In an effort to halt the exercise of significant market power inthe California bulk power markets, FERC staff has proposed that thestate-run Independent Operator System (Cal-ISO) be permitted tomitigate prices on power transactions in its real-time marketsduring periods of reserve deficiencies, such as Stage 3emergencies.

“These hours are those which are extremely conducive to theexercise of market power by suppliers” in the California bulkelectricity market,” staff said in a March 9 report Friday, whichlisted its recommendations for market monitoring and mitigationmeasures in the out-of-control power market.

During such emergency periods, all units that have signed aParticipating Generator Agreement (PGA) with the Cal-ISO should berequired to offer all of their capacity that is available and notscheduled to run for use in the California market, the FERC staffproposed. In return, the PGA units would be paid the marginal costof the highest priced PGA unit called upon to run when reserves areat a critical stage, staff said.

Likewise, staff believes load-serving entities (utilities)should be required to report the price at which they will curtailtheir loads, as well as identify which loads will be curtailed.

It further recommended that each generating unit be required tohave a “standing, confidential price based on its marginal costs”to be used by the Cal-ISO to establish the real-time marketclearing price when mitigation is required, as well as an estimateof the available capacity that could be counted on from eachgenerating unit. The Cal-ISO would have the option of choosingbetween demand bids or the price-mitigation levels on file whendetermining the market-clearing price during critical reservesituations, according to the staff report.

Staff’s proposed long-term mitigation/monitoring measures areintended to replace the “soft” $150/MWh price cap that took effecton Jan. 1 on certain transactions in the Cal-ISO and Cal-PXmarkets. FERC expects to adopt a long-term mitigation/monitoringapproach by May 1.

Staff recommends that its price mitigation approach for theCalifornia power market “sunset” in no more than one year. “We alsorecommend that mitigation levels be adjusted within the timeperiod, if necessary, to help ensure new investments ininfrastructure are undertaken quickly.”

The FERC staff report also seeks to give the Cal-ISO greaterauthority over planned outage schedules for all generating plants.The ISO’s existing authority is limited to approving the outageschedules for reliability must-run facilities. “The current ISOauthority may need to be strengthened to achieve greater systematiccontrol over all units (including those of the IOUs) that the ISOmust dispatch,” it said.

“The procedures for coordination and outage control should becoupled with reporting requirements to the Commission and expeditedreview when disputes arise.” It added that “questionable outagesshould be immediately reported to the Commission.”Susan Parker

©Copyright 2001 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.