CPUC Commmissioner Blasts Generators for 'Manipulating' Market

Acknowledging that the state's cost for spot wholesale power supplies has increased significantly since the PG&E utility bankruptcy filing, the newest member of the California Public Utilities Commission lashed out at merchant generators and power suppliers last week for "manipulating" the western wholesale electricity market and extracting billions of dollars out of the states' economies. If the situation does not ease soon, Gov. Gray Davis is likely to seize some of the private sector power plants, according to Geoffery Brown, a former San Francisco public defender named to the CPUC by Davis earlier this year.

"The situation with the wholesalers is getting to a point that is intolerable, and I don't know how long the governor's patience is going to be tried by this," Brown said. "Certainly the [CPUC's] patience is being tried by the way [the wholesalers] have absolutely scalped the state in terms of financial resources. It is a disgrace. All you have to do is pick up the Wall Street Journal today and see [the wholesalers'] profits.

"The situation in the western states is intolerable. What you are seeing is wholesale manipulation of the market. Everyone agrees that there is manipulation of this market in some form or another, and at this point, the manipulation has caused a huge financial drain for this state and Oregon and Washington."

The CPUC last week ordered a new state investigation of the qualifying facility (QF) generators to determine what their obligations are to serve the state's major investor-owned utilities under the state regulators' jurisdiction (see related story this issue). The regulators are also expected to begin determining how to marry a proposal from Davis on the new retail rate increase and the provisions of the memorandum of understanding (MOU) for bailing out Southern California Edison Co.

In response to questions at a news media briefing, the state regulator acknowledged additional rate increases may be needed to make the utilities whole, but he thinks it would be "intolerable" to put in a larger increase now in the absence of "any clear evidence."

"Something has to be done to relieve the utilities of their debt situation," said Brown, who conceded that theoretically price caps stifle incentives, but for an interim period in the current situation they could help resolve the ongoing crisis.

"How much incentive do [the generators] need?," he asked. "Do they need all the money in the world? Are they allowed to prostrate the state of California to incent them to build facilities."

Reiterating what he had told federal regulators at meetings in Boise, ID, last week, Brown said that the Federal Energy Regulatory Commission has to regain some control over the wholesale power market.

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