California’s governor weighed in more forcefully last week inthe continuing summer electricity rate shock plaguing the southernend of the state and calling into question the future of thestate’s four-year electric industry restructuring. A virtual flurryof state activity is expected this week at four different stateagencies and at the state legislature, which returns from a summerrecess.

Gov. Gray Davis called for extending wholesale power price caps,hurrying consumer rate relief and investigating whether marketpower abuse has been part of the price spikes, sending letters tofour state agencies overseeing parts of the new electricitystructure and to FERC. He specifically directed the CaliforniaPublic Utilities Commission to file with FERC this week a petitionto extend the wholesale price caps, and to ask the federalregulators to declare “no competitive market currently exists inthe state.” Calling the current situation in California “unjust andtotally unacceptable,” Gov. Davis said Californians were originallytold electric deregulation would bring competition and lower or atleast more stable prices. “That is clearly not the case inCalifornia. The result is uncontrolled price spikes with no end insight.”

Under its obligations in the Federal Power Act to ensurewholesale power rates are just and reasonable, Gov. Davis wrote ina letter to FERC Chairman James Hoecker that he supports hisinitiative “to undertake an investigation into wholesale powerrates,” and he requested that FERC “order immediate refunds tocustomers if this investigation determines that these rates are notjust and reasonable.

“This is an important step FERC can take to ensure thatCalifornia customers have an effective remedy to market abuse.”

The governor’s initiative seeking actions from the federal andstate agencies came in the midst demands Friday from three stateconsumer organizations calling for repeal of California’s 1996electricity industry restructuring law. They called on the governorand legislature to rollback the law and impose an immediate ratefreeze (presumably for San Diego Gas and Electric customers, sincecustomers of the two other major investor-owned utilities stillhave their rates frozen at 1996 levels).

“Utility companies and politicians made mistakes and consumersaren’t going to pay for them,” said a joint statement from thethree consumer groups. “We need to put a lid on the damage beingsuffered by the consumers of San Diego now and prevent a similarcrisis from hitting the whole state next year.”

One of Gov. Davis’ letters went to the California IndependentSystem Operator (Cal-ISO), asking its board when it meets Tuesdayto consider an immediate FERC application for authority to useprice caps beyond an upcoming November expiration of thatauthority, and that the board revisit the issue of lowering furtherthe present price caps that were dropped from $750 to $500/MWearlier this summer.

The CPUC, which also meets this week (Aug. 3), was similarlyasked by Gov. Davis to quickly authorize the return of anadditional $100 million in rate refunds to SDG&E customers, andalso to “take all actions necessary to assure that electricitysupplies are adequate and that prices paid by California consumersare just and reasonable.

Yet another state agency meeting this week, the ElectricityOversight Board, which oversees California’s restructuredelectricity market, was asked in a separate letter from Gov. Davisat its meeting Tuesday to use its authority to urge the Cal-ISOboard to follow through on getting its price cap-setting authorityextended by FERC and to lower the current $500/MW cap.

Finally, the California Power Exchange (Cal-PX), through whichthe three investor-owned electric utilities are required to buy allof their power, was asked by Gov. Davis to apply with FERC forprice caps on the wholesale power prices in the day-ahead andday-of spot markets that are operated by Cal-PX. The Cal-PXcurrently has no price caps.

SDG&E through a spokesperson said it supports the governor’sefforts, noting that he is putting the emphasis on solutions in thestate’s wholesale electricity market. “That’s where the fix needsto be implemented,’ the spokesperson said.

Richard Nemec, Los Angeles

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