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Report says power wholesalers gouged California by $5.5 billion

SACRAMENTO, Calif. (AP) — Electricity wholesalers overcharged California $5.5 billion over the past 10 months, according to a report by managers of the state's power grid.

The five companies, among other things, frequently offered electricity at prices double what it cost them to produce, concludes the California Independent System Operator study, which was published Thursday in the Los Angeles Times.<

"All overcharged, but some excessively and some by moderate amounts," said Anjali Sheffrin, the ISO's director of market analysis.

The Times said the ISO planned to file the study with federal regulators Thursday and are demanding that the money be paid back.

The companies denied the allegations, adding they expect the Federal Energy Regulatory Commission will determine their prices were justified.

The commission has recently stepped up its scrutiny of power companies' behavior during California's power crisis, asking suppliers to justify $124 million in sales during the first two months of the year or refund the money. Critics claim thousands of additional questionable sales are not being challenged.

The ISO study alleges the wholesalers manipulated the market by bidding at excessive prices, effectively withholding supplies, or by not bidding at all when they had generation capability available.

California has been spending about $45 million a day — $4.2 billion since January — to purchase power for Pacific Gas and Electric Co. and Southern California Edison. Both utilities, the state's largest, have been cut off by electricity wholesalers because their credit is almost worthless.

State Controller Kathleen Connell said Wednesday that the state's power-buying is gutting its budget surplus. Since the state started making emergency power buys, the surplus has fallen from $8.5 billion to about $3.2 billion, she said.

A federal judge issued a preliminary injunction Wednesday ordering a major electricity wholesaler, Reliant Energy Services, to continue selling to California despite its fear that it will not be paid.

U.S. District Judge Frank C. Damrell Jr. said Californians were at risk of irreparable harm if Reliant stopped selling power to the ISO, which buys it at the last minute on behalf of utilities to bolster supplies and try to fend off rolling blackouts.

Such blackouts hit the state twice this week. On Wednesday, cooling temperatures and the completion of repairs at several power plants allowed the state to avoid blackouts.