July 1, 2001
L.A. Loves a Loophole
There's no getting around it...
August 1, 2001
Reliant comes clean on profits, says California picked its own pocket.
While the media made hay chiding power producers for gouging consumers for electricity generated from gas-fired turbines, California' s system of a single market-clearing price for electricity was "delivering immense windfalls" to utilities who had no need to buy gas at all to run the power plants they still owned (or controlled through affiliates).
"The real money stayed in California," says Reliant Energy, "with California' s own three big utilities plus the Los Angeles Department of Water and Power, who together collected more than half of the $27 billion power bill in 2000."
"After the independent gas-fired generators paid their fuel bills," says the Texas-based power producer, "their net revenues totaled less than 10 percent of the total market."
THESE CONCLUSIONS CAN BE FOUND in a white paper entitled, "Myths Debunked: The Real Story of Wholesale Power Costs in California." Reliant produced and released it on July 6 to dispel the idea that Texas power producers ate California' s lunch last year.
Reliant claims "no significant increase in operating margins" over the period 1998 to 2001 on the basis of dollars per megawatt-hour (MWh).
"While revenues have increased significantly," adds Reliant, "what is ignored is that [our] sales quantities have increased four fold and [our] fuel costs have increased seven fold over this same period. In stark contrast, operating margin has increased slightly more than 10 percent.
"The evidence is compelling: Operating costs and sales quantities are driving the revenues of gas-fired generators, not increases in operating margins."
SIX DAYS LATER , in his report of attempts to settle the issue of possible power cost refunds, the administrative law judge at the Federal Energy Regulatory Commission, Curtis L. Wagner, Jr. guessed that power producers owed California "probably more than a billion dollars in an aggregate sum," but "not $8.9 billion as claimed."
Anticipating such a finding, Reliant pointed to its financials: "This analysis illustrates the absurd nature of the claims."
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