“It will only happen this once; it’s not likely to happenagain,” a power marketing source said last week, explaining howelectric spot market prices in the Midwest went as high as$7,500/MWh on June 25, 1998, causing some utilities and traders torun to FERC for protection.

One utility, PacifiCorp, already has informed stockholders ofsecond-quarter losses due to the electric market debacle the weekof June 22nd, and put them on notice there will be further lossesthrough the rest of the year. The Portland, OR, utility which has anationwide trading operation, said it has covered short positionsat a loss “limiting the magnitude of potential losses.” Aspokeswoman put the second-quarter market loss figure at about $13million.

A marketing affiliate of utility FirstEnergy of Akron, OH, won arestraining order and froze the assets of Federal Energy Sales ofRocky River, OH, saying it had lost $25 million because themarketer defaulted on power delivery contracts.

Another report that one mid-sized marketer was on the ropes andlooking for a buyer could not be confirmed.

Meanwhile, Illinois Power asked the Federal Energy RegulatoryCommission to impose a $200/MWh price cap in emergency situationsafter IP paid as much as $4,000/MWh last week. The utility said itknew of another company that paid $7,500/MWh. It is believed to bethe first time anyone has asked FERC to interfere in spot marketpricing. Others were trying to head off government interference.

“Some new traders got a real education about buying in a tightmarket,” said Brian Jordan, spokesman for Peco Energy’s Power Team.Since the market is new, some utilities made the wrong moves at thewrong time, but “the important thing is the market self-correctedeven before additional power came on line.” The stratosphericpricing problem only lasted five or six hours, Jordan maintained.Peco, which has a power surplus, reportedly made some money on thesituation, but Jordan would say only the company had come out “allright.”

Others said the problem actually began Tuesday, June 23, in themidst of an extended heat wave as prices into Cinergy began movingup and FirstEnergy was notified by Federal Energy Sales (FES) itwould not be able to supply promised power. After that, a series ofmishaps unexpectedly shut down several baseload nuclear facilitiesin the East and Midwest, escalating the situation.

One utility source claimed some large utilities, hearing of asupply squeeze, actually took transmission lines out of the market,reserving them for their own use if needed.

It was these so far unnamed culprits who were guilty of “pricegouging” and “a raw abuse of market power,” according to severalMidwest utilities and power marketers who asked FERC to hold anemergency fact-finding conference.

Illinois Power blamed the skyrocketing electric prices onmarketers who took advantage of a power shortage. Faced with theprospect of curtailing retail customers “franchised utilities, suchas Illinois Power, had no choice but to pay whatever price wasdemanded.” IP said it bought power at prices ranging from$1,000/MWh to $1,900/MWh on one day and up to $4,000 the next day.”In one instance a seller offered emergency power at around$400/MWh and then, after the energy flowed, adjusted the price to$4,000/MWh.”

Cincinnati Gas &amp Electric, the utility arm of Cinergy Corp.,along with Dynegy Inc., NP Energy, and Western Resources stoppedshort of asking for a price cap, but said FERC should conduct afact-finding forum “to determine whether any action from theCommission is required for the remainder of the summer period toensure the continued availability of electricity supply in themarket at just and reasonable prices.”

The group said as much as 15% of the generating capacity in ECARwas out of service during the period from June 22 to June 27 and”utilities through the region were subject to Regional ReliabilityCouncil emergency conditions and were forced to interrupt serviceto certain end-use customers.”

Some market participants defaulted on commitments and “severecredit and financial strength issues have arisen regarding thestatus of market participants and access to transmission andcommodity services.”

FERC has an interest in “assuring that rates charged forjurisdictional service shall be just and reasonable (18 U.S.C.,Sec. 824d(a):” and also ensuring no undue preference, the groupsaid.

IP said FERC should issue an emergency order for this summer”amending each and every rate schedule that permits the sale ofwholesale power at market rates” to cap the price at $200/MWh.

Last Friday, a FERC spokeswoman said only that the Commission iscontinuing to gather information. Every indication is there will be more to gather as new charges and losses surface.

Ellen Beswick

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