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CA Regulators Give Utilities Okay for More Block-Forward Action

CA Regulators Give Utilities Okay for More Block-Forward Action

California regulators last week approved additional participation by the state's major private sector electric utilities in the California Power Exchange's new block-forward markets for ancillary and other services. Normally just a footnote, the action drew considerable attention by the California Public Utilities Commission's five governor-appointed members in light of the recent power crunch in the state.

Part of the finger-pointing ongoing in the wake of rolling blackouts and supplies dipping below comfortable reserve levels has included criticism of the state's major investor-owned utilities-particularly San Diego Gas and Electric Co.-for not fully utilizing their block-forward market-hedging options.

In light of this criticism, the CPUC waived normal processing times to vote the added trading authority to Southern California Edison Co. and the other major utilities.

"We're in a critical period because California's ability to achieve electric supply security at reasonable prices is seriously threatened," said CPUC Commissioner Carl Wood in joining his colleagues in a unanimous vote on the issue. "Improving the ability of the utilities to manage prices and price risks is vitally important. I am gratified that my colleagues share my sense of urgency about this matter

"The alacrity with which PG&E and Edison have moved in this area seems appropriate, and is in sharp contrast to the more deliberative approach of San Diego Gas and Electric, whose consumers are fully exposed to the absurdity of wholesale energy prices."

Prompting the CPUC action was FERC authorization for the Cal-PX earlier in the year to begin July 1 two new block-forward markets: daily and "balance-of-the-month" markets. The utilities needed the CPUC approval to recover the costs of their participation in the markets.

The CPUC couched its action as a means of giving the utilities more tools to hedge against the continuing price volatility. In the midst of widespread debates on the current hot-weather market constraints and resulting price spikes, the CPUC provided expedited handling of the matter, which normally would have required a 30-day comment period before it was effective.

Wood said he supported the expeditious handling of the issue and was pleased by the flexibility of Edison and PG&E.

Managing price spikes for bundled small utility customers is a critical job, Wood said, noting that it will become all the more important once stranded costs are paid off and rate freezes are lifted.

He criticized the lack of management of these prices in the case of SDG&E, which unfroze its rates a year ago. And Wood was particularly critical of retail energy service marketers, none of which he thinks have seriously attempted to market to residential and small business customers in SDG&E's territory since rates were allowed last summer to fluctuate with the market.

Richard Nemec, Los Angeles

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