Staff's Review of California Public Utility

Commission's September 17, 2002 Investigative

Report On Wholesale Electric Generation

Prepared by Staff of the Federal Energy Regulatory Commission

March 26, 2003
TABLE OF CONTENTS

I. EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. THE REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

III. RESPONSES TO THE REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

A. The Generators' Responses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

B. The CAISO's Response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

IV. THE CPUC'S SUPPLEMENTAL REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

V. STAFF'S APPROACH TO DETERMINE

WHETHER THERE WAS AVAILABLE POWER

NOT GENERATED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . 13

A. Data Collection And Methodology . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . .13

B. The CPUC's Calculation Of Available Power

Not Generated And Staff's Method Of Estimating

Available Power Not Generated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

C. The CPUC's Analysis Is Incomplete–The Results

Of The Equation Must Be Compared To The

CAISO's SLIC Logs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

VI. STAFF'S FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

A. There Was No Material Amount Of Available

Power Not Generated During The

Firm Service Interruptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

B. The Amount Of Available Power Not Generated

Does Not Suggest Material Withholding During

The Firm Service Interruptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

C. The CPUC's Analysis Of The Generators' Bidding

Overstates The Amount Of Power Not Bid . . . . . . . . . . . . . . . . . . . . . . . . 29

1. The CPUC's Calculation Of The Amount
Of Power Not Bid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

2. The CPUC Did Not Consider Non-electronic Bids 

And Certain Bilateral Contracts/Offers With

CAISO And CDWR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

3. The Effect Of Unit Start-Ups And Environmental

Restrictions On The Bidding Process Were Not 

Considered In The CPUC's Analysis . . . . . . . . . . . . . . . . . . . . . . . 35

D. There Were Problems With The CAISO's Data . . . . . . . . . . . . . . . . . . . . 37

E. The CAISO's Emergency Dispatch Authority

Did Not Materially Affect The Firm Service 

Interruptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

F. Intrazonal Transmission Constraints Do Not 

Appear To Have Affected The Firm Service

Interruptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

G. The CPUC's Report Must Be Viewed In The 

Appropriate Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

VII. CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

APPENDICES

Appendix A

Appendix B

Appendix C

Appendix D

Appendix E
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1 The CPUC excluded from its examination Dynegy's Cabrillo plant because

(continued...)

I. EXECUTIVE SUMMARY

This is the Commission staff's analysis of the "Investigative Report on Wholesale

Electric Generation" (Report) by the California Public Utilities Commission (CPUC) in

which the CPUC analyzed data on electric power production and bidding behavior of five

electric generators on 38 days from November 2000 through May 2001 during which

California experienced interruptions of firm or non-firm service. The CPUC concluded,

in that Report and elsewhere, that the merchant generators in California engaged in

significant physical withholding (reducing the amount of generation made available to the

market to increase the value of their remaining generation) and economic withholding

(raising the asking price for their generation to levels well above marginal costs). 

In the narrow context of staff's review of the Report, staff concludes that the

CPUC significantly overstated the degree to which the generators held power out of the

market on those days when firm service was interrupted. This is a very narrow

conclusion. The Commission has not concluded its investigations of whether physical

and economic withholding occurred in California or its magnitude and effect. The

conclusion here, that the merchant generators were not withholding during the six days of

firm service interruptions, does not mean that staff or the Commission have determined

that no physical or economic withholding occurred during 2000 or 2001. Those

investigations are continuing and require a much broader analysis of more extensive data

than the analysis discussed here.

More specifically, the Report concluded that had California's five largest

independent non-utility generators produced their available capacity during the relevant

period, the majority of the service interruptions could have been avoided. The Report

also found that the five generators failed to bid all of their available power into the

relevant California markets, further contributing to the service interruptions. The five

generators are affiliates of: Duke Energy Corporation (Duke); Dynegy Inc. (Dynegy);

Mirant Americas, Inc. (Mirant); Reliant Resources, Inc. (Reliant); and Williams Energy

Marketing & Trading Company (Williams). All of the generators except Williams market

energy generated from plants that they operate within the state of California. Williams

markets power for California plants operated by subsidiaries of AES Corporation (AES)

under an agreement between Williams and AES. The five generators have a total of 18

plants with an aggregate of 66 individual generating units in California.1
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1

(...continued)

the generating units are less than 50 megawatts. Report

At the request of Senator Dianne Feinstein and as part of the Commission's

oversight responsibilities, staff reviewed the data and analysis presented in the Report to

determine if the CPUC's conclusions were reasonable based on available data and

information. The scope of staff's analysis was narrowly limited to reviewing the specific

analysis contained in the Report. Thus, staff's analysis was limited to whether there was

available power not generated (Available Power Not Generated) assuming, as the CPUC

did, that all reported outages were legitimate and whether the generators failed to bid

available power (Power Not Bid). Similarly, like the CPUC, staff did not examine

whether any Available Power Not Generated related to the exercise of market power or

the prices at which the generators may have bid power–i.e., economic withholding. 

Staff’s focus was primarily on the days that firm service interruptions (i.e., blackouts)

actually occurred–January 17, 18, 21, 2001, March 19, 20, 2001, and May 7, 8, 2001, and

concludes that there was not any material withholding on those days. But, as noted,

staff's analysis was not an exhaustive study of generator performance for the 2000

through 2001 time period. Staff did not make any findings with respect to whether there

was physical withholding on other days during 2000 and 2001, or whether any of the

reported outages were not in fact legitimate.
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2 CPUC Supplemental Report 1 (January 30, 2003) (emphasis original).

The CPUC recently stated in response to criticism of its Report that its study "did

not attempt to answer the question of why, at each plant and for each hour, the generators

did not generate all available power."2

 In contrast, staff has answered that very question

for the days on which there were firm service interruptions. Staff's review demonstrates

that most of the power that the CPUC concluded was Available Power Not Generated

during the firm service interruptions was actually unavailable for use. More specifically,

based on its review, staff concludes:

(1) There is no evidence that any of the generators withheld any material amounts of

available power during the hours of the firm service interruptions.

(2) The CPUC's conclusion, that had Duke, Dynegy, Mirant, Reliant, and Williams

provided their available power, the majority of the service interruptions could have been

avoided, is not supported by the evidence. 

(3) The CPUC's analysis is incomplete and resulted in the CPUC overstating, in large

part, the amount of Available Power Not Generated by Duke, Dynegy, Mirant, Reliant,

and Williams. 

(4) Staff's review and analysis of the hours during which firm service interruptions

occurred reveals that approximately 87 percent of the power that the CPUC concluded

was Available Power Not Generated was not in fact available. Staff found that most of

the power that the CPUC concluded was available and withheld by the generators was

actually unavailable because a generating unit was: 

• experiencing an outage; 

• operating at least some of its capacity under the Automatic

Generation Control (AGC) of the California Independent System

Operator (CAISO), and being dispatched by the CAISO to decrease

power in order to control the grid;

• the unit was starting up from having been off-line due to a repair or

having tripped (an automatic shutdown) such that it was not yet

capable of producing its full capacity;
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Actual Status of MW Reported By CPUC As 

Available Power Not Generated For Six Days 

Of Firm Service Interruptions

Outage

31%

AGC

13%

Start-Up

8%

Unaccounted for

13%

SP15

28%

Other

7%

Outage

AGC

Start-Up

SP15

Other

Unaccounted for

• located south of an overloaded transmission path that prevented the

transmission of energy to the area suffering firm service

interruptions; or 

• experiencing other constraints limiting its generation. 

The following chart reflects the relative breakdown of the results of staff's review

of the days on which there were firm service interruptions:

(5) For the six days of service interruptions examined, staff could not account for 13

percent of the amount that the CPUC identified as Available Power Not Generated for the

firm service interruptions; some of these megawatts could have been withheld, as the

CPUC contends. But the amount of unaccounted for Available Power Not Generated is

insufficient to have caused the firm service interruptions, as shown by the chart below. 

On each of the days for which there was a firm service interruption, the amount of

Available Power Not Generated is less than 100 to 200 megawatts, while between 300

and 1000 megawatts were interrupted. Thus, had the additional capacity been available, it

could not have closed the shortfall. Further, during each of the firm service interruptions

the unaccounted for Available Power Not Generated was spread among dozens of

generating units (primarily less than five megawatts per generating unit per hour), making
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Unaccounted for Capacity and Firm Service 

Interruptions For Five Generators

0

200

400

600

800

1000

1200

Jan 17 Jan 18 Mar 19 Mar 20 May 7 May 8

MWh

Unaccounted for Capacity Firm Service Interruptions

it likely that this is rounding, reporting, or recording error rather than deliberate

withholding.

(6) Because the CPUC was not able to correctly identify Available Power Not

Generated, its Power Not Bid estimates are overstated. In addition, the CPUC's analysis

of the bidding behavior of the generators did not consider all of the relevant variables,

such as environmental restrictions, start-up limitations, certain bilateral contracts, and

non-electronic bids that were submitted by telephone or fax. Because the CPUC did not

consider these factors, it overstated the amount of Power Not Bid by the generators.

Accordingly, based on its review and findings, staff recommends that no further

investigation is required with respect to the CPUC's specific claims that the generators

had available power that was not provided during the service interruptions in late 2000

and early 2001. Specifically, for the six days on which firm service interruptions were

experienced, the CPUC's numbers simply do not accurately reflect the amounts of

Available Power Not Generated or Power Not Bid. 
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3 See, e.g., 93 FERC ¶ 61,294 (December 15, 2000); 95 FERC ¶ 61,115

(April 26, 2001); 95 FERC ¶ 61,418 (June 19, 2001); 97 FERC ¶ 61,275 (December 19,

2001); 100 FERC ¶ 61,060 (July 17, 2002); 101 FERC ¶ 61,061 (October 11, 2002); 101

FERC ¶ 61,084 (October 25, 2002); 101 FERC ¶ 61,266 (November 27, 2002); 102

FERC ¶ 61,050 (January 17, 2003).

4 During the time period studied by the CPUC, there was no requirement that

generators bid all of their available power into the California markets.

5 The Report also stated that while the Commission took many corrective

measures to address remaining market problems in its July 17, 2002 Order, those actions

are insufficient and that additional reforms are needed. Report 6-7, 63-69. However,

staff believes that this is not the appropriate forum in which to address CPUC's

disagreement with the Commission's July 17, 2002 Order. In fact, the CPUC's differing

view on some of the measures adopted in that Order have already been fully aired and the

Commission has explained at length why it did not adopt the CPUC's proposals. See 100

FERC ¶ 61,060 (July 17, 2002).

The Commission has taken several measures to reduce the likelihood of

withholding by generators beginning in late 2000.3

 These include:

• eliminating rules that ended the investor-owned utilities' reliance on

spot markets and increased the use of longer-term contracts; 

• establishing penalties for underscheduling load; 

• requiring the CAISO to submit to the Commission staff for

monitoring purposes weekly reports on schedule, outage, and bid

data; and 

• establishing a price mitigation plan requiring generators, as well as

non-public utility generators in California, to offer the CAISO all of

their capacity in real time during all hours if it is available and not

already scheduled to run (i.e., the "must-offer" rule).4

As the Report acknowledges, there have been no price spikes or market-related supply

constraints since the implementation of the Commission's must-offer rule on May 29,

2001. See Report 10, 14, 30.5

 It is also important to note that the analysis that the CPUC attempted to do–i.e.,

calculate the amount of Available Power Not Generated during the seven month time
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period from November 2000 through May 2001 on the days when California experienced

firm or non-firm service interruptions–is extremely difficult and complex given the

variables and the record-keeping systems in place at the CAISO during the relevant time. 

The CAISO's data and information systems were forward looking and designed as

planning tools; they were not intended to gauge performance of past events or to

reconstruct causes of service interruptions. Further complicating the CPUC's efforts to

determine the extent of any Available Power Not Generated was that the CPUC did not

identify to the CAISO what it was attempting to do when it asked for data and

information prior to releasing its Report. As a result, and as discussed in this report, staff

concludes that the CPUC's analysis was incomplete. 

Commission staff informed the CAISO of the review that it was conducting and

discussed in detail with the CAISO the various data sources available and the

appropriateness of each for determining whether there was any Available Power Not

Generated. Then, for the firm service interruptions, staff conducted a detailed unit-byunit time intensive analysis, including reviewing and interpreting the CAISO's

voluminous operational log entries, something the CPUC did not do. In addition to

obtaining data from the CAISO, staff obtained from the CPUC information regarding the

data sources and assumptions it used in its analysis. Staff also reviewed data and

responses to the Report that each of the five generators and the CAISO submitted in

response to a request to comment on the Report from the California Senate Select

Committee to Investigate Price Manipulation of the Wholesale Energy Market (Select

Committee). 

This report consists of six additional sections. Section II summarizes the findings

of the Report. Section III summarizes the responses to the Report by the generators and

the CAISO. Section IV summarizes the CPUC's Supplemental Report. In Section V staff

analyzes the Report's methodology and explains the different approach adopted by staff

based on the data received from the CAISO. In Section VI staff explains its findings

from the detailed analysis and review it conducted for the hours during which firm service

interruptions occurred. Finally, in Section VII staff presents its conclusions.

II. THE REPORT

The Report concluded that had Duke, Dynegy, Mirant, Reliant, and Williams

produced all of their Available Power Not Generated, the majority of the service

interruptions would not have occurred. Although the five generators were only
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6 The majority of California's in-state generation capacity was comprised of

generating facilities owned by municipalities, investor-owned utilities, or "qualifying

facilities" (QFs) that are independent generators who sell their power directly to the

utilities.

responsible for 38 percent of the generation capacity in California,6

 the Report claimed

that "blackouts and service interruptions occurred because generators, Duke, Dynegy,

Mirant, Reliant, and this AES/Williams, did not produce needed power even though their

plants could have met California's electricity needs." Report 2. The Report asserted that

between 37 percent to 46 percent of each of the five generator's total generating capacity

was either not available, or not supplied, on the relevant service interruption days. 

