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
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
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
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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