Cal-ISO Lowers Cap to $100, Makes Other Changes
As an interim measure, the Cal ISO board last week approved (on
a 13-10 vote) a load differentiated price cap that was promoted by
a consumer advocate representative on the badly splintered
stakeholder board. The action drew swift criticism from generators.
The so-called $100/MW cap --- lowering the current $250/MW one
--- is effective Nov. 3, although the Cal-ISO management did not
make a public announcement on the change. Under the new system,
high-demand summer days would keep the $250/MW cap.
Citing political, election-year interference with the Cal-ISO
board, Lynne Church, president of the Electric Power Supply
Association, blasted the move, saying without findings of specific
market abuse, regulators have the "obligation to let established
free markets bring about true, long-lasting solutions to the
state's power supply shortages."
Church said reliability ultimately could be hurt if what she
called "meddling and fix-of-the-week pandering" are allowed to
continue. "In fact, Cal-ISO management recommended against this
action because of reliability implications."
The complicated new mechanism uses natural gas futures contract
prices and various generating plant heat rates to set price caps
for varying peak-demand electric forecasts. Based on running the
calculations for the first 23 days of October, price caps would
have varied between a low of $65/MW for five days and $105/MW for
13 days; the rest would have equaled $90/MW.
As proposed by the utility consumer group TURN's senior attorney
Mike Florio and adopted by the board, when the Cal-ISO forecasts
daily peaks above 40,000 MW, the $250/MW cap will be effective; for
lesser peak forecasts, the cap varies in 5,000-MW increments, so
forecast of above 35,000 MW but to 40,000 MW would drop to $165/MW,
"It is very complicated, and it isn't as simple as saying that
the board voted to drop the price cap (on emergency ancillary
services that the Cal-ISO must buy in peak-demand situations) from
$250 to $100," said Cal-ISO Sacramento-based spokesperson Patrick
Price caps will be determined before the beginning of each month
by applying a formula and indexes that multiply the closing price
of Nymex Henry Hub gas futures contracts (average closing price
during the last three days of trading) times pre-determined heat
rates. Cal-ISO then rounds the price cap to the nearest $5.
Cal-ISO will post hourly caps at least 24 hours prior to the
hour of delivery, according to Florio's proposal. At the time this
item went to press, Florio and TURN's San Francisco office had not
returned calls for comments on the new price cap measure.
Richard Nemec, Los Angeles