CA Governor Seeks Action on Power Prices
California's governor weighed in more forcefully last week in
the continuing summer electricity rate shock plaguing the southern
end of the state and calling into question the future of the
state's four-year electric industry restructuring. A virtual flurry
of state activity is expected this week at four different state
agencies and at the state legislature, which returns from a summer
Gov. Gray Davis called for extending wholesale power price caps,
hurrying consumer rate relief and investigating whether market
power abuse has been part of the price spikes, sending letters to
four state agencies overseeing parts of the new electricity
structure and to FERC. He specifically directed the California
Public Utilities Commission to file with FERC this week a petition
to extend the wholesale price caps, and to ask the federal
regulators to declare "no competitive market currently exists in
the state." Calling the current situation in California "unjust and
totally unacceptable," Gov. Davis said Californians were originally
told electric deregulation would bring competition and lower or at
least more stable prices. "That is clearly not the case in
California. The result is uncontrolled price spikes with no end in
Under its obligations in the Federal Power Act to ensure
wholesale power rates are just and reasonable, Gov. Davis wrote in
a letter to FERC Chairman James Hoecker that he supports his
initiative "to undertake an investigation into wholesale power
rates," and he requested that FERC "order immediate refunds to
customers if this investigation determines that these rates are not
just and reasonable.
"This is an important step FERC can take to ensure that
California customers have an effective remedy to market abuse."
The governor's initiative seeking actions from the federal and
state agencies came in the midst demands Friday from three state
consumer organizations calling for repeal of California's 1996
electricity industry restructuring law. They called on the governor
and legislature to rollback the law and impose an immediate rate
freeze (presumably for San Diego Gas and Electric customers, since
customers of the two other major investor-owned utilities still
have their rates frozen at 1996 levels).
"Utility companies and politicians made mistakes and consumers
aren't going to pay for them," said a joint statement from the
three consumer groups. "We need to put a lid on the damage being
suffered by the consumers of San Diego now and prevent a similar
crisis from hitting the whole state next year."
One of Gov. Davis' letters went to the California Independent
System Operator (Cal-ISO), asking its board when it meets Tuesday
to consider an immediate FERC application for authority to use
price caps beyond an upcoming November expiration of that
authority, and that the board revisit the issue of lowering further
the present price caps that were dropped from $750 to $500/MW
earlier this summer.
The CPUC, which also meets this week (Aug. 3), was similarly
asked by Gov. Davis to quickly authorize the return of an
additional $100 million in rate refunds to SDG&E customers, and
also to "take all actions necessary to assure that electricity
supplies are adequate and that prices paid by California consumers
are just and reasonable.
Yet another state agency meeting this week, the Electricity
Oversight Board, which oversees California's restructured
electricity market, was asked in a separate letter from Gov. Davis
at its meeting Tuesday to use its authority to urge the Cal-ISO
board to follow through on getting its price cap-setting authority
extended by FERC and to lower the current $500/MW cap.
Finally, the California Power Exchange (Cal-PX), through which
the three investor-owned electric utilities are required to buy all
of their power, was asked by Gov. Davis to apply with FERC for
price caps on the wholesale power prices in the day-ahead and
day-of spot markets that are operated by Cal-PX. The Cal-PX
currently has no price caps.
SDG&E through a spokesperson said it supports the governor's
efforts, noting that he is putting the emphasis on solutions in the
state's wholesale electricity market. "That's where the fix needs
to be implemented,' the spokesperson said.
Richard Nemec, Los Angeles