Additionally, the Report made specific findings regarding each generator's alleged effect

on the service interruptions for certain days. Id. at 24-28.

In calculating available power, the CPUC explained that it subtracted from each

plant's generation capacity: (1) megawatts that were out of service as a result of planned

or unplanned outages; (2) obligations to provide reserve power; and (3) all megawatts

actually generated. Report 15. The CPUC claimed that it gave the "benefit of the doubt"

to the generators in the methodology it employed to ascertain their available capacity

because it accepted as legitimate the plants' reported outages. Id. at 14.

The Report also concluded that the generators did not bid all available power into

the markets on the relevant service interruption days, stating that "[i]f a generator neither

bid power into markets nor supplied that power 'out of market' to the ISO, the ISO could

not dispatch that power to meet electricity demand within its control area." Id. at 30. 

Finally, the Report alleged that, in addition to not bidding, "there were many other

strategies the five generators could and did use to withhold power under rules then current

at the ISO" and listed examples of "evidence that one or more generators may have

deliberately withheld power they could have generated during blackouts and service

interruptions." Report 51. The examples of the alleged withholding strategies included:

• Generators failed to follow the CAISO dispatch instructions to move

all available units to full load or to start up a plant.

• Generators declined the CAISO's automated dispatch instructions,

citing "economic considerations" even though the generator had

made a bid. According to the CPUC, this occurred 262 times from

January 18, 2001 to February 16, 2001.
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7 Similarly, in an October 2, 2002 letter to the vice-chair of the Select

Committee, CPUC's president stated that the Report is but one step in examining the

factors that explain the operations of the five generators, and not the last or only step. 

Letter from Loretta M. Lynch to Senator Bill Morrow 2 (October 2, 2002).

• Generators failed to take all actions necessary to make plants

available to the CAISO as soon as possible after outages.

• Generators failed to provide adequate fuel and staffing for plants.

• Generators argued with the CAISO operators over price and terms.

Report 51-55.

Although the CPUC concluded that the five generators contributed to the service

interruptions, it also explained that "considerable additional work remains . . . [and] this

study does not attempt to answer fully the question of why, at each plant and for each

hour, the generators did not generate all available power during each service interruption

hour." Report 20. Further, the CPUC noted that the "ultimate determination of the

relative role of each of the five generators . . . cannot be made until a more detailed

examination of plant outages has been completed." Id. at 50.7

III. RESPONSES TO THE REPORT

A. The Generators' Responses

Each of the five generators submitted a response to the Select Committee. 

Although each generator's response varied in the level of detail provided and differed in

emphasis based on its particular situation, there were many common themes, such as:

• The CPUC's generation capacity numbers were incorrect.

• The CPUC failed to account for environmental restrictions.

• The CPUC's outage data was incorrect.

• The CPUC did not consider the conduct of the majority of the

market–e.g., the investor-owned utilities, the qualifying facilities, or

the municipal owned utilities.
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8 "CAISO Commentary" refers to the CAISO's October 25, 2002 submission

to the Select Committee entitled, "Commentary by the California Independent System

Operator Corporation on the CPUC Staff Investigative Report on Wholesale Electric

Generation released September 17, 2002."

• The CPUC did not take into account in its analysis of bids the

generators' bilateral contracts with the CAISO or the California

Department of Water Resources (CDWR).

• The CPUC did not take into account that the CAISO had emergency

dispatch authority that enabled it to order generators to produce

power irrespective of bids.

• The CPUC stated that it assumed all outages were legitimate, yet

throughout its Report the CPUC appeared to question the genuineness

of the generators' scheduled and unscheduled outages, without

providing any substantiation for questioning the outages.

The generators also directly and indirectly criticized the CAISO, suggesting that

the CAISO did not appropriately dispatch power that was made available to it. Duke,

Mirant, and Reliant additionally claimed that they cooperated with the CAISO and

attempted to assist during the periods of emergency. With respect to the CPUC's specific

allegations regarding Available Power Not Generated directed at the individual generators

for particular days, the generators offered their own numbers and computations with

different results, showing little available capacity on the relevant days. 

B. The CAISO's Response

Pursuant to the Select Committee's request, the CAISO also submitted a

"Commentary" on the Report. The CAISO agreed with the CPUC that the generators did

not bid all of the available generation into the CAISO's markets which, according to the

CAISO, caused it to procure resources in real time to balance the system. CAISO

Commentary 1.8

 The CAISO also agreed that it encountered situations when the

generators refused to produce available power for what appeared to be inappropriate

reasons. Id. But the CAISO could not agree with the quantitative conclusions reached by

the CPUC because:

(1) the CAISO was unable to verify the data used by the CPUC; 

(2) the CPUC did not take into account all relevant factors; and 
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(3) even if the quantitative analysis of the CPUC was correct and took into

account all relevant factors, an after-the-fact calculation of "available"

generation is not possible because the decision to curtail load had to be made

in advance on the basis of projections and other factors. 

Id. at 1, 7.

More specifically, the CAISO explained that it could not replicate the CPUC data

because the CPUC used aggregate numbers relating to the generators and the CAISO's

data is maintained on a plant-by-plant basis. CAISO Commentary 4. Nor could the

CAISO, in many instances, determine how the CPUC applied its stated methodology. Id. 

Further, with respect to available capacity, the CAISO pointed out that generating units'

capacity can be limited by a number of operating constraints and that at least some of the

outage data used by the CPUC may not be reliable, a fact about which the CAISO advised

the CPUC at the time the data was provided. Id. at 4. 

Additionally, the CAISO noted that it is unclear whether the CPUC accounted for

decreases in generator power in response to an automatic dispatch instruction by the

CAISO through its AGC. Id. at 6. Indeed, in response to Duke's rebuttal to the Report,

the CAISO stated that according to the CAISO records during Hour 15 on May 8, 2001,

Duke was generating at full capacity. However, the Report indicated that Duke withheld

over 600 megawatts during that hour, making it appear that the CPUC did not account for

the amount of megawatts of Duke's units that the CAISO controlled through its AGC. Id.

at 6-7. Finally, the CAISO also stated that the CPUC failed to consider that capacity may

have been bid into the CAISO markets (or otherwise be available), but not dispatched

because of locational transmission constraints. Id. at 5.

Despite its misgivings over the CPUC's data, methodology, and conclusion, the

CAISO agreed with the CPUC that the generators did not bid all of their available capacity

into the CAISO's markets and that the generators many times declined to follow dispatch

instructions for inappropriate reasons, such as "economic considerations," or argued over

the prices at which they would run. Id. at 3. Further, the CAISO disagreed with the

implication by the generators that its emergency dispatch authority was a substitute for

bids. Rather, the CAISO explained that despite its authority to issue emergency dispatch

instructions to generators for available power, the CAISO had no control over the

generators' performance of those instructions. In fact, according to the CAISO, "refusals

to follow dispatch instructions occurred with great frequency." Id. at 8. However, in its
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9 See Section VI.E. infra regarding the data provided by the CAISO to staff

relating to the generators' declines of emergency dispatch instructions.

10 In response to a request from staff for details regarding instances that

generators alleged feigned environmental restrictions, the CAISO provided information

about two instances that occurred in early February 2001 in which the CAISO believed

that Williams and Dynegy falsely claimed they could not run certain of their units

because of environmental limitations. Litigation ensued, but the issue of whether the

environmental restrictions were feigned was not directly resolved because it was mooted

when the environmental governing authority agreed to allow the generators to continue

operating without violating emission regulations.

Commentary, the CAISO did not quantify or otherwise provide specific information

regarding such refusals, such as on what days the refusals occurred or by what generators.9

The CAISO similarly noted that while some environmental restrictions did actually

exist that affected the generators' ability to provide power, at times such restrictions appear

to have been "feigned." Id. However, no details were provided by the CAISO in its

Commentary as to when restrictions were allegedly feigned, by which generators, or why

the CAISO believed they were feigned.10

IV. THE CPUC'S SUPPLEMENTAL REPORT

In response to comments by the generators, the Select Committee, and the CAISO,

the CPUC issued a Supplemental Report on January 30, 2003. The CPUC did not change

any of its conclusions but it did refine downward some of its computed amounts of

Available Power Not Generated. See Supplemental Report Appendices. The CPUC also

defended its methodology by explaining that it was a "macro-level overview of available

power not generated and not bid . . . . The study did not attempt to answer the question of

why, at each plant and for each hour, the generators did not generate all available power."

Supplemental Report 1 (emphasis original). 

The Supplemental Report emphasized that its investigation is not final and is

continuing, especially with respect to looking into what it characterizes as "suspicious

outages." Id. At 6-8. In fact, the CPUC described five particular instances that it is

investigating as potential illegitimate outages. Id. Despite this, however, the CPUC did

not change the analytical approach that it adopted in its initial Report, which was to
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11 For this reason, staff also made that assumption and did not undertake an

investigation of outages in this report. Staff is independently examining the alleged

improper outages cited in the Supplemental Report, none of which had been previously

referred to the Commission by the CPUC or the CAISO.

12 In the case of localized reliability problems, the CAISO can dispatch

generating units that have a Reliability Must Run (RMR) agreement with the CAISO.

assume all outages were legitimate for purposes of its study of the alleged available power

that was not generated and not bid.11

The CPUC further noted that additional study is needed regarding the generating

units that were operating under AGC, and therefore under the control of the CAISO. Id. at

12. As part of its continuing investigation, the CPUC stated that it will analyze all data

regarding the CAISO's control of power plants on AGC. Id. at 13.

In response to comments that the CPUC had not considered the CAISO's

emergency dispatch and RMR12 dispatch authority, the CPUC contended that (1) it

accounted for all power generated pursuant to RMR, and (2) despite the CAISO's ability to

issue emergency dispatch orders, the generators were nonetheless obligated to bid their

available power into the market. Id. at 9-11. The CPUC further stated that the emergency

authority of the CAISO was "sub-optimal at best," explaining that "[t]he ISO cannot use its

efficient, automated systems to dispatch power under such circumstances." Id. at 11. The

CPUC similarly dismissed the generators' arguments that they had legitimate financial

reasons not to bid all available power into the market as unpersuasive. Id. at 14. Rather,

according to the CPUC, once the CDWR took over procurement responsibilities for the

state in mid-January 2001, the generators' concerns about creditworthiness were nearly

eliminated. Id. Finally, the CPUC also dismissed many of the generators' criticisms as

being of "questionable validity," including: (1) not taking into account lengthy start-up

times; (2) environmental limitations; (3) imports and exports by generators; and (4) the

generators' claims that they operated more during the crisis than previously. Id. at 13-16.

V. STAFF'S APPROACH TO DETERMINE WHETHER 

THERE WAS AVAILABLE POWER NOT GENERATED

A. Data Collection And Methodology

To review the Report, staff sought more specific information from the CPUC

regarding its methodology, including: (a) the sources of the data that it utilized, (b) how it

accounted for such factors as environmental restrictions, export sales, bilateral contracts,

ramp rates, grid transmission constraints, and derates, and (c) how it determined the
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13 These are the days that a firm service interruption was experienced, either

in Southern or Northern California, and two days before and after each firm service

interruption.

14 See Appendix A for a list of the thirty items requested.

15 SLIC (Scheduling Logging for the ISO of California) is the name of the

data system the CAISO uses to record a variety of operational information including some

outage information.

maximum capacity of each generating unit. In response, the CPUC explained that it relied

on information provided by the CAISO and described whether and, if so how, it accounted

for the factors inquired about. 

From the CAISO, staff attempted to obtain all relevant data that reflected any

available power and/or bids for each of the five generators' units for January 15, 16, 17,

18, 19, 20, 21, 22, 23, 2001, March 17, 18, 19, 20, 22, 2001; and May 5, 6, 7, 8, 9, 10,

2001.13 In particular, staff requested thirty specific pieces of information for each relevant

hour and each relevant generating unit.14 In addition, staff requested from the CAISO data

relating to: grid transmission constraints; forecast and actual load generation; plant

outages (scheduled and forced); import capability; amount of imports; and amount of

exports. 

Although the CAISO attempted to provide everything staff requested, it was

produced piecemeal over three months and required considerable follow-up by staff to

obtain the data it needed. Additionally, the CAISO was not able to provide all of the

specific data requested for a variety of reasons. In some instances, the CAISO simply did

not maintain the information, such as snapshots of real-time topology during the service

interruptions. In other instances, the CAISO was only able to provide partial information. 

Moreover, in several instances, the CAISO did not have a distinct database that contained

the requested information, but referred staff to its SLIC logs that the CAISO said might

reflect the information that was sought.15 Specifically, for example, staff was advised by

the CAISO that some, but not all, environmental and start-up limitations would be in the

SLIC logs.

Staff also obtained the data that the CAISO had provided to the CPUC that the

CPUC identified as having used in its analysis. In addition to collecting and analyzing the

CAISO data and information, staff held numerous conference calls with CAISO personnel

to understand how the CAISO compiled the data that it provided and what the data

represented to ensure that staff was correctly analyzing the material.
-16-

16 Many reports and studies on the California electricity crisis have been

published and although their views may disagree on many issues, most agree that there

were many causes that contributed to the crisis. See, e.g., Christopher Weare, The

California Electricity Crisis: Causes and Policy Options 2003.

17 Generation includes all generation by a generating unit, irrespective of

whether it was exported out of California or pursuant to a bilateral contract and not bid

into one of the CAISO markets.

At the outset, it is important to understand not only the analysis and review that

staff conducted, but also what staff did not do. Staff did not, and could not attempt to

determine all the factors that contributed to the service interruptions. That is beyond the

scope of this study.16 Rather, staff limited the scope of its review to the subjects of the

Report–i.e., the Available Power Not Generated and the Power Not Bid. Moreover, the

scope of staff's review, like that of the CPUC, did not include whether the Available

Power Not Generated related to the exercise of market power, whether plant outages were

legitimate, or whether any of the bids related to the exercise of market power.

