California’s leading state legislator for energy issues and thechief architect of its 1996 electricity restructuring law last weekdeclared the state’s electricity market as “not workablycompetitive” and urged that state energy authorities re-establishprice caps at their original levels to mitigate against extremeprice spikes when the weather heats up.

Sen. Steve Peace (San Diego) asked California’s IndependentSystem Operator (Cal-ISO) to lower its price caps back to $250/MWfrom the $750/MW level as the latest reaction to the heat-relatedpower outages experienced earlier in the month in northernCalifornia. Cal-ISO’s board has called a special meeting this week(June 28) to consider the request from Peace.

“Sadly, last week’s market performance confirmed my worstfears,” Peace said in a letter to the Cal-ISO governing board.”Electricity prices and costs reached grossly unreasonable levelsconsidering that from a statewide perspective, there were amplesupplies. Instead, the performance of the market demonstrated thatthe conduct of power suppliers was unconnected to any public orprivate commitment they had made.”

Noting that the Cal-ISO was created by the 1996 statelegislation he helped craft, Peace said the nonprofit,state-chartered transmission grid operator’s board has “aresponsibility to ensure that (California’s energy consumers’)interests are protected.” He said the lower price caps should bekept “until the California electricity market is repaired.”

As he has done previously, Peace argued in his latest letterthat the state’s electricity market is not “workably competitive”because customers don’t have the real-time information to curtailtheir power use when the prices spike.

Before the reliability problems encountered with unusually hotweather in the San Francisco Bay Area June 13-15, the Cal-ISO hadsignaled its intention to remove the price caps entirely by the endof this summer electrical load season.

Sen. Peace’s letter that surfaced Friday culminated a week inwhich there was no shortage of hand-wringing and news mediaannouncements in the wake of recent electricity price spikes andmulti-million-dollar estimated consequences from California’srelative modest round of rolling brownouts in and around the SanFrancisco Bay Area. The big question now is whether new solutionswill come from regulators, lawmakers or the market (see Daily GPI,June 26).

A report due Aug. 1 to California’s Gov. Gray Davis on therecent managed series of power outages and some of the generatingplant problems contributing to that will provide a clearerindication, but that assumes there are no recurring power peaksthat strain the state’s struggling electricity transmission grid.

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