The state-chartered, nonprofit California wholesale spot powermarket (Cal-PX) concluded this week that the state’s market isflawed but has not been gamed. The power exchange intends to makeits results public Nov. 1 in a filing to the Federal EnergyRegulatory Commission, a Cal-PX spokesperson said Tuesday.

In addition, the market through which California’s majorinvestor-owned utilities are mandated to buy and sell most of theirelectricity also will file with FERC its arguments against mergingPX operations with its state-chartered cousin, the CaliforniaIndependent System Operator (Cal-ISO), the state’s transmissiongrid operator.

Some of the state’s most blatant flaws, the Cal-PX reportconcludes, related to sellers of power being encouraged to holdback supplies for sale at the last-minute to the Cal-ISO’sreal-time emergency market purchases that are made to ensure gridreliability in peak-demand times. As the ISO had said in earlierFERC filings, the Cal-PX report recommended selling more suppliesin the forward markets, including the Cal-PX day-ahead market.

Dynegy Senior Vice President Lynn Lednicky said his firm is”very supportive” of efforts to move the California sales out ofwhat he and fellow generators think is too much reliance on thespot market, which he characterized as including the Cal-PX.

“One of California’s biggest problems right now is that it ispurchasing the majority of its power in what is essentially thespot market,” Lednicky said. “We would make the distinction thatthe ISO and PX don’t in that we don’t consider the PX day-ahead andday-of markets as forward markets; those are spot markets. When wetalk about forward markets, we are talking about buying the balanceof supplies for the next quarter or the next year.

“We think it is very important that California move quickly topurchase the majority of its power out of forward markets and notthe spot market.”

The Cal-PX draft report indicates that volumes in the day-ofmarket have increased by 387% compared to 1999 as the increasingshortage of supplies in California day-ahead market in peak-demandsituations has encouraged power sellers to bid more into theCal-ISO real-time market.

“We concluded that there are structural problems with the marketthat can and should be changed, but we didn’t find anyone doinganything actually illegal in the market (this past summer),” said asource at Cal-PX.

Average prices in California’s wholesale market have stayedabove $100/MWh throughout October, during which peak-demandstatewide was about 60% of the summer peaks. The Cal-PX sourceconceded the prices have stayed “inordinately” high.

“There are a couple of potential ways for the state to inhibitelectrons being sold out of state only to be sold back into the mixat much higher prices,” said the Cal-PX source.

Spokespeople for several of the merchant generators, includingDuke Energy, Reliant and Dynegy, indicated they were expecting tomake some filing to FERC to reiterate that they don’t believe therehave been any illegal or market abusive behavior by the generators.

Richard Nemec, Los Angeles

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