The California electric transmission grid operator’s (Cal-ISO’s)26-member board today will consider various proposals from itsmembers and staff for imposing some form of wholesale price capsunder its existing federal authorization to do so. They would betargeted at specific generators or demand levels.

Two major investor-owned utilities, both of which haverepresentatives on the Cal-ISO board, will propose targetedwholesale caps using different methodology. Last month at a FederalEnergy Regulatory Commission hearing in San Diego, the CEO of thestate’s third major electric utility, San Diego Gas and ElectricCo.’s parent, Sempra Energy, proposed some form of wholesale capsaimed at generators and marketers whose prices are over-market.

Southern California Edison Co., working with several otherCal-ISO board members, will propose load differentiated wholesaleprice caps based on the size of demand at various times during a24-hour period. Its counterpart in the northern half of the state,Pacific Gas and Electric Co.(PG&E), reportedly will recommendsome form of cost-based wholesale price caps, tied to eachindividual electric generating unit’s cost of producing power atany given time.

Both ideas offer “a more sophisticated approach” than simpleacross-the-board price caps, said Robert Foster, an Edison seniorvice president, although he thinks the load-differentiated methodis “easier to understand and to implement. We would supportPG&E’s approach, too,” he said.

“We are working cooperatively with state and federal agencies tofix this problem and get some protection for California consumersand companies.”

In response to specific questions, Foster said that Edison hasnot given up the goal of establishing a competitive retail marketfor electricity, but because it is not what he calls “workablycompetitive” now, “in the interim we have to stop this market andcontrol it so that it can be corrected. When it can be workablycompetitive, we think that it will have some benefits.”

“I think the ISO board will get several interesting proposals,all of which are aimed at trying to get some measure of control andgive some rationality to this market,” said Foster.

The merchant generators, Foster said, have expressed awillingness to help and have stressed long-term contracts as asolution. Edison agrees “a major part” of the ultimate solutioninvolves long-term contracts, but prices have to be lowered first,Foster said, before any meaningful long-term deals can be struck.

“You can’t take this market, which is dysfunctional and use itas a gauge,” Foster said. “You have to get to a point where you getprices down in this market before you can do long-term contracts.”

For the short term, Edison is still considering filing with theCPUC for rate relief assurance regarding its current power costunder-collections that exceed $2 billion. Apparently, the utilityhas backed off plans to definitely make a filing and will now takeits lead from the regulatory commission, Foster said.

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