Study accuses power suppliers of manipulating prices

LOS ANGELES - Electricity suppliers in California manipulated prices by withholding power at key times, according to a study paid for by Southern California Edison Co.

The report, based on regulatory and industry data, found that plant owners and electricity resellers made huge returns starting in about June by cutting back power generation at some plants, creating artificial shortages that sent prices soaring.

The study, obtained by the Los Angeles Times for an article Thursday, did not estimate the dollar cost to consumers, but the state Public Utilities Commission has estimated that Californians were overcharged by more than $4 billion for electricity this year.

Power plant owners, who have defended their operations as responsible and legal, rejected the study's conclusions.

''We are not withholding anything,'' said Tom Williams, a spokesman for Duke Energy North America, which owns three power plants in California. ''We are running the plants as hard as they can run this year.''

A heated debate is raging in California over whether last summer's record electricity prices were the result simply of tight supplies and heavy demand, or whether market participants deliberately caused the price spikes.

Edison said the evidence in the study should make the Federal Energy Regulatory Commission reconsider ordering refunds to electricity users as well as to Edison, a unit of Rosemead-based Edison International, and Pacific Gas and Electric Co., PG&E Corp.'s San Francisco-based utility.

Those two utilities were unable to pass the full cost of electricity on to customers because of a state-mandated rate freeze. The uncollected costs now total more than $5 billion, and in a related development Wednesday PG&E asked state power regulators for permission to raise rates in part to defray them.

The report came in a response to a Wednesday deadline FERC had set for comment on its proposal to make sweeping but primarily technical changes in the way electricity is bought and sold in California. The proposed order, issued Nov. 1, disappointed California officials who hoped the commission would order refunds.

FERC found that prices in California last summer were at times unjust and unreasonable, but found no evidence that individual market participants were driving up prices - a finding FERC would need to order refunds.

The Edison study, though, found that, particularly in Southern California, significant amounts of electricity were not sent into the market at times when demand and prices were high.

Even accounting for factors like heavier demand and reduced imports, ''our analysis leads us to conclude that truly competitive prices in the California electricity market would have been substantially lower than those observed this past summer,'' the study's authors wrote.

The study was conducted by Paul L. Joskow, director of the Center for Energy and Environmental Policy Research at the Massachusetts Institute of Technology, and San Francisco-based energy consultant Edward Kahn of Analysis Group/Economics Inc.