FERC’s decision to mitigate prices only during Stage I, II and III emergencies will provide effective relief in the months ahead, said Commissioner Linda Breathitt yesterday, given that it’s very likely that California “may be in the stages for a lot of the summer.”

While testifying before the Senate Energy and Natural Resources Committee, Breathitt defended the Commission’s actions when Sen. Dianne Feinstein (D-CA) referred to the April 26 decision, which called for price mitigation of spot deals in California during reserve emergencies, “in a sense…next to worthless.”

Given the restrictions of FERC’s order, Commission William Massey said he had been told at least 40% of the transactions in the California spot market this summer would be subject to price mitigation, which means that 60% or more would be free of any price restraints whatsoever.

The Commission’s price-mitigation plan, which goes into effect in late May, has been referred to as the “Swiss Cheese” plan, said Massey, when asked by Sen. Bingaman (D-NM) if companies would be able to circumvent it.

“It is not a concern that I have,” quipped Chairman Curt Hebert during the Senate committee’s oversight hearing called to specifically address the FERC price-mitigation order. He acknowledged, however, that bids made by out-of-state generators would not be subject to mitigation.

During the hearing, Feinstein said she was handed a document that instructs companies on how to use the Commission price-mitigation plan to “price gouge” in the market.

Hebert assured the Chairman Frank Murkowski (R-AK) and other committee members that FERC will remain “vigilant” in its efforts to weed out manipulation in the market. In fact, it intends to conduct “ongoing audits of selected sellers” in the California power market, Breathitt said.

Massey, however, told Sen. Gordon Smith (R-OR) not to expect much from FERC’s “limited” Section 206 investigation into the reasonableness of power prices in states that make up the Western Systems Coordinating Council (WSCC). “…That investigation is so narrow that it holds no hope of any price relief in your state.”

The Commission came under further fire for conditioning the price mitigation relief on the California Independent System Operator (Cal-ISO) and the state’s investor-owned utilities filing a regional transmission organization (RTO) proposal by June 1.

“If we are to get California on its feet,” an RTO proposal is necessary, Hebert told the committee. While this “was not one of my favorite features” of the order, Breathitt acknowledged that she did vote for it. She said she didn’t believe that the Commission was demanding too much from California.

Massey noted that he would have voted for the RTO if it had been in a separate order, but he opposed conditioning the price mitigation relief on the Cal-ISO and utilities submitting an RTO plan. If they fail to meet the June 1 deadline, the price mitigation order “self destructs.”

The Commission is doing everything it can to help California, Hebert said, adding that it has issued about 40 orders addressing the state’s energy markets since the start of the year. “FERC is acting responsibly, but the one thing it cannot do is go to California and build” the power plants, transmission lines and gas pipelines, he noted.

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