The beleaguered California independent electricity grid operatorlashed out at a recent state report to the governor on thecontinuing electricity crisis in its own submittal to the state’schief executive on Tuesday.

The California Independent System Operator (Cal-ISO) said theAug. 2 report by two top energy regulators appointed by Gov. GrayDavis has “some key factual assertions and conclusions that aremistaken.” The report was extremely critical of California’s ongoingelectric industry restructuring (see Daily GPI, Aug. 4).

The Cal-ISO goes through nine major points of contention, aprimary one being that the state’s current shortage of reservegeneration has been caused by the industry restructuring. “Thisassertion is unfounded. Significant load growth in California andneighboring states, coupled with a lack of significantinfrastructure investment in both generation and transmission, havecaused this vulnerability.”

Billion- and hundred-million-dollar estimates on the consumerimpact of May, June and July power shortages and price spikes thatwere in last week’s report to the governor from California PublicUtilities Commission President Loretta Lynch and ElectricityOversight Board Chairman Michael Kahn were strongly challenged bythe Cal-ISO. The exchange asserts the report leaves the “mistakenimpression” that these figures represent the amounts actually paidby investor-owned utilities or their customers. The Cal-ISO reportalso quibbled with the contention in the Lynch/Kahn report thatconsumers could have saved $110 million in May and June if a$250/MWh price cap had been effective for the ISO emergencypurchases.

In a somewhat defensive posture, given the criticism leveled atthe state-chartered nonprofit organization charged with being thestate’s traffic cop on the bulk of the transmission grid, theCal-ISO report defends its operating procedures in the midst ofrolling blackouts in the San Francisco Bay Area in June as adheringto industry voluntary reliability council standards. It staunchlydefends the operations of its 26-member stakeholder board and itsprofessional staff. Terry Winter, Cal-ISO CEO and a board member,transmitted the report via fax to the governor’s office.

While acknowledging that changes are needed in market rules, andutility consumers need to be shielded more from price spikes, theCal-ISO report clashes head-on with the earlier report by arguingthat California’s electricity market is not dysfunctional. Itcontends the increased price spikes are a function of much tightersupply and demand conditions this summer, compared to the twoprevious summers when the Cal-ISO was operating on an annualizedbasis. For both 1998 and 1999 the amount of hours in which pricesexceeded $100/MW were 1% or less. By comparison, the number ofhours annualized for all of 2000 in which the price went over thatlevel is 4.5%

In the cover letter, Winter noted to the governor that theCal-ISO would like to have “the opportunity to work with” the newlycreated Governor’s Task Force on Energy Reliability, a panel onwhich both the Cal-ISO and California Power Exchange (Cal-PX)representatives were noticeably not included.

State legislative hearings on the electricity crisis open inSacramento today.

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