CAL PX Study Finds No Market Gaming
The state-chartered, nonprofit California wholesale spot power
market (Cal-PX) concluded this week that the state's market is
flawed but has not been gamed. The power exchange intends to make
its results public Nov. 1 in a filing to the Federal Energy
Regulatory Commission, a Cal-PX spokesperson said Tuesday.
In addition, the market through which California's major
investor-owned utilities are mandated to buy and sell most of their
electricity also will file with FERC its arguments against merging
PX operations with its state-chartered cousin, the California
Independent System Operator (Cal-ISO), the state's transmission
Some of the state's most blatant flaws, the Cal-PX report
concludes, related to sellers of power being encouraged to hold
back supplies for sale at the last-minute to the Cal-ISO's
real-time emergency market purchases that are made to ensure grid
reliability in peak-demand times. As the ISO had said in earlier
FERC filings, the Cal-PX report recommended selling more supplies
in the forward markets, including the Cal-PX day-ahead market.
Dynegy Senior Vice President Lynn Lednicky said his firm is
"very supportive" of efforts to move the California sales out of
what he and fellow generators think is too much reliance on the
spot market, which he characterized as including the Cal-PX.
"One of California's biggest problems right now is that it is
purchasing the majority of its power in what is essentially the
spot market," Lednicky said. "We would make the distinction that
the ISO and PX don't in that we don't consider the PX day-ahead and
day-of markets as forward markets; those are spot markets. When we
talk about forward markets, we are talking about buying the balance
of supplies for the next quarter or the next year.
"We think it is very important that California move quickly to
purchase the majority of its power out of forward markets and not
the spot market."
The Cal-PX draft report indicates that volumes in the day-of
market have increased by 387% compared to 1999 as the increasing
shortage of supplies in California day-ahead market in peak-demand
situations has encouraged power sellers to bid more into the
Cal-ISO real-time market.
"We concluded that there are structural problems with the market
that can and should be changed, but we didn't find anyone doing
anything actually illegal in the market (this past summer)," said a
source at Cal-PX.
Average prices in California's wholesale market have stayed
above $100/MWh throughout October, during which peak-demand
statewide was about 60% of the summer peaks. The Cal-PX source
conceded the prices have stayed "inordinately" high.
"There are a couple of potential ways for the state to inhibit
electrons being sold out of state only to be sold back into the mix
at much higher prices," said the Cal-PX source.
Spokespeople for several of the merchant generators, including
Duke Energy, Reliant and Dynegy, indicated they were expecting to
make some filing to FERC to reiterate that they don't believe there
have been any illegal or market abusive behavior by the generators.
Richard Nemec, Los Angeles