The California Electricity Oversight Board has called on FERC toorder the state Independent System Operator (Cal-ISO) to maintainexisting bid caps on wholesale energy, ancillary services andreplacement reserves until the Commission completes its probe ofthe California bulk market, initiates reforms and finds the marketsto be “workably competitive.”

In a complaint filed against all sellers of energy and ancillaryservices, scheduling coordinators, the Cal-ISO and the CaliforniaPower Exchange (Cal-PX), the California board is seeking anextension of the bid-cap authority for the Cal-ISO beyond its Nov.15 expiration date.

It said the current $250/MWh bid caps for wholesale energy andancillary services, and the $100/MWh bid cap for replacementreserves should be continued because of suspected market-powerabuse in the California bulk market. “We believe that is the case,”noted Erik N. Saltmarsh, counsel for the California board, whichcurrently is investigating the matter.

“Once demand reaches or exceeds approximately 33,000 MW[statewide], sellers and scheduling coordinators have the ability,and do, exercise market power. It is not competitive forces butrather the Cal-ISO’s bid cap that most significantly moderatesprice run-up during these periods,” said the board, which hasoversight authority over the Cal-ISO and Cal-PX and theenergy/ancillary markets that they operate.

As a result of price spikes, the Cal-ISO has estimated the totalmarket costs for this past June were as much as $3.6 billion basedon day-ahead, day-of and real-time prices for energy and ancillaryservices in the Cal-PX and Cal-ISO markets, the California boardtold FERC. This compares to total costs of about $8 billion for allof 1999.

The California board said the existing $250/MWh caps in theCal-ISO and $350/MWh for the Cal-PX “are sufficiently high to allowgenerators to recover their variable costs and earn significantadditional revenues.”

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