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CA Regulators Ease PX Control

CA Regulators Ease PX Control

Looking beyond rate freezes and charges for stranded investments, California regulators last Thursday opened the door for greater retail electric price fluctuations in a decision allowing the state's three major investor-owned electric utilities to buy and sell some of their power outside the state-mandated nonprofit power exchange (Cal-PX).

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

Under California's 1996 electricity restructuring law, large customers or retail energy service providers can buy their power on the open wholesale market, but for the majority of small residential and business customers continuing to get their power from one of the three IOUs, the utilities have been required to buy and sell all of their supplies through the Cal-PX, at least through 2002 or until their stranded costs are paid off.

The California Public Utilities Commission now has decided the utilities can buy from "any qualified exchange" during the ongoing transition period. After the transition period --- which only applies to two of the three IOUs --- the PX buy requirement is entirely eliminated.

The action "releases the grip of the power exchange on California markets," said CPUC commissioner Richard Bilas, in supporting the majority in a 3-2 vote by the five-member commission. A Cal-PX spokesperson said the exchange will file for rehearing of the decision. The two most recent CPUC appointees by Gov. Gray Davis opposed the idea of opening up utility purchases outside the state-created exchange, arguing it was too soon to do so.

The issue of the utilities' power buying mandate was brought on by SDG&E's lifting of its rate freeze when it essentially paid off its stranded costs (which were relatively small compared to its two biggest sister electric utilities) last summer. SDG&E struck a settlement that includes the Cal-PX and consumer groups under which the utility would continue to buy about 80% of its supplies through the power exchange, remaining free to buy up to 20% of its supplies on the open market.

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

Richard Nemec, Los Angeles

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