California regulators last week approved additionalparticipation by the state’s major private sector electricutilities in the California Power Exchange’s new block-forwardmarkets for ancillary and other services. Normally just a footnote,the action drew considerable attention by the California PublicUtilities Commission’s five governor-appointed members in light ofthe recent power crunch in the state.

Part of the finger-pointing ongoing in the wake of rollingblackouts and supplies dipping below comfortable reserve levels hasincluded criticism of the state’s major investor-ownedutilities-particularly San Diego Gas and Electric Co.-for not fullyutilizing their block-forward market-hedging options.

In light of this criticism, the CPUC waived normal processingtimes to vote the added trading authority to Southern CaliforniaEdison Co. and the other major utilities.

“We’re in a critical period because California’s ability toachieve electric supply security at reasonable prices is seriouslythreatened,” said CPUC Commissioner Carl Wood in joining hiscolleagues in a unanimous vote on the issue. “Improving the abilityof the utilities to manage prices and price risks is vitallyimportant. I am gratified that my colleagues share my sense ofurgency about this matter

“The alacrity with which PG&E and Edison have moved in thisarea seems appropriate, and is in sharp contrast to the moredeliberative approach of San Diego Gas and Electric, whoseconsumers are fully exposed to the absurdity of wholesale energyprices.”

Prompting the CPUC action was FERC authorization for the Cal-PXearlier in the year to begin July 1 two new block-forward markets:daily and “balance-of-the-month” markets. The utilities needed theCPUC approval to recover the costs of their participation in themarkets.

The CPUC couched its action as a means of giving the utilitiesmore tools to hedge against the continuing price volatility. In themidst of widespread debates on the current hot-weather marketconstraints and resulting price spikes, the CPUC provided expeditedhandling of the matter, which normally would have required a 30-daycomment period before it was effective.

Wood said he supported the expeditious handling of the issue andwas pleased by the flexibility of Edison and PG&E.

Managing price spikes for bundled small utility customers is acritical job, Wood said, noting that it will become all the moreimportant once stranded costs are paid off and rate freezes arelifted.

He criticized the lack of management of these prices in the caseof SDG&E, which unfroze its rates a year ago. And Wood wasparticularly critical of retail energy service marketers, none ofwhich he thinks have seriously attempted to market to residentialand small business customers in SDG&E’s territory since rateswere allowed last summer to fluctuate with the market.

Richard Nemec, Los Angeles

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