Looking beyond rate freezes and charges for strandedinvestments, California regulators Thursday opened the door forgreater retail electric price fluctuations in a decision allowingthe state’s three major investor-owned electric utilities to buyand sell some of their power outside the state-mandated nonprofitpower exchange (Cal-PX).

The move was part of a larger decision on so-called”post-transition electricity rates,” including a $430 millionrefund for San Diego Gas and Electric customers for used portionsof rate reduction bonds.

Under California’s 1996 electricity restructuring law, largecustomers or retail energy service providers can buy their power onthe open wholesale market, but for the majority of smallresidential and business customers continuing to get their powerfrom one of the three IOUs, the utilities have been required to buyand sell all of their supplies through the Cal-PX, at least through2002 or until their stranded costs are paid off.

The California Public Utilities Commission now has decided theutilities can buy from “any qualified exchange” during the ongoingtransition period. After the transition period-which only appliesto two of the three IOUs – the PX buy requirement is entirelyeliminated.

The action “releases the grip of the power exchange onCalifornia markets,” said CPUC commissioner Richard Bilas, insupporting the majority in a 3-2 vote by the five-membercommission. A Cal-PX spokesperson said the exchange will file forrehearing of the decision. The two most recent CPUC appointees byGov. Gray Davis opposed the idea of opening up utility purchasesoutside the state-created exchange, arguing it was too soon to doso.

The issue of the utilities’ power buying mandate was brought onby SDGE’s lifting of its rate freeze when it essentially paid offits stranded costs (which were relatively small compared to its twobiggest sister electric utilities) last summer. SDG&E struck asettlement that includes the Cal-PX and consumer groups under whichthe utility would continue to buy about 80% of its supplies throughthe power exchange, remaining free to buy up to 20% of its supplieson the open market.

As an adjunct to Thursday’s decision, SDG&E will be requiredto make a one-time, lump sum credits to customers for their $430million share of unrealized savings from excess rate reduction bondproceeds the utility has collected since the lifting of its ratefreeze. On average that equates to about $290 for residentialcustomers and about $900 for small business customers.

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