While the financial and political sectors are consumed with what last week’s revelations about wholesale power market manipulation will mean to the energy industry, California’s independent electric transmission grid operator, Cal-ISO, is focused on the broader market power abuses as the potential malfunctions that have the broadest, longest lasting and most costly impact. Relatively, the market power costs are in the billions of dollars, while the market manipulation of the kind described in the infamous Enron internal memos (see Daily GPI, May 9) collectively costs maybe hundreds of millions, according to Cal-ISO sources.

The “lions share” of the over-payments comes from the overall abuse of market power in which suppliers just charged a lot more because they could, even though the outcry this month is for putting more market gaming rules in place, with teeth to enforce them, according to Cal-ISO. In many cases, the grid operator already has the added authority and the unwanted behavior is no longer an issue. The so-called “megawatt laundering” is an example; it was eliminated last summer with FERC’s western wholesale power price mitigation measures.

“We need to still address the games as described in the Enron memos and variations, but that is still not the ‘big ticket’ item,” said Gregg Fishman, Cal-ISO spokesperson at its Folsom, CA, headquarters near Sacramento. “A lot of the market gaming described in the Enron memos we had already noted going back into mid-2000, so those reports and a lot of the data already exist.

“The refund case, on the other hand, might be a different story. And if these latest revelations lead to significant changes in the way the (Federal Energy Regulatory Commission) case is being handled, that would mean a huge undertaking for Cal-ISO. We have already run those settlement calculations three times, and each time it is about an eight-week process.

“As we re-run those past markets, we are still handling everything we do on a daily, weekly and monthly basis. In the refund case it is certainly worth doing because potentially we could get back significant amounts of money.”

Still to be worked out is an overall agreement between FERC and the Cal-ISO staff on a specific model and numbers to use in cranking out the numbers for the various refund case scenarios, Fishman said. In addition, the major market power abuse is addressed by Cal-ISO’s newly proposed market design and specifically an “available capacity requirement” (acap) that requires participants to secure needed resources ahead of time and not wait until the real-time market, forcing more of the state’s imbalance supplies into the forward market and reducing the Cal-ISO day-of, real-time market.

Regarding the Enron-like market manipulation, Cal-ISO has known for some time that certain participants in the state’s wholesale market were trying to game the system at certain times. Fishman said the grid operator has never named names publicly because of confidentiality issues.

“We’ve noted in a variety of reports going back quite a ways that these games are being played, and even the recent memos indicated Enron was doing something until we (Cal-ISO) put out a notice to stop, and it indicated (in the memo) that they stopped,” Fishman said. “There are a lot of those kinds of things, but we have never named specific companies.”

FERC has a lot of this same information already, and last week asked some 150 market participants nationally to provide data and affirm under oath that they have not done any of the Enron-like manipulation measures, if that is the case. Cal-ISO expects FERC to correlate the new data with the old information from Cal-ISO to see if the data matches, or in what areas it does not.

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