The head of California’s small power producers’ trade group and state political officials clashed in separate news media conference calls Wednesday over whether past and present political considerations are hampering moves to bring stability to the state’s continuously unsettled energy markets.

Generators are concerned about the political and regulatory climate poisoning the state’s economic climate for new investment in power generation beyond the current phase of new plants being built, while regulators, absent a last-minute legislative solution, seem sure to drop direct access as an option to protect the state’s investment in long-term energy contracts and the state’s proposed long-term, $13.4 billion public bond offering in late summer.

A majority of the five-member California Public Utilities Commission loyal to Gov. Gray Davis are adamant that direct access has not worked and is counter to the governor’s strategy relying heavily on long-term contracts and a massive public bond offering to spread the cost of those supplies over a 15-year period in the future.

One accusation uncovered by trade news media is that the state transmission grid operator, Cal-ISO, is sending out “warnings” even when reserves are very high to trigger new FERC spot price mitigation measures.

The Cal-ISO should not change its alert processes to implement price caps because “that would cause me great concern,” said Jan Smutny-Jones, former chairman of the ISO’s now-defunct stakeholder oversight board and executive director of the California Independent Energy Producers (IEP), noting he had heard the same concerns, but has not substantiated that the grid operator has, in fact, changed its approach to alerts.

Saying he feels very paternalistic toward the Cal-ISO and has tremendous respect for the job they have been doing to avoid blackouts, Smutny-Jones said “The ISO is under tremendous political pressure in California and external to California, and it is very troubling time there.”

Regarding the prospect of the state abandoning direct access, Smutny-Jones called it a “very unfortunate action” that will “really move California backward down the wrong path,” making customers “hostage” to the monopoly utility providers. “It will be a dark day for the people of California and we would urge the (state regulators) not to take such action.”

Smutny-Jones said he is concerned that California is being looked at skeptically by potential new generators for the next wave of plants that have not yet been proposed to state authorities. Proposed anti-generator legislative proposals are “really having a dampening effect on investment opportunities in California and will result in projects either not being built or being delayed.

“What gets built here will be built with a very significant risk premium. California is beginning to sound a lot like Bangladesh, although that country at least pays its bills. So this is a significant concern that we have going forward.”

On the current Federal Energy Regulatory Commission settlement discussions in Washington, DC, Smutny-Jones said a lot depends on all the parties wanting to settle the issue, noting he is concerned about press reports that the state is taking a “very hard position that they only want to talk about a refund of $9 billion.

“The retail politics where California plays the victim and is demanding this large sum of money has basically surpassed the need to solve this problem and move on. I hope that is not the case, and is rather a traditional opening line you find in any negotiations.”

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