CAISO Blasts LADWP for Failing to Sell Power

In a tersely worded letter released to the media, the California Independent System Operator took aim at the Los Angeles Department of Water & Power for creating "fragmented operation of the state's grid" and failing to provide "mutual assistance for the benefit of consumers throughout California." CAISO chief executive officer Yakout Mansour fired off the angry letter to LADWP general manager Ron Deaton on September 29, the day after a department engineer refused to sell needed power to the grid operator. Temperatures rose into the 90s in Southern California that day, and a brush fire raged near the Pacific DC Intertie. The line brings power into populated Southern California from the Pacific Northwest. In the latest incident, CAISO control room operator Ricardo Perez called the department's wholesale power sales desk seeking to purchase power as demand climbed. "You calling me for energy"? said LADWP engineer Ken Larson. "First megawatt will cost you $186 million." Larson was referring to money the department believes the grid operator still owes for power it sold during the energy crisis. "In my mind, this is the last straw with regard to absent or inappropriate communication between two of the largest and most critical control areas in the Western United States," Mansour wrote. "It is irresponsible that LADWP would hold CAISO hostage for these obligations," he added. However, not all agreed. "It was understandable that people of Los Angeles wouldn?t want to sell power to ISO if they wouldn't get paid," said Jerry Jordan, California Municipal Utility Association executive director. Moreover, earlier in the summer, the city offered to sell power to the grid operator if the governor's office could help facilitate an arrangement for guaranteed payments. The mayor sent the letter after learning that the California Energy Commission and the grid operator were projecting potential shortages of electricity in Southern California last summer, said Henry Martinez, LADWP assistant general manager for power. In that July 18 letter to Governor Arnold Schwarzenegger, Los Angeles mayor Antonio Villaraigosa wrote that "in order to support the statewide grid, LADWP is currently able to offer to the grid operator, on a short-term basis, uncommitted generating capacity." The mayor pointed out that the department also had offered to sell power to Southern California Edison beginning July 1, but the utility claimed it was "fully resourced." The Los Angeles mayor noted that the department was offering to make electricity available even though it is still owed $180 million for power sold to CAISO during the state?s 2000-01 energy crisis. In exchange for offering to sell power, Villaraigosa asked that CAISO provide "a reasonable guarantee that all sales will be paid in an agreed upon manner and time." He asked for the governor's help in "quickly" setting up "such financial agreements." Martinez said that the department suggested to the grid operator that it set up an escrow account out of which it could draw money when power is sold or offer a letter of credit to cover purchases. "Frankly, I don't think they were really interested," said Martinez. CAISO never seriously discussed the department's suggestions, and neither the governor nor anybody in his administration ever responded to Villaraigosa, he asserted. A spokesperson for the governor's office was unfamiliar with the letter from Villaraigosa, as were the California Energy Commission and the Department of Water Resources. DWR routinely bought power from the department during the state?s crisis. CAISO spokesperson Gregg Fishman said that the grid operator and the department are getting closer to settling their differences. He pointed out that investor-owned utilities are solvent today, so that payment is not an issue as it was during the energy crisis, particularly since CAISO simply passes through money paid by power buyers to generators, minus its own fees. However, while the dispute over terms of payment continues, LADWP continues to withhold power from the grid operator. Since the crisis, the department has not sold power directly to CAISO, Martinez said in a prepared statement. He told Circuit the grid operator knew this policy and that it was highly unusual for the grid operator to call the department's wholesale power desk. Martinez added that the department has made power available to neighboring investor-owned utilities as its claim for back payments from the grid operator remains pending before the Federal Energy Regulatory Commission. He added that his agency always stands ready to supply power to the grid in case of an emergency. Those actions and response did not calm Mansour. "Others in the West face the same credit and refund issues as LADWP, and yet LADWP is the only entity in the West that will not provide power to CAISO," he claimed. LADWP's refusal to sell power to the grid operator last week follows a string of outages caused by problems at department facilities, including rolling blackouts in Southern California Edison and San Diego Gas & Electric territories on August 25 and a major blackout in Los Angeles and adjoining cities on September 12 (Circuit, Sept. 16, 2005). Mansour blasted the department in his letter for failing to communicate with the grid operator about those problems. CAISO had to rely on television to find out what was going on, Mansour noted. The Western Electricity Coordinating Council this week opened a formal investigation of the Los Angeles blackout last month, said Kwin Peterson, council spokesperson.

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CAISO Blasts LADWP for Failing to Sell Power

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