B. The CPUC's Calculation Of Available Power Not Generated And

Staff's Method Of Estimating Available Power Not Generated

The CPUC described its methodology in computing the available power not

generated as subtracting from each plant's generation capacity: (1) megawatts that were

out of service as a result of planned or unplanned outages; (2) all megawatts actually

generated;17 and (3) obligations to provide reserve power. Report 15. Thus, the CPUC

apparently used the following arithmetical calculation:

Available Power Not Generated = Capacity - Outages - Generation - Reserves 

Graphically, the CPUC's calculation was:
-17-

18 The CPUC claims that it was required to aggregate its numbers for

confidentiality reasons. Supplemental Report 4.

OUTAGES

GENERATION 

RESERVES 

AVAILABLE POWER 

NOT GENERATRED 

GENERATING 

UNIT 

CAPACITY 

(MW) 

ILLUSTRATIVE ONLY – 

NOT DRAWN TO SCALE 

On its face, this calculation seems logical and uncomplicated. The difficulty in reviewing

the Report, however, is that the CPUC did not provide the actual numbers it used for each

element of the equation and the numbers that are provided are aggregated by generator and

not for each generating unit.18 Therefore, staff could not precisely replicate CPUC's

computations. 

Even more problematic, however, is the outage data used by the CPUC. The CPUC

informed staff that it used a table referred to as "SchOut" that the CAISO prepared based

on an algorithm from CAISO's SLIC database. However, in an July 23, 2002 email, the

CAISO specifically advised the CPUC that:

The SchOut table is intended to reflect a higher-level picture of outages and

is not intended to be used in micro-investigations of specific generating unit

behavior during a specific subset of hours. . . . I become concerned that you

may be placing too much stock in the data contained in that table.

July 23, 2002 email from Jeff McDonald at the CAISO to Charles Magee at the CPUC. In

fact, when staff inquired of the CAISO about the SchOut file, the CAISO informed staff

that it would not be of assistance in reviewing the Available Power Not Generated for

specific days or generators.
-18-

19 For example, if a generating unit that has a maximum capacity (known as

PMAX) of 100 megawatts experiences a pump failure on January 17, causing a 30

megawatts derate, the unit then has a derated PMAX of 70 megawatts. On January 18, the

same unit experiences a clogged condenser, which does not cause a further derate below

the 70 megawatts. However, if the unit had been at its full PMAX of 100 megawatts, the

clogged condenser would have derated the unit by 20 megawatts, down to a PMAX of 80

megawatts. Although the unit has two separate outages concurrently (30 megawatts and

20 megawatts, respectively) they are not cumulative. The availability capacity of the unit

is still 70 megawatts despite the additional problem on January 18. Similarly, assume that

the second outage on January 18 caused a derate of 40 megawatts instead of only 20. The

derated PMAX would then be 60 megawatts with the January 17 outage of 30 megawatts

subsumed by the larger 40 megawatts outage on January. Again, the outages are not

cumulative. If, in fact, the concurrent outages were erroneously treated as cumulative, it

would cause an underestimate of the Available Power Not Generated.

20 The CAISO implemented a new system of reporting outages on February

19, 2003, which is fully integrated with the CAISO's other systems in an attempt to

eliminate problems encountered in the past regarding outage information.

Because of the potential for overlap with respect to concurrent outage problems on

the same generating unit,19 the CAISO required generators to also report the amount of

megawatts that the units can generate, known as an "availability" number, at the same time

outages are reported to the CAISO. The amount reported as available represents the

amount of megawatts that the generating unit is then capable of generating, taking into

account all outages. Staff was advised by CAISO that the availability database should be

the starting place to calculate the amount of power not generated at a given point in time.

Because the CAISO availability database was designed to account for all outages and

because of the reliability problems with the CAISO outage databases, staff concluded that

the availability database is the appropriate data source to use to estimate the amount of

Available Power Not Generated.20 

Using the availability database, the staff subtracted from the amount of megawatts

that the generators reported as available: (1) the amount generated; and (2) the amount of

reserve obligations:

Available Power Not Generated = Available Generation - Actual Generation

- Reserves
-19-

21 The outage element included in the CPUC's equation is not separately

identified in the graph of staff's equation because it has already been subtracted from a

unit's maximum capacity in determining availability.

22 The generators provided available generation data in two different formats;

one as to available generation by generating unit and one listing detailed event data

describing outages or de-rates. These two sets of data were not always entirely

consistent.

23 Because of some reliability problems with the CAISO data as discussed

more fully in Section VI.D, staff uses the term "estimate" as opposed to "calculation"

when describing its analysis.

GENERATION 

RESERVES 

AVAILABLE POWER 

NOT GENERATRED 

GENERATING 

UNIT 

AVAILABILITY 

(MW) 

ILLUSTRATIVE ONLY – 

NOT DRAWN TO SCALE 

Alternatively, in graphic format, the staff's approach was as follows:21

Although this equation provides a better estimate of the amount of Available Power

Not Generated than that used by the CPUC, this equation must also be qualified to some

degree. Upon comparing the availability database of the CAISO to the availability data

provided by some of the generators to the Commission, staff discovered inconsistencies. 

There were not only discrepancies between the data provided by the CAISO and that of

the generators, but in some instances there were discrepancies among the generators' own

data.22 Thus, even the results of this equation are an estimate and not so reliable such that

staff can precisely determine to the megawatt the amount of Available Power Not

Generated.23 Significantly, however, the initial results of the staff's estimate for the days

during which there were firm service interruptions roughly correlate to those of the CPUC

–i.e., the results appear to reflect that there was a substantial amount of Available Power

Not Generated by the five generators, in the aggregate range of 425 to 856 megawatts for
-20-

24 Included as Appendix B are bar charts that reflect the CPUC's and staff's

aggregate estimates of Available Power Not Generated as a result of their respective

equations. Because most of the information staff obtained from the CAISO is confidential

pursuant to the CAISO's tariff and was provided to staff with the understanding that it

would remain confidential, staff's detailed calculations revealing names of generating

units and amounts of megawatts are not revealed in this report. Further, based on the

results of staff's review–i.e., the CPUC's analysis is incomplete and its conclusions

unsupported--publicly revealing the details of the first step in the analysis is unnecessary.

each of the relevant days.24 But, as described in the next section, this step of the estimate

is just the beginning, not the end of the analysis.

C. The CPUC's Analysis Is Incomplete–The Results Of The

Equation Must Be Compared To The CAISO's SLIC Logs

Due to the manner in which the CAISO maintains its records, using the above

mathematical formulas to estimate Available Power Not Generated is only the first step,

not the final one. Rather, as the CAISO stressed to staff, after calculating what appears to

be Available Power Not Generated by a particular generating unit for a given hour, the

circumstances surrounding the particular generating unit must be carefully scrutinized by

examining all relevant SLIC operation log entries that can reveal additional information

about the unit at the relevant time. This is not an easy task–the log entries are narrative

notations made by the CAISO operations personnel contemporaneous with events and are

not always entered the same day that is being examined with regard to whether potential

power is available. For instance, while examining whether there was Available Power Not

Generated on January 17, 2001, it may be necessary to review SLIC log entries for an

earlier time period. Specifically, a particular generating unit that appears to have

Available Power Not Generated on January 17 may have experienced an outage on

January 3. As a result, the unit's status on January 17, both as to megawatt capacity and

repairs, may be detailed in the January 3 outage report. Thus, in this example, unless that

January 3 outage report is reviewed, as well as any subsequent relevant reports, it may not

be possible to know the accurate state of affairs for that unit on January 17.

Because the results of the first step (the arithmetical equation) revealed many

instances of what appeared to be Available Power Not Generated by the generators, staff

narrowed its focus on the hours during which firm service interruptions occurred on

January 17, 18, March 19, 20, and May 7, 8, 2001 to conduct the critical second step of
-21-

25 Firm service interruptions also occurred in the north on Sunday, January 21,

2001. However, the CAISO's decision to interrupt firm service on January 21 was due to

its effort to mitigate severe overloading of Path 15 that was caused by the loss of the

Pacific DC Intertie while carrying 1700 megawatts. Because of the much larger

magnitude of the of the system disturbance (1700 megawatts) compared to the small

amount of generation the CPUC claimed that generating units north of Path 15 were not

generating (8 to 21 megawatts), staff did not include January 21 in its analysis.

26 These 58 instances were the aggregate number of times where it appeared

that a generating unit had Available Power Not Generated during the first hour of one of

the six days during which firm service interruptions occurred. Only the first hour of each

of the service interruptions was examined closely by staff because of the time and

resource intensive nature of the necessary review of the SLIC log entries and because the

first hour of the firm service interruption is the most critical. According to the CAISO,

many other variables enter into the picture after the first hour of a service interruption,

such as large load curtailments that often resulted in response to the CAISO's public

announcements about the service interruptions and requests to conserve energy. Another

reason staff focused on the first hour of the interruptions is that frequently the reason

explaining why a unit was in fact unavailable continued throughout the entire service

interruption (e.g., an outage, the unit was located south of an overloaded transmission

path, or the unit was experiencing a physical constraint limiting its output).

reviewing the SLIC log entries.25 Thus, staff examined the SLIC logs for 58 instances

where a generating unit appeared to have Available Power Not Generated for one of the

firm service interruption hours.26

 In addition, because the SLIC logs vary in their detail, contain abbreviations, and

can be subject to different interpretations, after reviewing the log entries and determining

what it believed was the explanation for the unit not generating to its full capacity, staff

consulted with the CAISO to confirm that staff was correctly interpreting the log entries. 

Based on this process and, as discussed in further detail below, staff was able to ascertain

in most cases why the unit was not producing its entire capacity and determined that it was

not in fact available to generate additional power. 

VI. STAFF'S FINDINGS

A. There Was No Material Amount Of Available Power

Not Generated During The Firm Service Interruptions
-22-

27 See also Section VI.D, infra.

28 This unit's outage was publicly reported on the CAISO's web site on March

19, 2001.

Applying the detailed analysis and review described above, staff was able to

determine that approximately 87 percent of the power that its arithmetical estimate showed

as potentially Available Power Not Generated was not in fact available. In general, the

explanations for why the power was not actually available fell into five categories: 

(1) the unit was unavailable due to an outage (that had been erroneously

recorded or overlooked in the outages file, but was contained in the SLIC log

entry); 

(2) the unit was on AGC and was being dispatched by the CAISO to

decrease power in order to control the grid; 

(3) the unit was starting up from having been off-line due to a repair or

having tripped (an automatic shutdown) such that it was not yet capable of

producing its full capacity;

(4) the unit was located south of an overloaded transmission path that

prevented the transmission of energy to the area suffering firm service

interruptions; or 

(5) the unit was experiencing some other physical constraint that prevented it

from producing at full capacity.

(1) Erroneously recorded outages: Staff discovered many instances where the

availability log and outage database (which were used for the equations, respectively by

staff and the CPUC) were in error.27 Illustrative is Ormond Beach Unit No. 1, that was

listed in the CAISO's availability and outage databases as available for March 19, 2001 at

724 megawatts. In reality, however, the unit was only capable of producing 550

megawatts due to an outage.28 The SLIC log entries revealed that the unit had been

curtailed to 550 megawatts on March 12, 2001 due to a gas recirculation casing expansion

joint leak and not released to full load until April 3, 2001. However, the log entries also

reflected that from 11:30 p.m. on March 15 until 4:00 a.m. on March 16, the unit was

down completely due to condenser cleaning. Apparently, when the condenser cleaning

was completed, and the unit returned from that outage, 724 megawatts was erroneously

entered in the availability and outage databases instead of only 550 megawatts to correctly
-23-

29 This error also illustrates a problem with the consistency of the CAISO's

outage data. During the relevant time period, it had several distinct sources of data

regarding outages. On its web site during the relevant time period the CAISO posted a

daily report of planned and unplanned outages based on the generators' oral reports to the

CAISO. However, as its web site noted, the outages "may overlap or may not all be

simultaneously in effect." In addition to the outage numbers reported on the CAISO web

sites, the CAISO also maintained a record of outages in its availability log taken from its

SLIC logs. However, on February 19, 2003, the CAISO revised its system of collecting

and reporting outage information in an attempt to improve the consistency problem.

reflect the limitation from the concurrent outage caused by the gas recirculation problem.29

Thus, under the CPUC's analysis, which stopped with the arithmetical equation and used

the CAISO's erroneous outage information, this unit had 174 megawatts of Available

Power Not Generated, which the CPUC concluded was withholding by the generator. In

fact, however, the generator was not withholding and the unit was producing to the full

limit of its then capacity. Errors such as this in the CAISO's availability log and outage

files account for 31 percent of the CPUC's Available Power Not Generated where

generation was assumed as available when it was not during the firm service interruptions.

(2) Units on Automatic Generation Control (AGC): If a generating unit is

operating on AGC, a prescribed range of the unit's capacity is under the CAISO's control. 

The generating unit automatically responds to signals from the CAISO's control systems in

real time to control the power output of the generators within a prescribed capacity band in

response to changes in system frequency or tieline loading. This is done to maintain the

frequency or to maintain interchange with other control areas within predetermined limits.

The CAISO's control over the generating units is effected by the CAISO purchasing

ancillary services known as Regulation Up and Regulation Down from generators.

Regulation Up is a band of capacity set aside by a generating unit to accommodate an

increase of output by a generating unit. Regulation Down is a band of capacity set aside

for a generating unit to decrease its output. When the CAISO exercises Regulation Up

that it has procured from a generating unit, the unit must generate additional power; when

the CAISO exercises Regulation Down procured from a generating unit, the unit's

production of power is decreased. Thus, a generating unit from which the CAISO has

purchased Regulation Up has capacity that it must set aside to await instruction from the

CAISO and a generating unit from which the CAISO has purchased Regulation Down may

be underproducing relative to its capacity because the CAISO controlled its output for that

purpose.

