While acknowledging behind the scenes that immediate help fromWashington was unlikely, the California Power Exchange (Cal-PX)last week prepared to put in a bid for a temporary $350 a MWh pricecap as the state suffered through another week of short power andhigh prices.

Reversing its past policies, the Cal-PX board last Wednesdayauthorized the state-run wholesale spot power market to seekfederal approval for the cap on its day-of and day-ahead markets asa means of lessening the peak-demand price volatility.

However, a source close to the Cal-PX said the move was mainlyfor local political consumption, and the Federal Energy RegulatoryCommission is not expected to approve the caps. “The Cal-PX haspretty much been told that FERC is unlikely to do anything with therequest,” the source said. “What the board is doing is making therequest, but until FERC acts, there will be no changes in theCal-PX markets.”

California officials noted that at least three FERC commissionershave indicated that aside from their ongoing investigation ofpotential market abuses and wholesale bulk market issues, they willcontinue to look to the California Public Utilities Commission andlegislature for solutions to the state’s electricity marketproblems. In an interview with Daily GPI last week, FERC ChairmanJames Hoecker said the agency was speeding up its investigation, butsaid the main remedies lie with California creators of the system,which operates differently from ISOs in other regions. (See Daily GPI,Aug. 17)

The Cal-PX pointed to the move by the California IndependentSystem Operator (Cal-ISO) to lower its price cap on emergency powerpurchases to $250/MW as reason for the exchange to take someaction. Cal-PX asked FERC for the $350/MW price caps as soon aspossible and establishes them for expiration at the time theCal-ISO’s FERC-granted price cap authorization expires. The reasonfor the higher Cal-PX cap is to discourage power generators fromholding back power supplies from the Cal-PX market to sell them inthe usually higher-priced Cal-ISO spot market.

California last week endured yet another week of hot weatherstatewide that necessitated power watches and alerts the first fourdays of the week with reserves dropping below the 5% level each ofthose days. Up to 2,000 MW of generation were out of service andcurtailment by large industrial and commercial customers wasimperative, along with much-needed power imports from the PacificNorthwest.

Meanwhile, a Reliant Energy spokesperson said a full-page ad in aCalifornia newspaper, placed by San Diego Gas & Electric blaminggreedy out-of-state merchant power generators for power shortages andhigh prices, was “totally wrong.” The ad contended the merchant plantoperators, Reliant, Dynegy and Southern Co., among others, asked FERCto lift the price cap. Instead, Reliant’s Richard Wheatley said, thegenerators’ filing is to assure the plant operators can recover theircosts if under emergency situations they are forced to bring inreplacement supplies that cost more than supplies they sold earlierout-of-state under long-term contracts. (see Daily GPI, Aug. 16)

The merchant generators under the state coalition of independentpower producers will begin their own advertising campaign this weekto counter the misinformation, said Wheatley.

In separate communications on the continuing power problem inthe northern part of the state, Pacific Gas and Electric reportedthat the California-based small qualifying facility (QF) powerplant operators that sprang up throughout the state over the pasttwo decades are reaping record profits from the high number ofpeak-demand days this summer.

A meeting of the California Public Utilities Commission will beheld today to respond to urgings by the governor and legislature toreintroduce price caps in San Diego and take other steps to relievethe SDG&E customers who have seen their summer electric billsdouble and triple.

Among the items to consider are options for freezing and cappingretail rates for SDG&E customers. One proposal would simply doas Gov. Gray Davis has requested — freeze rates (110% of June1998 levels) and establish a balancing account. The alternativeproposes capping residential and small business monthly bills forcustomers’ with loads under threshold amounts of 500 Kwh monthlyfor residential customers and 1,500 Kwh monthly for businesses.That amounts to about 70% of the residential and small businesscustomers in San Diego.

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