1

Final Report at VI - 54-55.

2

As a general principle, an administrative prosecutor has discretion as to whether

or whom to sue, and prosecutorial decision is either entirely committed to agency

discretion and hence unreviewable under 5 U.S.C.S. § 701 or, at most, subject to limited

review under "arbitrary and capricious" standard of 5 U.S.C.S. § 706. Presinzano v.

Hoffman-La Roche, Inc., 726 F.2d 105 (3d

 Cir.1984). See also Heckler v. Chaney, 470

U.S. 821(1985).

3

One entity was served with a data request too late to reasonably be able to submit

its full response prior to the issuance of this report. Upon receipt of the data response

from that entity, Staff will determine whether it is necessary to continue investigating that

entity.

1

STAFF'S INITIAL REPORT ON 

PHYSICAL WITHHOLDING BY GENERATORS

SELLING INTO THE CALIFORNIA MARKET

AND

NOTIFICATION TO COMPANIES

 The "Final Report on Price Manipulation in Western Markets," issued in March,

2003, in Docket No. PA02-2-000 (Final Report), suggested there was a significant

possibility of physical withholding of electric generation from the California market.1

Coincident with the issuance of the Final Report, the Commission directed Staff to

conduct an investigation into the existence of any such physical withholding of power

from California. Accordingly, Staff commenced an investigation to ascertain whether

generators located in California had physically withheld energy from the California

market to affect market prices during the time period from May 1, 2000, to June 30, 2001.

At the Commission meeting of June 25, 2003, Staff indicated it would notify the

entities originally considered in this investigation as to whether they would be subject to

further investigation. This report serves as such notification. The entities listed in the

Appendix will not be further investigated in the instant matter unless information comes

to light that would require further analyses of their actions.2

 The entities who, as part of

this investigation, received data requests and requests for admissions and who are not

listed in the Appendix attached hereto are subject to further investigation.3

 This should

not be interpreted as Commission Staff having found conclusive evidence of physical

withholding at this time, but that Staff has not concluded its review of these entities. 
2

Discussion

In determining the scope of this investigation, Staff reviewed 129 entities that 

potentially control (or controlled) generation in California and sell (or sold) energy into

the California market. Staff then served data requests and requests for admissions ("data

requests") on approximately 100 of those entities, consistent with the criteria described

below. The data requests were accompanied by a request for an admission or denial,

under oath, of whether the entity had engaged in any physical withholding of power

during the relevant period. The data requests asked for a description of the actions by

each entity to ascertain whether any physical withholding of power had occurred, or if no

review was conducted, the reasons why. The data requests also asked for a statement as

to preservation of electronic record media which may have been generated with regard to

such transactions. 

Among the entities reviewed, including those served with data requests, were

entities that own or control generating facilities in California that were not in operation

during the relevant time period. Other entities reviewed made no sales into the market

during this period. Those entities, all of whom are included in the Appendix, will not be

subject to further investigation. 

Further, Staff concluded that entities with less than 60 MW of total capacity should

not be the focus of this investigation. These entities controlled an amount of capacity that

was small relative to the size of the California market. According to data available on the

California Energy Commission's website, peak monthly demand reached a high in the

relevant period of 43,509 MW in August 2000 and a low of 29,567 MW in February

2001. Withholding a portion of 60 MW of capacity from markets of this size would be

unlikely to materially affect prices. Therefore, there would be no incentive to do so. 

These entities are included in the Appendix.

Staff also concluded that entities whose entire available capacity was committed

through long-term, firm contracts generally should not be further investigated. If an

entity is under contract to make all its capacity available through firm sales to another

entity, the selling entity is required to have that capacity available at any time for sale to

the buying entity. The selling entity may not use any of that capacity for other purposes

or other sales, unless explicitly provided for by the contract. In this instance, the selling

entity does not have the ability to offer sales into the market, and as such, can not

withhold capacity to drive up prices. Therefore, those entities that Staff determined to fall

within this category are included in the Appendix and will not be subject to further

investigation, barring additional information or evidence.
4

If the purchases and sales of these entities during the relevant time period are

netted out, the entity will have made more purchases than sales during that period. 

3

Certain other investor-owned utilities and municipal energy providers were net

buyers4

 during the relevant period, which would indicate that they neither had the

opportunity nor the incentive to withhold capacity from the market. These entities did not

have sufficient generation of their own to serve their native load, and frequently relied on

the real-time market for power to serve this load. Nevertheless, Staff reviewed the

entities in this category, and in most cases made contact with the entities to gain a fuller

understanding of their situation and trading practices. Those entities that Staff is satisfied

had neither the opportunity nor the incentive to withhold capacity are included in the

Appendix. 