Regulation Up and Regulation Down are distinct capacity products and are

separately bid by the generators and purchased by CAISO. The CPUC, however, stated in
-24-

30 In its Supplemental Report, the CPUC appears to recognize the flaw in its

approach to handling units on AGC, but stops short of acknowledging that its approach

overstated the amount of available power not generated. Supplemental Report 12-13. 

Rather, it contends that AGC "needs further study." For instance, the CPUC admits that

the CAISO's statement "appears to support a claim by Duke that the ISO reduced Duke's

generation up to 600 MW during that day [May 8, 2001]." Id. at 13. The CPUC further

notes that it has data to reflect that the CAISO accepted Duke's bid for Regulation Down

and sent AGC signals to reduce generation, but nonetheless claims that it needs data on

the CAISO's "use" of the Regulation Down bids. Id. at n 9.

its initial Report that Regulation Up and Regulation Down "should roughly balance out, in

which case, it is a wash for the purposes of this analysis." Report at 17 n. 15. That

statement is not accurate. From the CAISO data provided to staff, there is nothing to

indicate that Regulation Up and Regulation Down "balance out." In fact, it is not unusual

for a generating unit to bid for only one or the other. Regulation Up and Regulation Down

are separate products and were bid and purchased in distinct amounts that bore no

relationship to one another in terms of the amount of megawatts. Thus, treating it as a

wash is inappropriate when attempting to determine the amount of available power not

generated. By ignoring the Regulation Down service a generator provided, the CPUC was

inaccurately increasing the generators' purported Available Power Not Generated. Indeed,

as discussed earlier, the CAISO pointed out a specific instance of this occurring relating to

Duke on May 8, 2001. See page 11, supra.

30

(3) Start-Ups and Ramps: There are physical limitations on how fast a generating

unit, once synchronized to the grid, can increase its output to the maximum operating

level. For some units, it can take several hours to reach maximum capacity operating

levels. Power level increase restrictions may result from operational causes such as

turbine heating precautions or, for some maintenance outages, certain testing or

configuration changes which lengthen the time it takes to generate at full capacity. In

addition to start-up limitations (starting up from a shutdown condition), there are ramp rate

limitations when a unit's power is ramped up (or down) in response to changes in

demanded output levels. These limitations affect the availability of units due to the time it

takes to increase or decrease power from one level to the next. 

The CPUC informed staff that it did not take into account start-up limitations or

ramp rates in its analysis in its initial Report. However, in its Supplemental Report, the

CPUC noted that it made changes to its calculations to account for start-up times following
-25-

31 Neither the CPUC's Supplemental Report nor its revised appendices,

however, detail which start-ups or the amount of megawatts that were included in its

adjustments.

32 Staff obtained each unit's start-up and ramp rate information from the

CAISO.

33 Staff excluded start-ups of peaking units that can reach full capacity very

rapidly within a few minutes of start-up. Additionally, staff only reviewed start-ups that

spanned on-peak hours of the days of firm service interruptions.

34 The generator, at staff's request, waived its confidentiality of this data solely

for purposes of this report.

outages. Supplemental Report 14-15.31 Staff's examination of the SLIC logs, together with

each unit's start-up information,32 revealed that start-up or ramp rate limitations affected

nine separate units' performances on a total of nine occasions during the firm service

interruption days.33

An illustration of the effect that a start-up and ramp rate limitation can have on the

potential availability of a unit is depicted in the figure below, representing the start-up of

the Encina Unit 2 that occurred on May 7, 2001, following a trip of the unit that was

reflected in the SLIC log entries.34 By not reflecting in its calculations that the unit could

not instantly achieve its full capacity after being reconnected to the grid after the unit

tripped, the CPUC overstated this unit's Available Power Not Generated for at least the

first hour as represented by the yellow shaded area for the hour ending 1700 in the figure

below.
-26-

35 Up to 40 percent of those 2,700 megawatt hours consist of apparent "hold

points" which are assumed to be part of the normal start-ups. "Hold points" occurred

during some start-ups where the generating unit's power was halted and held constant for

a certain time. Although the CAISO informed staff that its system operators had no

consistently employed method for tracking and recording such hold points, hold points

are common to many start-ups. Examples of where hold points are sometimes needed

include maintenance, post-repair checks from a boiler casing leak, and testing during

(continued...)

Energy or Capacity (MWh or MW, Respectively) 

10 

20 

30 

40 

50 

Hourly metered output (MWh) 

Availability (from CPUC calculation), calculated as PMAX – “Outage” (MW) 

Estimate of amount of energy CPUC Report would attribute to “not-generated” (MWh) 

Time (Hour Ending) 

Legend 

Generator output 

1600 1700 1800

~ 10 MWh 

~ 42 MWh 

Encina Unit 2 Start-up, May 7, 2001

Included as Appendix C is a detailed explanation of the start-up depicted by this figure.

Overall, the failure to take into account the start-up limitations associated with the nine

start-ups during the firm service interruptions resulted in an overstatement by the CPUC of

alleged Available Power Not Generated. Staff estimates that the nine start-ups included

approximately 2,700 megawatt hours that the CPUC attributed to Available Power Not

Generated in its original Report.35
-27-

35(...continued)

start-ups.

36 Although there were also some non-firm service interruptions south of Path

15 on January 17 and 18, according to the CAISO, it was unable to use all of the available

power to avoid those interruptions because of the more restrictive nature of non-firm

interruptions. For example, most non-firm interruptions must be provided with advance

notice of at least 30 minutes and there cannot be more than one interruption per day

which means that non-firm interruptions typically last for several hours. See, e.g.,

(continued...)

(4) Generating units located south of Path 15 on January 17 and 18, 2001: On

January 17 and 18, 2001, the firm service interruptions occurred only in northern California.

In its report to the Department of Energy on these incidents, the CAISO stated that the firm

service interruptions were necessary because the limits on Path 15 were exceeded due to

hydro generation in northern California that had to be reduced because of low water levels.

CAISO Electric Power System Emergency Report 2 (January 20, 2001). More specifically,

according to the report, during the reduction of those hydro facilities, a thermal plant in

central California tripped and created an overload on Path 15. Id. Similarly, on January 18,

2001 the CAISO reported that Path 15 limits necessitated the firm service interruptions. Id.

As a result, the only power that could have averted the firm service interruptions on

January 17 and 18 had to be generated from units located north of Path 15. Path 15 consists

of two 500 kV and four 230 kV lines located in central California. When Path 15 becomes

constrained in the south to north direction, generation located south of Path 15 cannot be

dispatched to serve load north of Path 15. Similarly, when Path 15 is constrained in the north

to south direction, generation located north of Path 15 cannot be dispatched to serve load

south of Path 15. As the map depicted on page 2 supra reflects, all of the generating units

operated by Dynegy, Reliant, and Williams were located south of Path 15, while Duke

operated generating units located both north and south of Path 15. Mirant's generating units

were located north of Path 15.

Approximately 28 percent of the initial estimate of Available Power Not Generated

was from generating units located south of Path 15. That power from those units could not

therefore have averted the firm service interruptions in the northern part of the state.

Specifically, on January 17 and 18, additional generation at the Dynegy, Reliant, and

Williams and some of Duke's plants could have had no effect on northern California outages.

Moreover, staff discovered that the CAISO's records show that those generating units located

south of Path 15 that appeared to have Available Power Not Generated on January 17 and 18

were following the CAISO's dispatch instructions.36
-28-

36(...continued)

Southern California Edison Schedule TOU-8-SOP-1. 

(5) Other circumstances: The review of the SLIC log entries in consultation with the

CAISO personnel revealed other limitations on generating units that explained why they were

not generating at full capacity during firm service interruptions. For instance, some units were

apparently experiencing an "ambient derate" on May 7 and 8 whereby a unit's capacity slowly

decreases during the day by one or two megawatts an hour due to the air and cooling water

temperatures increasing or the degrading of the cooling water intake screens. Another

limitation staff found was that sometimes a generating unit was required to decrease its output

by a few megawatts throughout the day because it had reached an equipment thermal limit that

was causing overheating, requiring the unit to be operated at a reduced capacity. 

In summary, by analyzing the detailed SLIC log entries, staff was able to account for

87 percent of the potentially Available Power Not Generated, demonstrating that in fact only

a small amount of megawatts was not accounted for during the firm service interruptions. The

figure below graphically reflects for each of the relevant days, the amount of power that the

staff was able to verify was not actually available and the reasons that the generators were

unable to produce their full capacity. More particular, the chart reflects the amount of the

total megawatts of potentially Available Power Not Generated by all of the five generators'

during the first hour of the firm service interruptions for which staff was able to explain its

status as unavailable due to outages, start-ups, located South of Path 15, operating under

AGC, or other physical constraints. In addition, the chart reflects the small amount of total

megawatts for which staff could not account–i.e., Available Power Not Generated.
-29-

Available Power Not Generated (MW) for Six 

Days of Firm Service Interruption

0

100

200

300

400

500

600

700

800

900

Jan

17

Jan

18

Mar

19

Mar

20

May 7 May 8

MW

Other

SP15

Startup

AGC

Outage

Unaccounted for

B. The Amount Of Available Power Not Generated Does Not Suggest

Material Withholding During The Firm Service Interruptions

Staff's review of the SLIC log entries accounts for most, but not all of the potentially

Available Power Not Generated by the five generators studied during the firm service

interruptions. It appears that a small amount of Available Power Not Generated existed during

the firm service interruptions for which staff's investigation found no explanation.

Specifically, the estimated amount of aggregate (by all of the five generators) megawatts that

were available, not generated and not accounted for on the first hour of the firm service

interruptions were as follows:

Interruption Date Available MW Unaccounted For MW Interrupted

January 17, 2001 73 MW 500 MW

January 18, 2001 55 MW 1000 MW

March 19, 2001 50 MW 500 MW

March 20, 2001 62 MW 500 MW

May 7, 2001 194 MW 300 MW

May 8, 2001 120 MW 400 MW
-30-

37 The generator, at staff's request, waived its confidentiality of this data solely

for purposes of this report.

38 The CPUC did not provide the results of its computations on an individual

unit basis; rather, it provided the aggregate numbers for each of the five generators.

No one generator ever accounted for more than 75 megawatts in one of those hours.

Moreover, the megawatts were widely spread among the multiple generating units of each

generator. Listed below is an example of staff's detailed analysis of multiple generating units

for one generator during hour ending 10 on January 18, 2001.37

Generating Unit CPUC's

Calculation38

Staff's Estimate Accounted For By

Staff

Unaccounted For

By Staff

El Segundo 7, #1 N/A 8 8

El Segundo 7, #2 N/A 46 46

El Segundo 7, #3 N/A 0

El Segundo 7, #4 N/A 0

Encina 7, #1 N/A 0

Encina 7, #2 N/A 18 18

Encina 7, #3 N/A 0

Encina 7, #4 N/A 163 163

Encina 7, #5 N/A 0

Long Beach, #2 N/A 1 1

Long Beach, #6 N/A 20 20

Total 269 256 247 9

As the above illustration demonstrates, the nine megawatts of power not produced for

which there is no explanation do not appear to represent purposeful withholding and are

plainly not in the order of magnitude that could have averted the firm service interruptions had

they been produced. Moreover, although eight megawatts were not produced from the El
-31-

39 See Section VI.C.1 infra for a discussion of the CAISO's markets.

40 The California Power Exchange (California PX) ceased operations in

January 2001. However, the CAISO informed staff that by the time of the first firm

service interruption on January 17, 2001, the volumes of transactions conducted in the

California PX had dropped to a practically negligible level.

Segundo 7, #1 unit, that unit had bid its full capacity into the ancillary services and

supplemental markets,39 but the eight megawatts were not called upon by the CAISO. With

respect to the one remaining megawatt that the Long Beach #2 unit purportedly had available

and did not produce, it is more likely attributable to an error in the CAISO database or a minor

deviation in the production level that is endemic to generating plants.

There were six instances among the 58 studied in which the amount of apparent

Available Power Not Generated was greater than 20 megawatts (per generating unit) for

which staff's review of the CAISO's SLIC logs could not account. None of these six

unaccounted for situations exceeded 53 megawatts, but staff could not determine why the

power was not generated. For instance, on January 17, 2001 at hour ending 12, a generating

unit with a maximum capacity of 57 megawatts was only generating 27 megawatts. The SLIC

logs reflected only that an outage occurred due to a lockout, but that it lasted only nineteen

minutes and was over by 7:18 am. According to the CAISO and its records, the CAISO was

not notified by the generator that the problem was repaired until two days later, so it was not

called upon by the CAISO.

In the final analysis then, as the chart set forth on page 5 supra, demonstrates, the

estimated amount of Available Power Not Generated by Duke, Dynegy, Mirant, Reliant, and

Williams for which staff was unable to account was not sufficient to have averted the firm

service interruptions.

C. The CPUC's Analysis Of The Generators' Bidding

Overstates The Amount Of Power Not Bid

1. The CPUC's Calculation Of The Amount Of Power 

Not Bid

To review the CPUC's calculation of the amount of Power Not Bid, it is necessary to

understand the structure of the CAISO's markets during the time period studied.40 The CAISO

had three markets: (1) the day ahead; (2) the hour ahead; and (3) real time. In the day ahead

and hour ahead markets, the generators could bid, and the CAISO could purchase, ancillary

services, consisting of regulation up, regulation down, spinning reserve, non-spinning
-32-

41 The CAISO uses the term OOM to refer to all generation purchased outside

of the generators' electronic bids that are known as the BEEP stack (BEEP refers to

Balanced Energy Ex Post Pricing).

reserve, and replacement reserve. In the real time market, the generators could bid

supplemental energy and, in order to balance the system, the CAISO could call upon the

ancillary services it had procured or purchase supplemental energy. The table below reflects

the products of the CAISO's markets:

Product Day Ahead Hour Ahead Real Time

Regulation Up x x

Regulation Down x x

Spinning Reserve x x *

Non-spinning Reserve x x *

Replacement Reserve x x *

Supplemental Energy x

* Spinning Reserve, non-spinning reserve, and replacement reserve are capacity

products available for procurement by the CAISO in the day ahead and hour

ahead markets. Energy corresponding to those capacities is available for

purchase by the CAISO in the real time market.

