Cal-ISO Seeks FERC Action Against Power Marketers

The Cal-ISO has filed emergency motions with FERC, seeking to terminate the Commission's grant of market-based authority to Mirant/Southern Energy, Reliant, Dynegy, and Duke unless it imposes a mitigation plan that "fully protects against the exercise of market power in California," including refunds, plus interest, of charges exceeding cost-based rates going back to May 2000. The filings join similar actions filed earlier against Williams and AES, after a federal court refused to act.

The filings, announced late Friday, ask that the Federal Energy Regulatory Commission's action include protection against "out-of-state laundering of energy sales." The Commission should institute proceedings determining that the companies exercised market power, the Cal-ISO said, submitting several studies, backing up its call for an investigation.

Cal-ISO said the action was timed to coincide with renewal of the grant of market-based rate authority to the marketers.

"Clearly, wholesale rates in the state have not been just and reasonable and the ISO wants FERC to live up to its mandate and revoke the market-based rate authority," said Charles Robinson, general counsel for the ISO. Robinson said FERC's other option would be to enact meaningful price mitigation. "There are loopholes in FERC's current mitigation plan that could lead to charging unreasonably high prices."

Asked in a teleconference if the ISO had specific instances of abuse of market power, he said the Cal-ISO analysis compared bidding patterns and prices actually charged. But "we don't carry the burden of proof. The generators have to demonstrate that they don't exercise market power, or that it is adequately mitigated." The ISO is asking FERC to issue orders in the cases by June 28.

One of the loopholes involves "megawatt laundering," Robinson said, in which generators sell power on a forward basis out-of-state and then send the energy back in real time. Closing this loophole could involve installing market mitigation or cost-based rates all across the region.

If the Commission doesn't follow through, the ISO could go back to the court, Robinson said, although he refused to be pinned down as to whether the Cal-ISO was actually prepared to mount a court case again. The Ninth Circuit Court of Appeals in San Francisco took little time in rejecting an emergency request by the California legislature to force FERC to cap wholesale energy prices. The court petition, directed at AES and Williams, was filed May 22 and tossed out three days later. The panel ruled that the legislature did not demonstrate that the case warranted emergency action, indicating FERC had original jurisdiction.

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