California Threatens Market Takeover
Threatening takeover of the state's electric infrastructure,
California officials Tuesday continued their unwavering call for
the Federal Energy Regulatory Commission to provide consumer
refunds and cost-based rates to stabilize wholesale markets in the
state and throughout the western U.S.
If these actions aren't taken, California will be forced to go
to court and eventually create its own public power agency to
provide generation at "justifiable prices," the state officials
told FERC Chairman James Hoecker and Commissioner William Massey.
The two presided at a FERC public conference in San Diego, the
second held by the Commission to hear comments on the Commission's
proposal to overhaul the "seriously flawed" rules and structure of
the California bulk power market. FERC proposed a "soft" $150/MWh
cap on power sales into the Cal-ISO and Cal-PX over the next two
years, and rules changes for those agencies, but said it would not
grant consumer refunds.
"We will resort to any remedy available to us," Gov. Gray Davis
said. "We won't stand by idly and let these higher rates happen
again." Accusing FERC of being too focused on generators and
utilities, Davis reiterated his call for the federal refunds to
consumers "who continue to be gouged by generators and marketers."
He also said the Commission should impose "hard price and bid caps"
until competitive markets are a reality. It is "incomprehensible"
that FERC hasn't already ordered the refunds based on its own
conclusion that wholesale prices are unjust and unreasonable.
Davis said FERC's proposed soft caps and other measures would
maket the situation "worse" next summer. The deregulation
experiment will end and consumers will resort to the ballot box if
FERC doesn't act, he continued, referring to the state's referendum
process. State Sen. Steve Peace, a prime architect of the 1996
state electric restructuring law, challenged FERC to "interpret its
power broadly" as he said the federal regulators did when they
originally opened up the wholesale power market eight years ago
without congressional authority to do so. Citing an old Federal
Register report, Peace said FERC originally projected wholesale
deregulation could create savings of $3.8 to $5.4 billion annually
and result in power generation prices in the 3.5 cents per kWh
range. Instead, Peace said, prices Monday in the day ahead
California market were 18 cents per kWh.
Peace said FERC "will never reach the goal of competitive
markets unless it uses cost-based rates to create a stable platform
from which to work."
Local officials and consumer representatives indicated that
without re-regulation by FERC, the state and local jurisdictions
will look to creating government-run power organizations. The
chairwoman of the San Diego County Board of Supervisors said she is
sure the state will move to create a public power agency if FERC
does not fix the problem. FERC has a "legal, moral and ethical
obligation:" to investigate the merchant generators.
At a press conference following his appearance before the
commissioners, Davis, however, indicated he did not think the
generators necessarily had done anything illegal, but indicated the
state attorney general is still looking at that question.
At Hoecker's urging the governor said the state would submit its
own proposals to FERC by Dec. 1, so they can be considered when the
federal regulators make a final decision Dec. 13.
Richard Nemec, Los Angeles
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