The CAISO market system was designed to receive bids electronically from the

generators in the three markets and pricing was established through a market clearing auction.

If the CAISO needed additional energy not bid through one of its three markets, it could reach

agreements with generators to supply energy at agreed upon prices referred to as out of market

(OOM) sales.41

In addition to the amount of Available Power Not Generated, the CPUC attempted to

calculate the amount of power that Duke, Dynegy, Mirant, Reliant, and Williams did not bid

into the California market during the service interruptions. The methodology employed by

the CPUC, as described in its Report, was to subtract from each generating unit's capacity: 
-33-

42 The CAISO provided the component bid quantities of "Reserves" in the

CPUC's equation and provided the algorithm by which the components should be

combined. For the reasons discussed below, however, in Sections VI.C.2 and VI.C.3,

staff's replication does not suggest that the CAISO's bid analysis represents all offers of

power to the CAISO.

OUTAGES

ENERGY

SCHEDULED 

RESERVES 

AVAILABLE POWER 

NOT BID 

GENERATING 

UNIT 

CAPACITY 

(MW) 

SUPPLEMENTAL

BIDS 

OOM 

ILLUSTRATIVE ONLY – 

NOT DRAWN TO SCALE 

(1) outages;

(2) hour ahead energy schedules;

(3) bids into the real time supplemental energy market;

(4) agreements to supply power out of market (OOM); and 

(5) any reserve obligations. 

Report 17-18. Thus, the CPUC's apparent calculation was as follows:

Available Power Not Bid = Capacity - Outages - Energy Scheduled -

Supplemental Bids - OOM - Reserves 

Or, graphically, the CPUC's calculation of Power Not Bid was:

Once again, at first glance, the CPUC's equation appears simple and reasonable. However,

again the CPUC's analysis stopped too soon and it did not look at the detailed unit level as is

required. Staff replicated the CPUC's calculations for the days of the firm service interruptions

with the CAISO's assistance.42 But staff then went further and looked at the SLIC logs and

reviewed the individual units that appeared not to have bid for the firm service interruptions.

The results of that endeavor are principally two: 
-34-

43 Report 29 (emphasis original). See also Report 37 ("[I]t is reasonable to

conclude that failure to bid was a major reason why the five generators did not generate

all available power on the 32 days statewide blackout and service interruptions day that

occurred between November 2000 and May 2001."

(1) Many of the instances where generators did not bid are explained by the

outages errors, unit start-ups, and the provision of Regulation Up or Regulation

Down, discussed previously; and

(2) The CPUC's conclusion, that the generators "did not generate all available

power . . . in significant part because they did not bid all available power into

the ISO real-time market on those days,"43 is not supported by the calculations.

In approximately 35 percent of the instances that the CPUC claimed generators were

not bidding all of their available power during firm service interruptions, staff's review shows

that the generating units did not have available power. In over half of the instances where

staff could not account for the Power Not Bid by its review of the SLIC logs, the CPUC

attributes a quantity of Power Not Bid to generating units that produced all of their available

capacity in the same hour. In other words, the CPUC's Power Not Bid numbers do not

coincide with the generating units that were allegedly not generating, as the following figure

demonstrates:
-35-

44 For a detailed explanation of staff's analysis of the relationship of the Power

Not Bid and the Available Power Not Generated during the firm service interruptions, see

Appendix D.

Power Not Bid and Available Power Not Generated Quantities Coincide

 With The Same Generator In Only Limited Cases

In the few cases where both the Power Not Bid and Available Power Not Generated coincided

(i.e., the same generating unit), the amount of relevant megawatts was significantly less than

the amount of firm load that was interrupted during the same hour.44

Furthermore, the CPUC overstates the estimated amount of Power Not Bid by the

generators because the CPUC's analysis of bidding by the generators fails to take into account

several significant factors, such as start-up rates, environmental restrictions, and nonelectronic bids, as discussed below. Staff was unable to quantify the actual amount of

available Power Not Bid because not all the necessary data was maintained by the CAISO for

the relevant time period. However, when the CPUC ignored these factors it overstated the

available Power Not Bid by the generators, as more fully discussed below in Sections C.2 and

C.3.

2. The CPUC Did Not Consider Non-electronic Bids And

Certain Bilateral Contracts/Offers With CAISO And

CDWR

The CPUC calculated the amount of bids made by the generators based on energy

scheduled in the hour ahead market, bids into the supplemental energy market, and OOM

sales. Report 17-18. But the CPUC did not account for all energy that was offered by the

generators in at least two respects.

First, the CPUC used only OOM sales, not OOM-related offers. The CAISO only has

data on completed OOM sales and this is the data used by the CPUC. However, an OOMrelated offer that the CAISO may not have accepted because it was deemed too high a price

(or for any other reason) is still an offer and should not be excluded from an analysis of

whether all available capacity was bid into the market. As noted, the Report did not analyze

prices or possible exercises of market power so the fact that a generator's requested price in

a potential OOM transaction was deemed excessive by the CAISO should not have been a

reason to exclude it from being a legitimate offer to provide power. For example, Dynegy

faxed to the CAISO on a regular basis during January 2001 through March 2001 what it

referred to as its "OOM sheets." The Dynegy OOM sheets set forth the amount of megawatts

that its units had available and at what OOM price Dynegy would produce energy for the
-36-

45 Whether Dynegy's offers were an attempt to exercise market power was

beyond the scope of this study and not considered.

46 In fact, the CPUC admitted that it did not consider "rejected" bids in the day

ahead market because, according to the CPUC, that market was "dysfunctional, and the

fact that a bid was rejected simply does not imply that the associated power was not

needed." Supplemental Report 12. The CPUC fails to acknowledge, however, that

rejected bids were nonetheless bids and that by not taking them into account, it was

overstating the amount of available power not bid by the generators.

47 In its Supplemental Report, the CPUC noted that the CDWR entered into

agreements with some of the generators. Supplemental Report 16. However, instead of

acknowledging that the amount of Power Not Bid may have been overstated by failing to

account for any such offers that CDWR did not accept, the CPUC merely stated that it is

important to find out if the CDWR had a good reason for turning down any offers of

power. Id. 

following day.45 Staff found no indication that the CPUC considered such offers in its

analysis.46

The CAISO informed us that it did not provide to the CPUC, nor did the CPUC

request, any information on bids by the generators other than what the CAISO had available

in its electronic database. Yet, during the relevant time period generators periodically called

or faxed in bids. For example, in addition to the Dynegy OOM sheets that were faxed to the

CAISO, Reliant noted in its Response to the Select Committee that after the CDWR contract

discussed below expired, "Reliant continued to offer bilateral generation that was available

to CDWR by phone." Reliant October 11, 2002 letter to Select Committee 7. Williams

similarly pointed out that the CPUC did not apparently factor in bids made by telephone that

were often required since the rules in effect at the time did not allow bids to be taken after 45

minutes before the hour (for power) or three hours before the hour (for ancillary services).

Williams October 1, 2002 letter to Select Committee 2.

Second, some of the generators entered into agreements with the CAISO or CDWR

whereby they offered to generate power at OOM prices. Those agreements do not appear to

have been included in the CPUC's analysis. For example, from February 21, 2001 through

March 22, 2001, Reliant entered into a contractual arrangement in which it offered its power

for sale directly to CDWR rather than through the CAISO.47 Similarly, Dynegy entered into

a contract with the CAISO that gave the CAISO the right to all generation capacity under

Dynegy's control between December 5 and 15, 2000 at a price determined by an agreed upon

formula.
-37-

48 The CAISO advised staff that it did not have data relating to start-up times

of generating units until 2002. 

49 Environmental factors can cause a unit to be unavailable for service. For

example, there are restrictions on units exceeding annual permissible levels of nitrous

(continued...)

In short, the CPUC's Report's review of the generators bids did not take into account

the entire universe of generators' offers to produce energy. Moreover, that information cannot

be accurately replicated at this time because, at least with respect to the non-electronic offers

of power, the CAISO has not retained the records. The CAISO informed staff that it keeps

records only of its completed OOM transactions, but not of any OOM offers that were not

accepted by the CAISO.

3. The Effect Of Unit Start-Ups And Environmental

Restrictions On The Bidding Process Were Not

Considered In The CPUC's Analysis 

The CPUC's bidding analysis focused on the real time market, which closed 45 minutes

prior to each hour, because, according to the CPUC, "[b]y this time, the generators knew their

commitments in all other markets, and could have bid in all their remaining power into

California's market." (Report 30). However, the CPUC's statement overlooks at least two

fundamental factors that may have affected the generators' bidding behavior.

As discussed earlier, many generating units take several hours to start up once they

have been off-line before they can generate power at full capacity. Indeed, older units can

take as long as twelve hours to ramp up. Duke, Dynegy, Reliant, and Williams each pointed

out in their responses to the Select Committee that long ramp times and operational problems

sometimes incurred in starting up units and can result in discrepancies in actual availability

of power and CAISO's records of availability.48 Dynegy also noted that the CAISO bid

system in place during late 2000 and early 2001 did not take into account the long start-up

times that made it "neither economically nor practically feasible to submit bids on a 10-

minute, or even hourly, basis for a unit that needs eight or more hours to ramp-up." Dynegy

October 3, 2002 letter to Select Committee 3. Similarly, Reliant stated that if "energy was not

taken in the Day Ahead market, then units might not be available for bidding into the realtime energy market due to start-up lead time constraints." Reliant October 11, 2002 letter to

Select Committee 2.

Environmental restrictions also may have affected certain generators' ability to bid in

all of their available capacity in either the day-ahead or real-time markets.49 Williams noted
-38-

49(...continued)

oxides (NOx) emissions, particularly in southern California. Unless waivers from the

applicable agencies are granted, the generators can face expensive fines for exceeding

those limits. Other important environmental factors include potential impacts on water

quality and temperature. For example, units located in the Sacramento River and Delta

area must be shut down or have their output reduced when the unit discharge causes the

ambient water temperature to exceed a certain level. This requirement is to protect the

reproductive success of the indigenous and anadromous fishery. The timing of such

reductions in output, while anticipated, cannot be predicted with certainty and can result

in short term fluctuations in supply.

50 Although the Delta Dispatch requirements limited Mirant's ability to bid all

available capacity in the day ahead and real time markets, Mirant told staff that when the

CAISO instructed it to deviate from the Delta Dispatch provisions by producing more

generation, it did so.

in its response to the Select Committee, that two of its units are peaking units that are capable

of producing 133 megawatts each, but have high NOx emissions levels. As a result, they have

limitations to yearly operating hours imposed by the Southern California Air Quality

Management District (SCAQMD). For example, one of the peakers (Alamitos Unit 7) had

an annual limit of only 200 megawatt-hours of operation per year, a limit that had already

been reached by February 2001. According to Williams, although a series of Executive

Orders by California's governor permitted the units to continue operating, SCAQMD imposed

restrictions, including that they operate only upon the request of the CAISO during

emergencies to avoid service interruptions or maintain essential reserves. Thus, Williams

contends that it could not bid these units' generation until the CAISO requested the units since

Williams could not predict when the system emergencies would be declared by the CAISO.

Similarly, Mirant representatives advised staff that the Delta Dispatch provisions

restrict Mirant from running its Pittsburg and Contra Costa units at full capacity from

approximately May 1 until mid-July. Under Delta Dispatch, the discharge water temperatures

must not exceed 86 degrees, thus including two of the firm service interruptions. Mirant must

estimate the dispatch limitations on its plants based on water temperatures and schedule its

units accordingly. Mirant advised staff that in 2001, it scheduled its units in the day ahead

market consistent with the Delta Dispatch protocols and estimates of available capacity.

Because bids were due in the real time market 45 minutes prior to the applicable hour, Mirant

could not bid all available supplemental energy into the real time market if it was unsure 45

minutes in advance whether the generation would result in temperature above 86 degrees.50
-39-

51 See, e.g., Workpaper No. 007108 (noting entries for January 17, 2001 in the

CAISO's OSMOSIS database (reflecting bids that were accepted out of market and/or out

of sequence) were not reflected as dispatched in the SLIC log because "[d]ispatch was

likely logged on the whiteboard in the control room."); Workpaper No. 006799 (entry for

January 18, 2001 contained in OSMOSIS database, but not the SLIC log, with notation

that "[n]o correction required, missing SLIC log."); Memorandum from Sean Barry to

Charlie Robinson (No. 015469) ("As a practical matter it is very difficult to recreate exact

control room conditions several months after the fact . . . . Accordingly, there was no

effort to reassess the quality of dispatch decisions made; nor was it practical to ascertain

if all dispatches were initially logged.").

In summary, by failing to take into account the effect that environmental restrictions

and unit start-ups had on generators' bidding patterns, and focusing instead on bidding in the

real time market only, the Report ignores significant aspects of the generators' bidding

behavior. This, along with the CPUC's failure to account for non-electronic bids and bilateral

contracts with the CAISO and CDWR, undermines the CPUC's conclusion that generators

failed to bid all of their available power into the markets as part of a deliberate withholding

strategy.

D. There Were Problems With The CAISO's Data

The CAISO has acknowledged that many of its data collection and reporting processes

during the time period of the service interruptions were deficient and in need of improvement.

