Higher costs are being incurred for 
no good reason," Florio said. 
"The question is, why is the ISO calling on Mohave and not (cheaper) gas 
plants? The answer is, the gas plants aren't bidding ... probably because 
they're contracted with DWR," he said. 
Four Corners, another low-cost coal plant partly owned by Edison, has also 
been throttled back at ISO request, Edison officials said. 
In addition, so few bidders have shown up at ISO auctions to ease stress on 
transmission lines that the system has fallen into disarray, with the ISO 
instead ordering across-the-board power production cuts that are boosting 
costs, Florio said. 
For its part, the ISO will say only that "we are making the most economical 
decisions we can based on the bids available," said spokeswoman Stephanie 
McCorkle. 
DWR's Garris said the state and the ISO have been meeting repeatedly on 
bidding and other coordination issues, and he hopes to have a 
smoother-running system in place by next summer. 


The Bee's Carrie Peyton can be reached at (916) 321-1086 or 
cpeyton@sacbee.com <mailto:cpeyton@sacbee.com>.