In response to a FERC directive, the California Power Exchange(Cal-PX) board last week decided to shut down day-ahead and day-ofwholesale electricity markets Jan. 31, bringing toÿa close one partof the state’s initial 1996 electric industry restructuring lawthat created the state-chartered, nonprofit public benefitscorporation to provide a wholesale spot market through whichCalifornia’s three major investor-owned utilities were required tobuy and sell all of their wholesale power. They are no longerrequired to do so.

“Regrettably, Cal-PX must take this extraordinary action inresponse to FERC’s order that directs us to immediately comply withthe terms of its Dec. 15 order and implement a $150/MWhbreakpoint,” said Cal-PX CEO George Sladoje, who noted that thisweek there is an oral argument (Feb.7) set for the power exchange’semergency motion and petition with the U.S. Ninth Circuit Court ofAppeals, requesting a stay and rehearing of the original FERC Dec.15 order.

The Cal-PX will not close down entirely as yet. It will continueto perform all scheduling and settlement services for its currentparticipants. “Forward contracts will be scheduled via approvedalternative delivery mechanisms, assuring both buyers and sellerswill not be inconvenienced or exposed to adverse economic impact asa result of the suspension of the day-ahead market,” the exchangesaid in announcing the market closings.

Cal-PX continued to resist recalculating its daily priceauctions up until their closing last week, pointing instead forthis week’s federal court hearing in a case it has brought againstthe FERC imposition of a $150/MWh price cap in the federal DC Courtof Appeals.

“How much lower can road kill get,” said Cal-PX’s Pasadena,CA-based spokesperson, Jesus Arredondo, noting that thestate-chartered nonprofit exchange has basically been put out ofbusiness by a combination of the state’s electricity crisis andFERC’s order that it end its tariffs at the end of April. With theinvestor-owned utilities relieved of their previous mandate to usethe Cal-PX for all its wholesale electricity transactions, thevolume in the Cal-PX market has slowed to a trickle, and like theutilities that it is suing for unpaid bills the exchange is out ofcash.

Initially, Cal-PX filed a new tariff to reflect FERC’s order forthe $150/MWh so-called “breakpoint,” with the state exchangeabandoning its previous single-price auction, but it neverimplemented the new tariff, filing for a rehearing.

“We find that the PX is in violation of our order to apply anas-bid price for bids above $150/MWh, and therefore, is causingunjust and unreasonable wholesale rates in California in violationof the Federal Power Act,” FERC said in its latest order.

The FERC order seems the least of the cash-strapped Cal-PX’sworries this week, having announced a week earlier that it wascutting 15% of its 200-person work force and taking initial stepsto go out of business. Among the various legislative remedies beingdiscussed this month in a continuing special session of the statelegislature is a measure to merge the PX with the state-charteredindependent grid operator (Cal-ISO), but it does not have a billnumber and is just a concept that may or may not make its way intoother pieces of legislation now being debated, Arredondo said.

Otherwise, Cal-PX’s only option seems to be shutting down, andamong the remaining loose ends would be a combination of theuncollected bills from the utilities, which in turn are owed to theexchange’s creditors and whether or not the outstanding powerfutures contracts will be honored as part of the proposed statebonds’ securitization program. One incentive for legislators tocombine the Cal-PX and Cal-ISO would be to follow through on theforward contracts.

“There is not a whole lot we can do,” Arredondo said. “We’re anonprofit public benefits corporation that is revenue neutral. Wehave handcuffs on, and we’re being told to keep swimming.”

For the exchange to expand into other regional energy markets— as it once envisioned — would require state and federalregulatory constraints being removed, said Arredondo, noting thatno one at this point is pursuing this with FERC because it wouldrequire state legislative permission to do so and it is notinterested in doing so.

Indications from FERC are that “they don’t want us around,”Arredondo said, and in the meantime there is no cash coming in tokeep the Cal-PX going.

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