Kilowatt Divide' Separates Winners, Losers in California Energy Crisis

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Kilowatt Divide' Separates Winners, Losers in California Energy Crisis Source: Knight Ridder/Tribune Business News Publication date: 2000-12-12

Dec. 12--There were fresh signs Monday that California's flawed electricity market is dividing the state's power players into winners and losers. Shares in big power-plant owners, including Dynegy, Calpine, Southern Energy and AES, surged on Wall Street, even as financial analysts downgraded the stock and debt of two of the state's oldest and best-known utilities, citing serious problems with the state's deregulated electricity market.

"Whoever owns power plants in this market is a winner," said James Bushnell, a researcher at the University of California Energy Institute in Berkeley. "The companies that buy from the power plants, on the other hand, are doing poorly. It's like a tight housing market. Those who own, rule." That means the utility companies Californians grew up with are hurting, while the out-of-state generating companies that poured into the market after it was deregulated in 1998 are watching their profits and share prices explode.

Distributors like Edison International and PG&E Corp. whose debt and stock were downgraded by analysts at Fitch Investors Service and Morgan Stanley Dean Witter, respectively, on Monday -- have had to absorb the price spikes that have plagued California's electricity market this year because they are barred under deregulation rules from passing those costs along to customers for another two years.

Calpine, Southern, AES and others, meanwhile, have been minting money, as shortages have allowed them to sell their power for higher and higher prices. As those prices rose again Monday, shares of Calpine surged 14 percent, while Southern rose 11.9 percent and Dynegy rose 8.4 percent. That added to the big stock gains the companies have enjoyed this year.

Shares of PG&E, Edison and Sempra Energy, the parent company of San Diego Gas & Electric, tumbled Monday, pulled down by continued concern about their exposure to high prices, which prompted the analysts' downgrades.

PG&E, which is trying to persuade government officials to allow it to pass along the higher prices to customers, suggested that it was running out of money to buy power.

Critics of the state's deregulated marketplace say the out-of-state companies may have orchestrated this year's shortages by shutting down some plants, driving up the wholesale price of electricity.

But studies by two state organizations, as well as the Federal Energy Regulatory Commission, found no evidence of such naked manipulation. "We have played by the rules," said Dynegy spokesman Steve Stengel. "We have run our plants full-out to provide all the generation we can to alleviate the situation. These are difficult, indeed unprecedented times.

But Dynegy is trying to be part of the solution."

http://cnniw.yellowbrix.com/pages/cnniw/Story.nsp?story_id=16490926&ID=cnniw&scategory=Utilities

-- Martin Thompson (mthom1927@aol.com), December 13, 2000


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