Puget Sound Energy Inc. has called on FERC to levy price caps inthe Pacific Northwest bulk electricity markets that are equal towhat it ultimately decides to establish for the Californiawholesale market. Last week, the Commission proposed a “soft”$150/MWh price cap on wholesale sales of electricity in California.

“Generally, we do not favor price caps since they do not allow awholesale market to work competitively. But in this case, the onlything worse than a price cap is a price cap on only part of themarket,” said William A. Gaines, Puget Sound Energy’s vicepresident of energy supply.

Specifically, the Bellevue, WA, utility has asked FERC to imposeprice caps on wholesale sales of power and capacity into thePacific Northwest equal to the lowest price cap on prices forwholesale purchases in, or wholesale sales of power or capacity “toor through” markets operated by the California Independent SystemOperator (Cal-ISO) or the California Power Exchange Corp. (Cal-PX).FERC did not address Puget Sound Energy’s request in the majororder on the California power market that it issued last week[EL00-95 et al].

In a complaint filed before FERC issued its California decisionlast week, Puget Sound Energy said it believes such action iswarranted since “the Pacific Northwest is an integral part of theCalifornia market, and needs to be treated the same way theCalifornia market is treated at the wholesale level so that youdon’t create an imbalance,” said Puget Sound Energy spokesman GrantRingel.

“Price caps of the kind requested for sales to the Cal-PX andCal-ISO and those instituted by the Cal-ISO for purchases are —absent equivalent price caps on wholesale sales of energy andcapacity into the Pacific Northwest – fundamentally unfair toPacific Northwest public utilities such as [Puget Sound] and areantithetical to the development of a fair competitive wholesalepower market in the Western interconnection,” Puget Sound Energytold FERC [EL01-00].

It is “unfair and discriminatory to protect wholesale purchasersin California with a price cap and yet deny similar protection towholesale purchasers in another part of essentially the samemarket, i.e. the Pacific Northwest.” The effect of this “disparatetreatment” is that California is able to buy Pacific Northwestpower at “artificially low prices” when it needs it during thesummer, while Pacific Northwest customers are left paying highercosts when the need is reversed in the winter, said Puget Sound’sGaines.

Susan Parker

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