FYI.  Many similar stories in the major papers today.
Best,
Jeff
Figures show state lost big on extra power 
Posted at 9:53 p.m. PDT Monday, July 23, 2001 
BY JOHN WOOLFOLK 
Mercury News 
State figures show California may have lost about $14 million this month 
selling surplus electricity for less than it cost. 
The Mercury News disclosed last week that some power was being sold at a 
loss. But the new figures provide the first indication of just how much 
excess power the state bought in its desperate effort to avoid blackouts -- 
and how cheaply some of that power was sold when it turned out not to be 
needed. 
A Republican lawmaker said Monday the loss also shows Democratic Gov. Gray 
Davis' energy policies are needlessly costing consumers. 
``This whole thing is a mess,'' said Assemblyman John Campbell, R-Irvine, who 
requested details of the state's surplus power sales. ``The government needs 
to get out of the power business before it costs Californians even more 
money.'' 
A state spokesman didn't dispute the $14 million figure outright but said it 
is an approximation based on average prices and that the actual loss probably 
is less. 
``It's a number I'm sure he likes very much, but it's definitely an estimated 
number, and it could be far lower,'' said Oscar Hidalgo, spokesman for the 
state Department of Water Resources. 
Campbell responded that the loss also could be higher. 
The state has spent $415 million on power so far this month. 
State officials last week confirmed that cool weather and consumer 
conservation have left California holding more power than it needs. The 
revelation was a stunning turnaround for a state that months ago was paying 
top dollar for power, expecting shortages this summer. 
Price that was paid 
The state bought 3.5 million megawatt-hours of electricity for July at an 
average price of $118 per megawatt-hour, according to a response Friday by 
the Department of Water Resources to Campbell's inquiry. The state has sold 
178,000 surplus megawatt-hours in July at an average price of $37, the 
department said. 
Based on those average prices, the state paid $21 million for the surplus 
power, which it sold for $6.5 million -- $14.5 million less than it cost. 
A more precise calculation of the state's loss is difficult because purchased 
power is acquired at different times and prices and pooled as a 
``portfolio.'' 
Purchases included long-term contracts that averaged $138 per megawatt-hour 
as well as cheaper spot-market buys. 
State officials last week said they were selling surplus at $15 to $30 a 
megawatt-hour, while some traders cited unconfirmed sales as low as $1. 
Hidalgo noted that the surplus sales represent just 5 percent of California's 
July purchases, which totaled $415 million. The $6.5 million from sales will 
help lower the state's power bill, he said, adding that utilities routinely 
sell some extra electricity. 
``Despite the fact that we're in somewhat of a surplus, any power-buying 
operation in the world is going to have to plan for these types of 
situations,'' Hidalgo said. ``It's not unique, and in fact it's normal 
operating procedure for any utility.'' 
Other Western utilities, including Portland General Electric in Oregon, have 
said they, too, are selling some surplus power at a loss and describe it as a 
cost of doing business. 
The suppliers buying the state's surplus electricity on the cheap include the 
big out-of-state energy companies that the governor has called price-gouging 
``snakes.'' Among them are Duke Energy, Dynegy Power and Marketing, El Paso 
Power Services, Mirant, Reliant Energy and Williams Energy. 
`Best bid' taken 
Hidalgo said the state took the best offers it could find. 
``It's only reasonable to get the best bid you can,'' he said. 
Campbell said the $14 million loss is troubling because ratepayers or 
taxpayers will have to cover the cost, whereas a private utility could be 
forced to eat the expense if regulators determined it was unreasonable. 
State officials say what's more important is that the overall cost of power 
is dropping, from an average daily tab of $64 million in May to $25 million 
this month, in part because the state has so much power. 
Contact John Woolfolk at jwoolfolk@sjmercury.com 
<mailto:jwoolfolk@sjmercury.com> or (408) 278-3410.