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CA Governor Seeks Action on Power Prices

CA Governor Seeks Action on Power Prices

California's governor weighed in more forcefully last week in the continuing summer electricity rate shock plaguing the southern end of the state and calling into question the future of the state's four-year electric industry restructuring. A virtual flurry of state activity is expected this week at four different state agencies and at the state legislature, which returns from a summer recess.

Gov. Gray Davis called for extending wholesale power price caps, hurrying consumer rate relief and investigating whether market power abuse has been part of the price spikes, sending letters to four state agencies overseeing parts of the new electricity structure and to FERC. He specifically directed the California Public Utilities Commission to file with FERC this week a petition to extend the wholesale price caps, and to ask the federal regulators to declare "no competitive market currently exists in the state." Calling the current situation in California "unjust and totally unacceptable," Gov. Davis said Californians were originally told electric deregulation would bring competition and lower or at least more stable prices. "That is clearly not the case in California. The result is uncontrolled price spikes with no end in sight."

Under its obligations in the Federal Power Act to ensure wholesale power rates are just and reasonable, Gov. Davis wrote in a letter to FERC Chairman James Hoecker that he supports his initiative "to undertake an investigation into wholesale power rates," and he requested that FERC "order immediate refunds to customers if this investigation determines that these rates are not just and reasonable.

"This is an important step FERC can take to ensure that California customers have an effective remedy to market abuse."

The governor's initiative seeking actions from the federal and state agencies came in the midst demands Friday from three state consumer organizations calling for repeal of California's 1996 electricity industry restructuring law. They called on the governor and legislature to rollback the law and impose an immediate rate freeze (presumably for San Diego Gas and Electric customers, since customers of the two other major investor-owned utilities still have their rates frozen at 1996 levels).

"Utility companies and politicians made mistakes and consumers aren't going to pay for them," said a joint statement from the three consumer groups. "We need to put a lid on the damage being suffered by the consumers of San Diego now and prevent a similar crisis from hitting the whole state next year."

One of Gov. Davis' letters went to the California Independent System Operator (Cal-ISO), asking its board when it meets Tuesday to consider an immediate FERC application for authority to use price caps beyond an upcoming November expiration of that authority, and that the board revisit the issue of lowering further the present price caps that were dropped from $750 to $500/MW earlier this summer.

The CPUC, which also meets this week (Aug. 3), was similarly asked by Gov. Davis to quickly authorize the return of an additional $100 million in rate refunds to SDG&E customers, and also to "take all actions necessary to assure that electricity supplies are adequate and that prices paid by California consumers are just and reasonable.

Yet another state agency meeting this week, the Electricity Oversight Board, which oversees California's restructured electricity market, was asked in a separate letter from Gov. Davis at its meeting Tuesday to use its authority to urge the Cal-ISO board to follow through on getting its price cap-setting authority extended by FERC and to lower the current $500/MW cap.

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

SDG&E through a spokesperson said it supports the governor's efforts, noting that he is putting the emphasis on solutions in the state's wholesale electricity market. "That's where the fix needs to be implemented,' the spokesperson said.

Richard Nemec, Los Angeles

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