Looking beyond rate freezes and charges for strandedinvestments, California regulators last Thursday opened the doorfor greater retail electric price fluctuations in a decisionallowing the state’s three major investor-owned electric utilitiesto buy and sell some of their power outside the state-mandatednonprofit power exchange (Cal-PX).

The move was part of a larger decision on so-called”post-transition electricity rates,” including a $430 millionrefund for San Diego Gas & Electric customers for used portionsof rate reduction bonds.

Under California’s 1996 electricity restructuring law, largecustomers or retail energy service providers can buy their power onthe open wholesale market, but for the majority of smallresidential and business customers continuing to get their powerfrom one of the three IOUs, the utilities have been required to buyand sell all of their supplies through the Cal-PX, at least through2002 or until their stranded costs are paid off.

The California Public Utilities Commission now has decided theutilities can buy from “any qualified exchange” during the ongoingtransition period. After the transition period — which onlyapplies to two of the three IOUs — the PX buy requirement isentirely eliminated.

The action “releases the grip of the power exchange onCalifornia markets,” said CPUC commissioner Richard Bilas, insupporting the majority in a 3-2 vote by the five-membercommission. A Cal-PX spokesperson said the exchange will file forrehearing of the decision. The two most recent CPUC appointees byGov. Gray Davis opposed the idea of opening up utility purchasesoutside the state-created exchange, arguing it was too soon to doso.

The issue of the utilities’ power buying mandate was brought onby SDG&E’s lifting of its rate freeze when it essentially paidoff its stranded costs (which were relatively small compared to itstwo biggest sister electric utilities) last summer. SDG&Estruck a settlement that includes the Cal-PX and consumer groupsunder which the utility would continue to buy about 80% of itssupplies through the power exchange, remaining free to buy up to20% of its supplies on the open market.

As an adjunct to Thursday’s decision, SDG&E will be requiredto make a one-time, lump sum credits to customers for their $430million share of unrealized savings from excess rate reduction bondproceeds the utility has collected since the lifting of its ratefreeze. On average that equates to about $290 for residentialcustomers and about $900 for small business customers.

Richard Nemec, Los Angeles

©Copyright 2000 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.