A proposed new state law submitted last Wednesday to the California legislature would punish industry sources providing phony natural gas pricing information to major national industry published indices. The California Public Utilities Commission (CPUC) would be required to use only natural gas price indices determined by the regulators to be “reliable and verifiable.”

The chairman of the state Senate special investigative committee looking at wholesale energy price manipulation, Sen. Joe Dunn, is sponsoring the legislation, calling for civil fines of up to $25,000/violation for anyone found guilty of lying about gas prices used in the industry indices. In his legislative investigation, Dunn has been motivated by the wholesale gas price spikes at the California-Arizona border in 2000-2001 that contributed to the state’s electricity crisis.

Dunn’s proposed legislation would require the CPUC to set standards for index reliability and verification. Only those indices meeting the standards could be used by the regulators to adjust rates paid to the state’s many small merchant power producers, or “qualifying facilities” (QFs), for the supplies they sell to the state’s three major private-sector utilities.

Many of the QFs are gas-fired plants and cogenerators that sell power under 25- to 30-year contracts with the utilities. The prices they are paid have traditionally been set by pre-agreed-to formulas that include the use of gas price indices.

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.