DOE Extends Emergency Order for CA

Making himself a domestic energy diplomat moving between meetings in Washington, DC, and the West, Energy Secretary Bill Richardson last week supported the need for a western regional wholesale power price cap as he extended for another week his earlier emergency order requiring generators and marketers to make power available to the continuing tight California market to avoid the threat of rolling blackouts. The order, which was first issued on Dec. 14, expired Tuesday at midnight. The new order will remain in effect until Dec. 27, unless modified.

"We continue to carefully monitor the situation in California. Electricity supplies are tight and the reliability of the grid may be endangered," Richardson said. "We don't take emergency orders lightly, but we must be in a position to react quickly and responsibly." However, "we cannot continue this [practice] indefinitely --- it is not the true long-term solution as market forces should dictate price."

The emergency order requires that, if the California Independent System Operator (Cal-ISO) certifies there is an inadequate supply of electricity, certain power suppliers would be required to make power available to the ISO if they have power in excess of the amount needed to satisfy service to firm customers. Those suppliers who provided power to the California Power Exchange (Cal-PX) and the Cal-ISO between Nov.14 and Dec. 14 that have available firm capacity would be subject to the order.

The Cal-ISO is required to notify each supplier subject to the order of the amount and type of service requested by 9 p.m. EST on the day before the requested service. The ISO must allocate the requests in proportion to the amount of each supplier's available power. The price for the power will be set by an agreement between the Cal-ISO and the supplier. If no agreement is reached, FERC will set a just and reasonable rate at a later date.

Twice last week the Cal-ISO invoked Richardson's emergency order with reserves dropping due mostly to in-state transmission problems causing potential shortfalls centered in the northern half of the state. California already faced the prospect of rolling blackouts because its reserves dipped below 1.5% at one point earlier this month.

Lack of sufficient generation in northern California, along with inability to get more supplies from the Pacific Northwest "necessitated the action," the Cal-ISO said in a prepared news announcement. In addition, for almost a week, a major transmission line carrying power from the south to the north has been overloaded and unable to carry additional supplies, although they are now available from generators that have come back on line after planned and unplanned maintenance.

While conceding he was disappointed that FERC a week earlier had not imposed a regional wholesale cap, Richardson said that the "only way to bring sanity to the electricity markets in the short-term" is through a regional ceiling on bulk power prices.

"This continues to be a dynamic situation that has been worsening over the last three weeks, and that is particularly true of hydro-electric resources," said Cal-ISO's COO, Kellan Fluckiger, who noted that Pacific Northwest sources are already using next February's water to supply power to California. Some plants are threatened with running out of water.

Richard Nemec, Los Angeles

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