In fact, in mid-2001, the CAISO performed "a comprehensive assessment of control room

dispatch documentation for the period from November 1, 2000 through May 13, 2001," which

became known as Project X. (Project X Recommendations, July 18, 2001). Among the

findings of Project X was that there existed many differences and irregularities between the

documentation in the CAISO dispatch logs and the recorded data in other databases of the

CAISO. These differences and irregularities related to, inter alia, start and ending times, the

amount of megawatts generated, and the type of dispatch instructions. Although many of

these discrepancies were corrected during Project X and a number of new procedures were

implemented as the result of Project X, it appears that not all the data errors for the November

2000 through May 2001 time period were corrected. For example, some of the Project X

work papers reflect that a record in the SLIC log was missing or an entry was never made in

the SLIC log.51 

Staff also knows from experience that the generator outage data reported by the CAISO

in the spring of 2001 was inconsistent and inaccurate. Beginning in December 2000, the

CAISO began providing staff with outage information on a daily basis. However, there were

frequent discrepancies between the outage data the CAISO was providing staff and the outage
-40-

52 In an email, a CAISO employee noted that he appreciated staff pointing out

the errors in the CAISO's outage data and "drawing attention to the growing importance

of accurate outage data as part of market power monitoring/mitigation and the poor

quality of data compiled by the ISO to date. It confirms/supports an internal battle we

have been waging for some time . . . to improve outage and tracking and reporting.").

53 Staff understands that the CPUC used the PMAX numbers from the SLIC

outage database. This may account for some of discrepancies in the generators' PMAX

numbers and those used by the CPUC that were noted by some of the generators in their

responses to the Select Committee. See, e.g., Duke September 26, 2002 letter to CPUC 2;

Mirant September 26, 2002 letter to Select Committee 4; Williams October 1, 2002 letter

to Select Committee 3.

54 In its Supplemental Report, the CPUC appears to acknowledge that there

may have been errors in the CAISO's databases, but nevertheless maintains that its

unqualified reliance on them was reasonable. Supplemental Report 9-10.

data posted on the CAISO's web site. Staff also discovered inaccurate information while

attempting to confirm the CAISO's outage information with the generators. At the time, staff

informed the CAISO of the discrepancies and understands that the CAISO has undertaken

some steps to correct the problems.52 But the fact remains that the CAISO's outage data for

the time period prior to mid-May of 2001 is not consistently reliable.

Similarly, the CAISO maintained two different data sets listing capacity for the

generating units. A unit's maximum generation capacity is known as PMAX. The CAISO

has a master PMAX file. However, one of the SLIC databases for outages also listed the

PMAX of the units. The problem is that the CAISO advised staff that the SLIC PMAX file

is sometimes different than its master PMAX file. Apparently, the CAISO operations

personnel sometimes changed a PMAX number in the SLIC records when they learned that

a unit's generating capacity had changed even though the process required to make a change

in the master PMAX file had not yet occurred. 53

The purpose of these comments regarding the CAISO's data is not to criticize the

CAISO. In fact, the CAISO should be commended for acknowledging that some of its data

reporting processes needed improvement and attempting to develop new systems to correct

the problems. However, the unreliable nature of the historical data is important for staff's

review of the Report on service interruptions in late 2000 and early 2001. Much of the

CAISO data utilized by the CPUC must be recognized as potentially inaccurate or incomplete.

The CPUC's Report, however, did not recognize this important fact in reaching conclusions

drawn from that data.54
-41-

55 See 93 FERC ¶ 61,239. (December 8, 2000). This order was limited to

dispatch instructions issued during System Emergencies and not, as the CPUC

erroneously implies, for any dispatch instructions that were declined. See Supplemental

(continued...)

E. The CAISO's Emergency Dispatch Authority Did Not

Materially Affect The Firm Service Interruptions

 The initial Report did not discuss the CAISO's emergency authority under its tariff to

dispatch available power that was not bid into the market. In fact, the CPUC stated that "[i]f

a generator neither bid power into markets nor supplied that power 'out-of-market' to the ISO,

the ISO could not dispatch that power to meet electricity demand within its control area."

Report 30. That is not entirely correct. The CAISO had emergency authority to dispatch

power instructions to a generator. Section 5.6.1 of the CAISO Tariff for the relevant time

provided, in pertinent part, that:

The ISO shall . . . have the authority to instruct a Participating Generator to

bring its Generating Unit on-line, off-line, or increase or curtail the output of

the Generating Unit and to alter scheduled deliveries of Energy and Ancillary

Services into or out of the ISO Controlled Grid, if such an instruction is

reasonably necessary to prevent an imminent or threatened System Emergency

or to retain Operational Control over the ISO Controlled Grid during an actual

System Emergency. 

CAISO Tariff § 5.6.1. The CAISO's authority to dispatch generation not bid during

emergency situations is germane to the CPUC's conclusion that the generators' failing to bid

available power was a major factor in causing the service interruptions. Specifically, before

blaming the five generators for causing the service interruptions, the CPUC should have

considered whether there was any available power from those and other California generators

that the CAISO failed to attempt to dispatch with its emergency authority. The effect of the

CAISO's emergency authority requires an examination of the circumstances during the

relevant time period, both from the CAISO's perspective and that of the generators.

In its Commentary regarding the Report, the CAISO took strong exception to the

suggestion by some generators that its emergency powers were the equivalent of "control"

over the generators. CAISO Commentary 8. Rather, the CAISO claimed that generators

routinely ignored the CAISO's emergency instructions. Id. In response to a request from the

CAISO, the Commission issued an order on December 8, 2000 that granted the CAISO the

ability to assess penalties against generators that failed to comply with emergency

instructions.55 
-42-

55(...continued)

Report 10-11.

56 The CAISO's authority to assess penalties for failure to deliver energy

during system emergencies was revoked effective June 20, 2001, following the time

period that is the subject of the Report. See 95 FERC ¶ 61,418 (June 19, 2001).

57 CAISO Tariff § 5.6.3.1.

58 More specifically, Section 5.6.3.2 of the CAISO Tariff required the

generator to notify the CAISO operations staff of its reason for failing to comply with the

dispatch instruction within the operating hour that the instruction was issued and then

verify the reason the generator failed to comply within 72 hours from the time the

instruction was issued.

Staff asked the CAISO for specific information relating to the generators' alleged

refusals to follow emergency instructions. In response, the CAISO provided data regarding

assessment of penalties. Pursuant to the penalty provision in effect at the relevant time,56 a

generator was assessed a monetary penalty for each megawatt per hour of the dispatch

instruction with which the generator did not comply.57 A generator was not subject to

penalties if the generator could demonstrate that it failed to comply with the dispatch

instruction either because (1) the generating unit was physically incapable of responding in

accordance with the instruction if the generator notified the CAISO in advance that the unit

was unavailable or derated,58 or (2) compliance with the dispatch instructions would have

resulted in a violation of an applicable state or federal law.

 Two points are most noteworthy from staff's review of the CAISO data on penalties.

First, the number of declines by the five generators was primarily for relatively small amounts

of power (almost 90 percent of the declines were for less than 25 megawatts and the average

amount declined was 12 megawatts). See Appendix E for a chart reflecting the aggregate of

the five generators' declines for emergency dispatch instructions on January 15-23, March 17-

22, and May 5-10, 2001. The largest hourly sum of all five generators for which dispatch

instructions were declined on these dates occurred during the 5:00 p.m. hour on January 18,

when ten generating units declined a total of 110 megawatts or one percent of the total

available capacity from the given generators for that hour. Notably, this was after the peak

load and after power was restored from firm service interruptions that day and would not have

prevented the 1000 megawatts interrupted earlier that day.

Second, because penalties were assessed regardless of the reason for the decline if the

generator failed to notify the CAISO within the operating hour that it could not provide the

power and the reason, staff could not determine if the decline was (1) due to economic
-43-

59 Reliant filed a complaint with the Commission (Docket No. EL01-57-000),

arguing that the CAISO's emergency dispatch authority should not apply in circumstances

in which economic conditions caused the emergency. The issue of when the CAISO may

appropriately use its emergency dispatch power is not relevant today because of the

existence of the "must offer" requirement effective on May 29, 2001, which mandates that

all generation be provided to the CAISO unless the CAISO grants a waiver. 

reasons, or (2) due to a physical limitation on the plant, but the generator failed to timely

notify the CAISO of the limitation.

On the other hand, despite the relative small number of megawatts declined under

emergency dispatch instructions and the generators' contrary protestations in their responses

to the Select Committee, staff is aware that there were some instances during the time period

studied by the CPUC that generators refused to follow the CAISO emergency dispatch

instructions. The details of these declines, which staff learned during the course of an earlier

nonpublic investigation, occurred in the first week of December 2000. In general, however,

the generators disputed the CAISO's efforts to use its emergency dispatch authority under the

conditions existing at the time.59 In most cases, the generators agreed to follow the disputed

instruction after the CAISO agreed to pay the price requested by the generator. As a result,

in at least some instances, the CAISO operators asked for power without invoking the

emergency dispatch authority and accepted the price offered by the generator as an out of

market transaction rather than debate the price or the authority to issue the emergency

instruction, in an effort to keep the grid running. 

Still another aspect of the CAISO's emergency authority to dispatch available power

that must be taken into account is the practical limits and constraints under which the CAISO

was operating when it attempted to issue emergency instructions. The CAISO informed staff

that, as a practical matter, the CAISO could not call 1300 individual generating units on its

system to locate available power during the system emergencies that occurred in late 2000 and

early 2001. Rather, it needed supplemental energy bids from the generators in order to

effectively dispatch pursuant to its emergency authority. Thus, as soon as the CAISO knew

from its forecasts that system problems were likely, it began issuing alerts and warnings to

the

generators by email that requested any available energy be bid into the CAISO's electronic

system. An example of one of the CAISO's warnings was included in its Commentary to the

Select Committee:

[T]he ISO is predicting deficiencies in Operating Reserve . . . . The ISO is

issuing a "Warning" notice and is requesting additional Supplemental Energy

bids during this period.
-44-

60 Similarly, in its Supplemental Report, the CPUC maintains that the

CAISO's emergency authority did not relieve the generators of their failure to bid all

available power into the market. Supplemental Report 11.

61 With respect to Path 15, the transmission path between central and southern

California that is often constrained, the CPUC calculated the Path 15 unused capacity as

the applicable rating (north to south or south to north) minus the Path 15 maximum flow

during the hour, minus a 200 megawatts safety margin. Report 18-19. The CPUC's

analysis also included sensitivity studies wherein safety margins of 600 megawatts and 50

(continued...)

CAISO Commentary 8, n. 7 (emphasis added). Although the CAISO operations personnel

who spoke to staff said that they believed the generators had an obligation upon receiving

such warnings and requests for bids to submit bids for any available power, the CAISO tariff

only required the generators to comply with emergency dispatch instructions, not with

requests to submit bids.60

Absent supplemental energy bids from the generators, the CAISO's dispatch personnel

could only review telemetered data from generators on the CAISO's Energy Management

System (EMS) data to determine whether a generating unit had some apparent available

power and then call the scheduling coordinator or unit to instruct that the power be supplied.

Although this was an ad hoc and chaotic process undertaken in stressful circumstances, the

operations personnel maintain that there were no material amounts of power that were not bid

or not called upon by the CAISO through its emergency authority–a position that is confirmed

by the staff's analysis for the firm service interruptions.

Nonetheless, in any future emergencies the "must offer" requirement that was

implemented in late May 2001 alleviates many of the problems experienced during the

emergencies in late 2000 and early 2001. Should a system-wide emergency present itself

again, the CAISO should not have a lack of bids from which to issue its emergency dispatch

instructions since all generating units within California must bid in their available power

absent a waiver from the CAISO. 

F. Intrazonal Transmission Constraints Do Not Appear To Have 

Affected The Firm Service Interruptions

The Report only discussed transmission constraints on Path 15 and did not consider

whether local or intrazonal transmission constraints (as opposed to interzonal constraints that

can result due to congestion on Path 15) were a contributing factor in some generating units

not being fully dispatched.61 The CAISO pointed out in its Commentary to the Select
-45-

61(...continued)

megawatts were tested. The Report stated that the results did not vary with changes in

these assumptions. Id. at 19, n.23. Staff was able to replicate the CPUC's calculation of

available Path 15 capacity using Path 15 rating and flow data provided by the CAISO and

by shifting the CPUC hourly availability figures by one hour, but staff cannot explain this

one-hour difference. However, the above-stated assumptions by the CPUC regarding Path

15 congestion during firm load interruption hours are consistent with the CAISO SLIC

log entries relating to generation dispatch instructions for interzonal congestion

mitigation. 

Committee that a factor not mentioned in the Report that is relevant to the issue of calculating

available capacity is whether any power that was bid was not dispatched because of intrazonal

transmission constraints. CAISO Commentary 5. However, in order to determine whether

intrazonal congestion and local transmission constraints would have prevented additional

power from being dispatched had it been made available, it is essential to have snapshots of

then-current system conditions and grid topology for the time periods during which the

service interruptions occurred. Such system snapshots would allow power flow

representations of system conditions to be prepared and permit re-creation of system

conditions during the service interruption periods. 

 The CAISO did not maintain snapshots of system conditions during the service

interruption periods. Nor does the CAISO have a complete record of local and intrazonal

transmission constraints during the periods studied. All that the CAISO has available from

the relevant time period are power flow models typically used for seasonal operations

planning studies. Such models are not sufficient to effectively recreate system conditions

during the service interruptions with the necessary parameters and accuracy. 

