Not surprisingly, federal and state witnesses disagreed over the future stability of California’s energy infrastructure and marketplace during a Congressional information-gathering hearing in Sacramento last month that was focused on the state’s independent, nonprofit electricity transmission grid operator, Cal-ISO. The chairman of the U.S.House Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs, Rep. Doug Ose (R-Woodland) set up shop in his district to hear from a number of state officials, along with Patrick Wood, chairman of the Federal Energy Regulatory Commission.
While reminding listeners that the state is “not out of the woods yet; not by a long shot,” Ose said he scheduled the hearing in Sacramento to focus on the future of the California electricity market. “While I have been critical, in the past, of many actions taken by the state, I am here (Feb. 22) to look for productive solutions to ensure that we never face such a crisis again,” said Ose in kicking off the hearing that included nine witnesses from the state legislature, state government and other sectors of the industry, in addition to Wood.
Following up on a recently completed FERC-sponsored audit of Cal-ISO by an outside consultant, Wood told the Congressional subcommittee that his commission has several important issues yet to decide related to Cal-ISO’s independence, but other issues also inherent in the grid operator’s proposed new market design.
“We will seek to act in both areas with careful deliberation,” said Wood, noting that FERC is trying on a generic basis to achieve the decade-old vision of competitive wholesale energy markets (outlined in the ’92 Energy Policy Act). “A solid, well-thought out market design will encourage competition and help ensure stable prices, both in implementing such a design for the benefit of the nation’s energy customers.”
Wood refused to be pinned down on how FERC will handle the Sept. 30 expiration of western wholesale electric power price caps, which many officials in California feel need to be continued beyond that date. At one point Wood hinted that a more targeted, “surgical” set of price mitigation measures may be put in place when the current caps expire.
Cal-ISO CEO Terry Winter told the subcommittee that his organization’s market design proposal for 2002 (MD02) is a “work in progress,” representing initial input Cal-ISO has received so far from participants, and another round of workshops is getting under way. “Cal-ISO can address many deficiencies through market design changes, but these are only part of the solution,” Winter said. “The resolution of the structural, operational and financial issues that contributed to the California crisis will require a much broader, highly coordinated effort among many parties.”
Specifically in response to the FERC audit, for which Cal-ISO provided a written response in a Feb.15 filing to the federal panel, Winter disagreed that the Cal-ISO current board needs to be replaced, noting that the current board “has performed effectively during the crisis, allowing the ISO management and staff to operate with sufficient latitude on a day-to-day basis.”
Jan Smutny-Jones, the executive director of the Independent Energy Producers (IEP), a Sacramento-based trade group for merchant generators of all sizes, spoke to the committee as a former head of Cal-ISO’s original stakeholder oversight board that was disbanded by the governor in January 2001, telling the Congressional panel that “the lack of ‘political’ independence has undermined the Cal-ISO’s credibility and ability to address real operational issues.”
Smutny-Jones listed three “lessons” that the state must build on to avoid what he called the “perfect storm” for electricity from reappearing
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