CPUC Vows to Review Dynegy's CA Costs

The California Public Utilities Commission (CPUC) thinks Dynegy Power Marketing Inc. doth protest too much.

In fact, the state regulatory agency has threatened to go over Dynegy's "actual costs" in the California electric market with a fine-tooth comb if FERC doesn't dismiss the marketer's complaint against the California Independent System Operator (Cal-ISO).

In the Section 206 filing in December, Dynegy Power accused the Cal-ISO of compensating generators with in-state facilities far less for emergency power than it does for purchases from marketers and generators with facilities outside of California. Dynegy claimed the rates being paid by the Cal-ISO weren't enough to cover its short-run marginal costs, including natural gas and emissions costs. As a result, the company said it has incurred "very substantial out-of-pocket losses" of more than $2 million since Nov. 1.

In an affidavit to the complaint, Dynegy estimated that its El Segundo Units 1 and 2 had variable operating costs of $660.50/MWh, well above the $150/MWh soft cap currently in effect in California. The total variable costs included paying $40/Mcf for gas and a $50/pound NOx emission cost.

But the CPUC seriously questioned whether Dynegy, which has "natural gas sales of more than 10 billion cubic feet...a day, and 13,5000 miles of pipeline," has ever paid $40 for gas in its life. "It would appear reasonable to assume that Dynegy's gas portfolio is no higher than $6," it said.

And the emission cost is probably closer to $30/pound, the CPUC says. Assuming these costs, "Dynegy will ordinarily operate at costs well under the $150 market clearing price 'breakpoint," it noted.

Susan Parker

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