Staff reviewed SLIC log entries in an attempt to identify instances when intrazonal

congestion may have limited a unit's output, but found no notations by system operators to

that effect. In addition, staff inquired of a number of the CAISO operations personnel

whether they had knowledge of any intrazonal congestion that limited a unit's output during

the periods of service interruptions. As a result, staff was unable to find any solid evidence

that any intrazonal congestion was present during the days on which there were firm service

interruptions. Nonetheless, without the system snapshots that the CAISO does not have, it

is impossible to know what effect any additional power might have had on the grid. For

instance, at a given hour on one of the days with service interruptions, if some of the lines

were near their capacity and another 25 megawatts was supplied by one of the generators, it

is theoretically possible that the result might have been intrazonal congestion such that

additional power could not have been dispatched. Thus, neither the CAISO, the CPUC, nor
-46-

62 During the relevant time, the CAISO had approximately 45,000 megawatts

of generation capacity in its control area, of which the five generators held approximately

17,000 megawatts.

63 On March 19, 2001, a CAISO news release stated that "half of the state's

Qualifying Facilities (QFs) are not operating because of reported financial concerns, low

wind, or an inability to purchase natural gas to run the plants."

64 The maintenance on the two nuclear units represented 1148 unavailable

megawatts.

staff can determine with absolute certainty whether additional power by the generators would

have prevented the service interruptions.

G. The CPUC's Report Must Be Viewed In The Appropriate Context

It is important to place the CPUC's study in perspective in terms of the entire electricity

market as it existed in California during late 2000 and early 2001. The CPUC chose to focus

on the five largest non-utility generators' conduct during the service interruptions.62 The

CPUC omitted any mention of other generators. Owners of QFs, for example, which in the

aggregate have over 5000megawatts of generation, began shutting their facilities down in late

2000 and early 2001when they were not assured of getting paid due to the financial troubles

of the largest utilities. During some days in March 2001, for example, generation from QFs

was down over 2000 megawatts.63

Further, as the CAISO noted in its emergency response reports issued

contemporaneous with the service interruptions, the CAISO operating personnel were unable

to make accurate predictions of the amount of power they would have available because they

could not obtain commitments in the forward markets "due to the financial concerns by

generator owners, both in and out of state." (May 8, 2002 email from CAISO Emergency

Response Coordinator)(emphasis added). Similarly, in referring to the large amount of

generation out of service on one of the days when there was a firm service interruption

(12,517 megawatts), the CAISO emergency coordinator noted that the large number of

outages included two of four nuclear units that were out for maintenance.64 Id. 

The question of whether merchant generators helped to cause the service interruptions

must be viewed in a larger context. A combination of events and policies gave rise to the

California electricity crisis. Volumes has been written on this issue and it need not be repeated

here. However, the California Public Policy Institute of California's report aptly noted:
-47-

Any search for simple answers . . . risks misperceiving the intracacies of the

systemic failure of California's electricity sector. A satisfactory explanation for

the severity of the crisis and its consequences cannot be composed based on any

single factor. Rather a number of factors must be considered. These include:

• A shortage of generating capacity,

• Bottlenecks in related markets,

• Wholesale generator market power,

• Regulatory missteps, and

• Faulty market design.

No single factor can fully account for the crisis. . . .

Because California's experience was unique and because a number of

factors were simultaneously at play, it is not possible to disentangle fully how

each distinctly contributed to the blackouts, major financial crisis, and the

systemic breakdown of market institutions. . . . 

Christopher Weare, The California Electricity Crisis: Causes and Policy Options 2003.

VII. CONCLUSIONS

The service interruptions that California experienced in late 2000 and early 2001 have

been, and will continue to be, studied. Such studies can be useful in attempts to avoid the

problems and circumstances that contributed to the electricity crisis in California. The CPUC

was right to study the amount of alleged Available Power Not Generated by merchant

generators. But the means by which to conduct such a study were complex and onerous given

the databases and record-keeping systems of the CAISO, causing the CPUC to fall short of

its goal. 

The CPUC's conclusion, that the 38 specific service interruptions could have been

avoided had the five generators produced all of their available power is not supported by the

evidence. Staff has demonstrably proven to the contrary for the six days of firm service

interruptions. This does not mean, however, that there was no withholding by the generators

during the 2000 and 2001 time frame, something which the Commission is still investigating.

The CPUC's calculation of Available Power Not Generated was incomplete. The

CPUC failed to review all of the available CAISO data to determine if the power was in fact

available. Close scrutiny of all the CAISO's relevant data reveals that the CPUC greatly

overstated the amount of available power that was not generated by Duke, Dynegy, Mirant,

Reliant, and Williams during the firm service interruptions. Indeed, most of the generation
that the CPUC claimed was available and could have averted the firm service interruptions

was unavailable. Staff concludes that 87 percent of the available generation that the CPUC

claimed was withheld during the firm service interruptions was either: 

(1) unavailable due to an outage erroneously recorded in one of the CAISO's

databases; 

(2) unavailable because the generating unit was on AGC and under the control

of the CAISO; 

(3) unavailable because the generating unit was starting up from having been

off-line due to a repair or having tripped; 

(4) unavailable because the generating unit was located south of an overloaded

transmission path that prevented the transmission of energy to the area suffering

from firm service interruptions; or

(5) unavailable because the generating unit was under some other internal or

external physical constraint that prevented it from producing at full capacity.

The actual amount of available power that was not generated by Duke, Dynegy,

Mirant, Reliant, and Williams during the firm service interruptions was not enough to have

averted those service interruptions. Moreover, the Available Power Not Generated was

widely dispersed in relatively small amounts among 66 separate generating units, so it is more

likely that the differences reflect rounding or reporting errors than deliberate physical

withholding on those days. Staff has disproven the CPUC's claim that but for the physical

withholding by the five merchant generators, the firm service interruptions on the six days

between January 17, 2001 and May 8, 2001 could have been avoided.

Similarly, the CPUC's study of the amount of available Power Not Bid by the five

generators during the service interruptions was incomplete. The CPUC did not appropriately

account for all of the variables that are relevant to the generators' bidding activity. Omitted

from the CPUC's analysis of bids were all non-electronic bids, certain bilateral contracts with

the CAISO and CDWR, environmental restrictions, and start-up limitations. By failing to take

these factors into account, the CPUC overstated the amount of available power that Duke,

Dynegy, Mirant, Reliant, and Williams did not bid into the California markets during the

service interruptions. 

Based on staff's review and analysis of the CAISO's data collection systems that were

in place in 2000 and 2001, staff urges the CAISO to continue to review and improve upon its

information databases. The CAISO's data collection systems were apparently designed as

primarily forward looking planning tools which, for purposes of running the grid alone, may

be appropriate. However, the CAISO's databases are not adequate for accurate and complete
65 It is noteworthy that the CAISO operations personnel advised staff that due

to additional generation that has become available since 2001, intrazonal congestion

relating to dispatching units has become an increasing problem.

reconstruction of events. Moreover, maintaining multiple databases, as was the case with

outages and PMAX limitations, is fraught with potential problems and likely to cause errors

in trying to recreate events. Accordingly, staff recommends that the CAISO review and

improve its record-keeping protocols with regard to all aspects of its communications with the

generators and that if there are any remaining multiple databases purporting to contain the

 same information, that sufficient checks and balances be implemented to assure consistency

and data quality among all databases. Similarly, to the extent information is available on the

CAISO's web site, it should not vary, in substance, from the underlying source database.

In addition, and critical in order to reconstruct events to fully understand in any future

service interruptions, the CAISO should develop and implement a state estimator system

sufficient to take periodic snapshots of the system conditions and preserve them.65 Such data

is needed, for example as discussed earlier, in order to determine whether intrazonal

congestion and local transmission constraints would have prevented additional power from

being dispatched had it been made available.

Finally, while we conclude that no further investigation is warranted at this time

regarding the Report's narrow conclusions for the 38 days of service interruptions, staff

continues to look at other areas of potential misconduct during the 2000 and 2001 time frame,

including whether physical and economic withholding occurred, questionable outages,

exercises of market power, and improper trading strategies.
APPENDIX
APPENDIX A

Firm service interruptions occurred in California on January 17, 18, 21, March 19, 20, May

7, 8 2001. To investigate whether those interruptions could have been avoided by the largest

five merchant generators, as the CPUC claims, staff requested that the CAISO provide the

following information on an hourly basis for January 15, 16, 17, 18, 19, 20, 21, 22, 23, 2001;

March17, 18, 19, 20, 21, 22, 2001; and May 5, 6, 7, 8, 9, 10, 200, for each plant operated by

each of the five generators:

PMAX at the Time (the maximum generation capacity of the unit at that

hour, assuming no outages, de-rates and environmental restrictions)

MW Scheduled Outage (the amount of megawatts from the unit unavailable

during the hour due to a partial or total outage scheduled and approved by the

ISO)

MW Forced Outage (the amount of megawatts from the unit unavailable

during the hour due to a partial or total forced outage) 

MW Emissions Constraints (the amount of megawatts from the unit

unavailable during the hour due to air emissions constraints)

MW Other Environmental Constraints (the amount of megawatts from the

unit unavailable during the hour due to environmental constraints other than air

emissions--e.g., water temperature)

MW Other Non-Environmental Constraints (the amount of megawatts from

the unit unavailable during the hour due to all constraints other than emissions

constraints and environmental constraints)

MW Unavailable Due to Unit Start-up Limitations (the amount of

megawatts from the unit unavailable during the hour due to the time required

to bring a unit on-line--e.g., to "warm-up" the unit)

MW Available Generation (the maximum amount of megawatts the unit can

produce after all outages, constraints, and limitations are accounted for)

MW Bid Into the Market (the amount of megawatts from the unit bid into the

Day-Ahead and Hour-Ahead Markets for energy and ancillary services as those

terms are defined in the CAISO Tariff)
MW Bid Accepted (the amount of megawatts bid in and accepted in the DayAhead and Hour-Ahead Markets for energy and ancillary services as those

terms are defined in the CAISO Tariff)

MW Bid Not Accepted Due to Transmission Constraints ( the amount of

megawatts bid in by a generating unit that would have been accepted in the

Day-Ahead and Hour-Ahead Markets for energy and ancillary had it not been

for transmission constraints.)

MW Out-of-Market (the amount of megawatts for which the CAISO entered

into an out-of-market agreement for that hour with the scheduling coordinator

for the unit)

MW for Bilateral Contracts (the amount of megawatts from the unit that were

not bid into the Markets because they were committed and sold under bilateral

contracts)

MW Final Schedule (the amount of megawatts from the unit that are scheduled

pursuant to the "Final Schedule" as that term is defined in the CAISO Tariff)

MW Generated (the energy delivered from a unit during the hour)

MW Not Dispatched for Congestion Management (the amount of energy

from a unit not dispatched in real-time because of transmission constraints)

MW for Reserve Margin (the amount of megawatts for the unit that the ISO

did not dispatch for purposes of maintaining an adequate reserve margin for that

hour)

Flexible Generation (whether the unit is capable of, and has agreed to, adjust

operating levels in response to real time market price or CAISO control signals)

Max Ramp Rate (the maximum rate (in MW/min) at which the unit is

normally capable of ramping up or down)

Unit Under AGC (whether the unit was under the CAISO's operational control

through AGC during the hour)

MW Dispatched with AGC (the amount of megawatts the CAISO dispatched

during the hour using AGC)
Could be Used RMR (whether a local reliability problem existed during the

hour for which the unit could have been called upon to run by the CAISO under

a RMR contract)

Ordered by CAISO RMR (whether the CAISO ordered the unit to run during

the hour pursuant to an RMR contract)

MW Ordered RMR (the amount of megawatts that the CAISO dispatched

from a unit during the hour pursuant to an RMR contract, if applicable)

MW Ordered Sec. 5 Tariff (the amount of megawatts that the ISO dispatched

from a unit during the hour pursuant to the ISO's emergency dispatch power

under section 5.6.2 of the CAISO's tariff at that time)

MW Declined by Generator (the amount of megawatts that the generator

declined to provide pursuant to an ISO dispatch instruction for the unit during

the hour)

Generating Unit High Operating Limit (the maximum dispatch limit that

must be observed due to generating unit limitations or system conditions)

Generating Unit Low Operating Limit (the minimum dispatch limit that must be

observed due to the generating unit limitations or system conditions)

Total MWBOH (the total power of the unit at the beginning of the hour)

Total MWEOH (the total power of the unit at the end of the hour; only necessary

if the unit's power was different at the end of the hour than the unit's power

level at the beginning of the hour)
Comparison of Available Power Not Generated 

Identified by CPUC and Commission Staff's First 

Step Of Review

0

200

400

600

800

1000

1200

1400

Jan 17 Jan 18 Mar 19 Mar 20 May 7 May 8

First Hour of Firm Service Interruption

MWh

CPUC

Staff

APPENDIX B
Energy or Capacity (MWh or MW, Respectively) 

10 

20 

30 

40 

50 

Hourly metered output (MWh) 

Availability (from CPUC calculation), calculated as PMAX – “Outage” (MW) 

Estimate of amount of energy CPUC Report would attribute to “not-generated” (MWh) 

Time (Hour Ending) 

Legend 

Generator output 

1600 1700 1800

~ 10 MWh 

~ 42 MWh 

Appendix C

Sample Reconstruction of the CPUC Report’s Treatment

of Unit Outage Data in Relation to a Unit Start-Up:

 Encina Unit 2 Start-Up On May 7, 2001

The following figure depicts data representative of that upon which staff believes

the CPUC relied to calculate amounts of Available Power Not Generated over the course

of the period covered by the CPUC Report. The data in this figure was developed from

information staff compiled as summarized below.

Staff reviewed CAISO SLIC logs which indicated that Encina Unit 2 tripped at

approximately 1255 on May 7, 2001 when experiencing problems associated with the

unit’s “FD fan.” At approximately 1640, CAISO recorded the unit was paralleled and

ramping up in power (SLIC log number 557663). As discussed in Section IV.B. of staff's
66 Full availability is 45 megawatts for Encina Unit 2 in Hour Ending 1800. Also, it

is doubtful that a unit of this vintage is capable of achieving its maximum ramp rate

immediately upon parallel. Upon startup for older steam turbine units such as Encina Unit

2, ramps below a minimum production level (e.g., below Pmin) are likely to include some

time for such operations as starting equipment thus making integrated power rise

equivalent to a slower ramp for a portion of the lower power levels.

