Officials fear some generators withhold power

The key to a successful competitive electricity market, lawmakers and utility executives say, is the fair and honest pricing of power on the wholesale market.

But as the price of electricity has spiked higher and higher over the past year, frustrated consumers and electricity experts worry that the people who generate electricity may be withholding some of their product at peak demand periods, forcing prices upward. The result, they say, is maximum profits for electricity generators and record bills for consumers.

The process is known as “gaming,” and the Federal Energy Regulatory Commission has already found enough evidence in California’s energy market to begin an investigation. Accusations that similar activities have taken place in New England’s market also have been leveled recently.

Stephen Ward, Maine’s public advocate, says he’s “inclined to believe” that gaming has taken place in this market. Gaming is accomplished, Ward explained, when generators claim technical difficulties or schedule routine maintenance at times when demand for power is increasing. With less power available online, the wholesale price of electricity rises. The offending generators then wait until they can get a maximum return before bringing their plants back on line.

“It can be extraordinarily profitable to force up the overall wholesale price,” Ward said, “if you can say with a straight face that your unit is down for maintenance [when there isn’t anything wrong].”

Finding evidence and proving gaming in this, or any, market can be difficult, Ward said. Yet, there have been questionable situations that have led him to believe gaming is alive and well in this market.

“There were a significant number of gas-fired plants that were operating at this point last year,” Ward said. The plants were producing power much more reliably a year ago than they are now, he said.

Two agencies – ISO New England and FERC – are charged with monitoring generators for gaming activities, but there has been some question about their ability to do so.

Bill Cohen, a spokesman for ISO New England, said it is difficult to prove gaming and there is limited action either agency can take if it is proved.

FERC can instruct the Department of Justice to look into possible collusion among generators or investigate any activities designed to artificially inflate the cost of electricity.

William Nugent, one of three commissioners on the Maine Public Utilities Commission, didn’t make any specific charges that gaming has taken place in the New England energy market, but admitted that the wholesale market has been volatile. “The prices have varied over the period of time we’ve been engaged in this process,” Nugent said. “That uncertainty might be expected to command a certain premium in the market.”

Robert Briggs, president of Bangor Hydro-Electric Co., is much more adamant that gaming has caused an artificial spike in the wholesale market. The company projects it will lose about $4.3 million through Feb. 28 by being forced to buy power on the wholesale market above the rate that the company can charge for standard offer service.

As soon as deregulation took effect, Briggs said, wholesale electricity prices immediately jumped. Briggs questioned why the same plants that were able to provide power at a lower price the day before suddenly were asking for considerably more money.

Carroll Lee, Bangor Hydro’s senior vice president and chief operating officer, said the price hikes cannot simply be blamed on higher oil and natural gas prices.

Lee would like to see FERC given greater authority to investigate and penalize generators who toy with the market for financial gain.

Lee believes gaming is occurring because competition isn’t providing lower electricity prices.

He believes that prices would have risen if the industry had not been deregulated, but not to the level they are today.

Lee said his standard question is, “What would the prices be under regulation?” If competition was working as it should under deregulation, he said, then consumers would be seeing lower electricity rates than they are now paying.