In addition to those entities listed in the Appendix, Duke Energy North America,

LLC, (Duke) will not be subject to further investigation, unless information comes to

light that would require additional analysis. Duke is a market participant with substantial

generation resources in California; specifically, Duke owns and controls over 3,000 MW

of generation capacity in California. The underlying reasons for any outages at facilities

operated by Duke during the relevant period have been adequately explained in Duke's

response to Staff's data request.

Conclusion

Staff has determined that there is no credible evidence, at this time, to support

further investigation of the entities discussed herein. However, should any such evidence

come to light, Staff will pursue investigation of that evidence at that time.
1

APPENDIX

COMPANIES NOT UNDER INVESTIGATION 

FOR PHYSICAL WITHHOLDING

Entities with less than 60 MW total capacity: 

Aera Energy (Alcantar & Kahl)

Air Products & Chemicals Inc.

Alliance Power Inc.

Bay Environmental Management

Berry Petroleum Company

City of Anaheim

City of Sunnyvale

Conoco Philips Company

County Sanitation District of Los Angeles Ct.

CP Kelco U.S. Inc.

Delano Energy Company

East Bay Municipal Utility District

Energy 2001, Inc.

Foster Wheeler Martinez, Inc.

Fresno Cogeneration Partners LP

Gas Recovery Systems Inc.

GPU Solar Inc.

Green Power Partners, LLC

IMC Chemicals, Inc.

Jefferson Smurfit Container

Los Alamos Energy LLC

Madera Power LLC

Martinez Refining Company

Metropolitan Water District of Southern California

Monterey Regional Waste Management District

Mt. Poso Cogeneration Company

Phoenix Wind Power LLC

Point Arguello Pipeline Company 

Ridgewood Renewable Power

Ripon Cogeneration Inc.

Riverside County WMD

Samoa Pacific Cellulose LLC
2

San Joaquin Cogen Ltd. 

Sea West Wind Power Inc.

Sempra Energy

Soledad Energy Inc. (Yankee Energy Inc.)

Sunlaw Energy Partners I, LP

Sunrise Power Company

Utica Power Authority

Wheelabrator Technologies, Inc.

Entities with no facilities or with facilities that were not operational during the

relevant period:

BP Energy Company

California Portland Cement Company

CalPeak Power, LLC

Cannon Power Corp.

Colton Power LP

Dinuba Energy Inc.

El Dorado Irrigation District

Elk Hills Power LLC

Energy Transfer - Hanover Ventures

GWF Energy LLC

GWF Power System Company Inc.

GWF Power System LP

High Desert Power Project LLC

RAMCO Inc.

Sempra Energy Trading Corp.

Wellhead Power Gates

Whitewater HillWind Partners

Wildflower Energy LLP

Entities that had no control over marketing or sales of generation:

Mountain View Power Company
3

Entities with all power committed through long-term contracts during the relevant

period:

Crockett Cogeneration

Recot, Inc., dba Frito-Lay Inc.

Midway Sunset Cogeneration Company

Millennium Energy LLC

NEO Corporation

Nuevo Energy Company

Sierra Pacific Industries 

Tri-Dam Project

Watson Cogeneration Company

Entities that made no sales into the California market during the relevant period:

Applied Energy Inc.

Cabazon Wind Partners

CE Generation, LLC

City of Redding

City of Riverside

Edison Mission Energy

FDX/Houa Station

FPB Cogeneration Partners, L.P.

Green Ridge Power LLC

Imperial Irrigation District

Kern River Cogeneration Company

Kings River Conservation District

Luz Solar Partners, Ltd. IX

Mojave 16/17/18, LLC

Nevada Irrigation District

Oroville-Wyandotte Irrigation District

Placer County Water Agency

San Francisco, City & County of

Shell Oil Company

Shell Oil Products, U.S.

Shell Wind Energy

Silicon Valley Power

Sycamore Cogeneration

Termoelectria de Mexicali

Turlock Irrigation District

U.S. Bureau of Reclamation
4

Union Oil Company of California

Zond Systems, Inc.

Investor-Owned Utility and Municipal Net Purchasers:

Sacramento Municipal Utility District

City of Burbank

City of Glendale

PacifiCorp