Report, the CPUC’s calculation of Available Power Not Generated is equal to unit

capacity less the sum of “outages,” generation, and reserves: 

Available Power Not Generated = Capacity - Outages - Generation - Reserves

For the Hour Ending (HE) 1500 and HE 1600, CAISO data for “outages” is equal to the

unit's maximum capacity of 104 megawatts. Then, at HE 1700 and HE 1800, the outage

data is recorded as 59.5 megawatts. 

Next, one needs to account for the fact that unit ramp rate limitations restrict how

fast the unit’s power output can be increased. According to information supplied by

Dynegy to the CAISO, Encina Unit 2’s ramp rate limit is equal to approximately 2

megawatts per minute. 

If the Encina Unit 2 was capable of immediately and continuously increasing power

at its maximum ramp rate upon paralleling, then the following would represent the

maximum theoretical power levels for HE 1600 and HE 1700:

• Given that the unit was paralleled to the grid approximately 20

minutes before 1700, and given the above ramp rate limit, the

maximum output that might theoretically be achievable at the

beginning and end of the first full hour after parallel are estimated to

be 40 megawatts at 1700 and 45 megawatts at 1800.66

• The unit may not be expected to approach 45 megawatts – the unit’s

availability for HE 1800 – at 2 megawatts per minute (i.e., the ramp

might be slowed slightly before reaching maximum availability).

• The corresponding hourly metered output levels for these hours

would theoretically be a maximum of 7 megawatt hours in HE 1700

and an amount less than 44 megawatt hours in HE 1800.

Referring to the figure above, the 42 megawatt hours of Available Power Not Generated in

HE 1600 should reasonably be expected to be near zero megawatt hours (or not more than

4 megawatt hours from the simplified, theoretical instantaneous-ramp-rate framework)
and, in HE 1800, the 10 megawatt hours of Available Power Not Generated should be a

maximum of 9 megawatt hours ( = 45 megawatt hours less the sum of 35 megawatt hours

and an unlikely, but theoretical estimate of at least 1 megawatt hour for the ramp from 40

to 45 megawatts).
67 In its report, the CPUC stated that the five generators "did not generate all

available power on those days in significant part because they did not bid all available

power into the ISO real-time market on those days" (CPUC Report 29). 

APPENDIX D

Review of Available Power Not Generated 

in Relation to Power Not Bid

The CPUC asserted that the amounts of Power Not Bid largely explained the

quantities of Available Power Not Generated.67 To determine the extent of any relationship

between the quantities of Available Power Not Generated and Power Not Bid, staff

reviewed the CAISO data on an individual generating unit basis. Based on its review, staff

found that there may be only a limited and much smaller relationship between these

quantities. 

General Approach Staff Used to Review the Data

Staff analyzed the quantities of Power Not Bid and Available Power Not Generated

(the “two quantities” associated with each generating unit) using the equations described

in Sections V.B. and VI.C. of staff's report. From the two quantities, staff removed the

amounts of megawatts that were found to be in fact not available as discussed in Section

VI.A. 

Next, to determine the extent of relationship between the two quantities, staff

tabulated the remaining data by generating unit across all firm service interruption hours.

Staff then identified and compared (1) the relative size and distribution of Power Not Bid

and Available Power Not Generated quantities, and (2) the values of the two quantities for

each generating unit. The detailed analytical methods used and the results are described

below.

Relative Size and Distribution of the Two Quantities: Power Not Bid and Available

Power Not Generated

Summarizing the individual generating unit data across all firm service interruption

hours, staff plotted the two quantities on histograms. Each of the three figures below was

prepared by dividing the range of the generating unit energy not generated or not bid into

separate bins defined by ranges of energy. Then, for each bin, the number of points (a

point is a generating unit in one hour) that fell into each bin was counted. That is, the plots

show:
Power Not Bid

0

10

20

30

40

50

60

70

80

90

100

0 > X < 1 1 > X < 2 2 > X < 5 5 > X < 10 10 > X < 25 25 > X < 50 50 > X < 100 > 100

MWh

Frequency

X = Hourly Energy or Capacity

P Vertical axis: Frequency (i.e., counts for each bin); and

P Horizontal axis: Range of hourly energy quantities (megawatt hours) in each

bin.

The bins for each Power Not Bid and Available Power Not Generated are as follows:

P 0 MWh < Hourly Energy < 1 MWh

P 1 MWh < Hourly Energy < 2 MWh

P 2 MWh < Hourly Energy < 5 MWh

P 5 MWh < Hourly Energy < 10 MWh

P 10 MWh < Hourly Energy < 25 MWh

P 25 MWh < Hourly Energy < 50 MWh

P 50 MWh < Hourly Energy < 100 MWh

P Hourly Energy > 100 MWh

Figures 1 and 2 below separately plot histograms of the quantities associated with

generating units that had amounts of Power Not Bid and Available Power Not Generated.

These two histograms are plotted without consideration of any relationship between the

Power Not Bid and Available Power Not Generated. Figure 3 is a histogram of the

intersection of the two quantities (where the two quantities coincided in the same

generating unit).

Figure 1
Available Power Not Generated

0

10

20

30

40

50

60

70

80

90

100

0 > X < 1 1 > X < 2 2 > X < 5 5 > X < 10 10 > X < 25 25 > X < 50 50 > X < 100 > 100

MWh

Frequency

X = Hourly Energy or Capacity

Intersection of Power Not Bid and Available Power Not Generated

0

10

20

30

40

50

60

70

80

90

100

0 > X < 1 1 > X < 2 2 > X < 5 5 > X < 10 10 > X < 25 25 > X < 50 50 > X < 100 > 100

MWh

Frequency

X = Hourly Energy or Capacity

Figure 2

Figure 3
As can be seen in the above figures, the quantities of Power Not Bid and Available

Power Not Generated were predominantly in the lower ranges (bins). That is, when a

generating unit did have a quantity that was either not bid or not generated, the amounts

were relatively small – e.g., less than or equal to five megawatt hours. The amount of

hourly energy within the most frequently occurring energy range in Figure 3 (hourly

energy greater than two megawatt hours and less than or equal to five megawatt hours) is

approximately 0.2 % of the available capacity from the five generating units during any

one of the firm load interruption hours.

Relatively few generating units were found to have appreciable hourly energy

quantities of both Power Not Bid and Available Power Not Generated (i.e., generating

units found in the intersection of both not bid and not generated as opposed to the hourly

energy that was both in the intersection of the two categories as well as those instances

without any intersection or overlap). Figure 4 below illustrates the intersection of

generating units with Power Not Bid and Available Power Not Generated. 

Figure 4
68 An instance is a single count (i.e., a frequency index equal to one) of a

generating unit that had either or both a quantity of Power Not Bid or Available Power

Not Generated during one hour.

Note, however, a total of 19 instances68 occurred with generating units that had

Available Power Not Generated greater than 25 megawatt hours while those same units

had some amount of Available Power Not Bid. What Figures 1 through 4 omit is the

amount of Available Power Not Generated in relation to the amount of Power Not Bid.

The next section addresses the description of the intersection of amounts not generated

with amounts not bid with respect to the same generating unit.

Relationship of the Two Quantities, Power Not Bid and Available Power Not

Generated, at the Individual Generating Unit Level

Staff summarized the individual generating unit data across all firm service

interruption hours by plotting the two quantities against each other on the same diagram.

The purpose of this plot is to highlight the extent to which the Power Not Bid quantities

might explain the Available Power Not Generated quantities.

Figure 5 plots the set of calculated Power Not Bid and Available Power Not

Generated quantities for each generating unit with a positive amount in either or both

categories. Specifically, the selection criteria used was to plot a generating unit if it had

a value, in at least one of the two quantities, of one megawatt hour or greater. 
Power Not Bid vs. Available Power Not Generated, Firm Service Interruption Hours

0

20

40

60

80

100

120

0 20 40 60 80 100 120

Power Not Bid (MW)

Available Power Not Generated (MW)

2

3

4A

4B

4C

4D

4E

Point: 167, 199

1

Figure 5

Case 1: Where the two quantities coincided with a single generating unit (i.e., a

matching set of data that is associated with one generating unit), the 

preponderance of individual generators (78% of all instances) have very small

quantities in both categories.

Case 2: The units (7% of all instances) scheduled and/or bid in essentially all of

their capacity while they had some amount not generated during the hour (see box

2 on Figure 5).

Case 3: The units (11% of all instances) had apparent quantities not bid as recorded

in the CAISO electronic database while they generated at essentially full available

capacity during the hour (see box 3 on Figure 5).

Case 4: A small number of individual generating units – 3 units over 11 separate
69 Two of the data points are common values for three and five 5 hours for two different

generating units, respectively.

70 One unit was operating on AGC over five hours where there appeared to be 26

megawatts of additional capacity that could have been dispatched if the unit’s base

operating point on AGC was adjusted to a level that was 26 megawatts higher. However,

staff is not aware of any requirements that a unit operate at a base level for AGC that

would place the unit in a situation where it may be dispatched to its full power level. In

this case, the CAISO would have needed to alter this unit’s scheduled energy by entering

into an OOM transaction. No information was found in the SLIC logs to indicate that this

such an OOM transaction was attempted.

71 Small differences between availability and actual output or schedule and bids could

result from such items as thermal/ambient deratings (e.g., from elevated cooling water

injection temperatures or condenser fouling), fluctuations in unit output due to equipment

problems, uninstructed deviations, and/or possible metering or recording errors.

72 The unit had to ramp up to full load after completing equipment repairs in the

previous hour, but the ramp rate was at less than maximum ramp rate, possibly indicating

other complications not recorded in the SLIC log.

hours69 (11 unit-hours is 3% of all instances observed) – had coincident amounts

of Available Power Not Bid and Available Power Not Generated.70

In Case 1, the magnitude of the not bid and not generated quantities are generally

not appreciable – i.e., the magnitudes of each quantity appear to be within levels of

uncertainty that would be framed by such items as small differences between availability

and actual output or between availability and quantities schedule and bid.71

In Case 2, these generating units have some amounts of Available Power Not

Generated, however, they have scheduled or bid in all of their capacity. 

In Case 3, it is possible that the bids for these generating units may not have been

recorded (bids or offers to other potential buyers or the bids may have been made via

telephone or facsimile and not recorded in the CAISO electronic databases). Irrespective

of the recordation of the bids, the fact is that these units did operate at or very close to full

availability for the hours noted.

In Case 4, staff's preliminary review of the SLIC log data available for the unit with

the largest quantities indicates there was an operational issue that could explain some or

all the resultant Power Not Bid and Available Power Not Generated.72 Further analysis

would be necessary to resolve if data may be found explaining the quantities associated
73 In seven out of eleven cases, it appears there are likely explanations for these units.

See notes 4 and 5.

with the generating units' Power Not Bid and Available Power Not Generated.73

Summary

The distribution of the quantities, Power Not Bid and Available Power Not

Generated, summed across all firm service interruption hours were concentrated in many

units with either small amounts of Power Not Bid or small amounts of Available Power

Not Generated. Further, the detailed review of individual generating unit data for all units

with any amount of Power Not Bid or Available Power Not Generated (after removing the

amounts of megawatts that was found to be in fact not available as discussed in Section

VI.A. of staff's report) shows that:

• Most (78%) generating units had no appreciable quantities of both

Power Not Bid and Available Power Not Generated; 

• Eleven percent of the generating units had appreciable Power Not

Bid quantities but had little or no Available Power Not Generated

quantities;

• Seven percent of the generating units had appreciable Available

Power Not Generated quantities but had little or no Power Not Bid

quantities; and

• Three percent of the generating units had both appreciable Power

Not Bid quantities and appreciable Available Power Not Generated

quantities.

Thus, it does not follow that the amounts of Power Not Bid largely explain the

quantities of Available Power Not Generated. After removing from the data those

generating units with small amounts in both quantities, the Power Not Bid and Available

Power Not Generated quantities coincided with the same generating unit in only limited

cases, as summarized in the following figure:
Figure 6
74 The instances of declined dispatches in the above figure are for on-peak hours, between 8:00 a.m. and 10:00 p.m.

Of the declines that occurred in January, all but one occurred by generating units south of Path 15 and would not

likely have mitigated the firm load interruptions that occurred north of Path 15, as discussed in Section VA.

0

2 0

4 0

6 0

8 0

100

120

01/16/01 0800

01/16/01 150001/17/01 160001/17/01 2000

01/17/01 2200

01/18/01 090001/18/01 110001/18/01 130001/18/01 1500

01/18/01 170001/18/01 190001/19/01 080001/19/01 1000

01/20/01 150001/23/01 090001/23/01 150003/19/01 200005/07/01 1100

05/07/01 1500

05/07/01 1700

Sum of Capacity (MW)

31 H ours in January 1 H our in M arch 5 H ours in M ay

0

2

4

6

8

10

12

1/16/2001 0800

1/16/2001 15001/17/2001 16001/17/2001 1600

1/17/2001 22001/18/2001 09001/18/2001 1100

1/18/2001 1300

1/18/2001 1500

1/18/2001 17001/18/2001 1900

1/19/2001 0800

1/19/2001 1000

1/20/2001 1500

1/23/2001 0900

1/23/2001 1500

3/19/2001 0800

5/7/2001 1100

5/7/2001 1500

5/7/2001 1700

Frequency (Number of Generating Units)

APPENDIX E

Emergency Dispatch Instructions Declined By All Five Generators 

On January 15-23, March 17-22, and May 5-10, 200174