The California Public Utilities Commission (CPUC) thinks DynegyPower Marketing Inc. doth protest too much.

In fact, the state regulatory agency has threatened to go overDynegy’s “actual costs” in the California electric market with afine-tooth comb if FERC doesn’t dismiss the marketer’s complaintagainst the California Independent System Operator (Cal-ISO).

In the Section 206 filing in December, Dynegy Power accused theCal-ISO of compensating generators with in-state facilities farless for emergency power than it does for purchases from marketersand generators with facilities outside of California. Dynegyclaimed the rates being paid by the Cal-ISO weren’t enough to coverits short-run marginal costs, including natural gas and emissionscosts. As a result, the company said it has incurred “verysubstantial out-of-pocket losses” of more than $2 million sinceNov. 1.

In an affidavit to the complaint, Dynegy estimated that its ElSegundo Units 1 and 2 had variable operating costs of $660.50/MWh,well above the $150/MWh soft cap currently in effect in California.The total variable costs included paying $40/Mcf for gas and a$50/pound NOx emission cost.

But the CPUC seriously questioned whether Dyney, which has”natural gas sales of more than 10 billion cubic feet.a day, and13,5000 miles of pipeline,” has ever paid $40 for gas in its life.”It would appear reasonable to assume that Dynegy’s gas portfoliois no higher than $6,” it said.

And the emission cost is probably closer to $30/pound, the CPUCsays. Assuming these costs, “Dynegy will ordinarily operate atcosts well under the $150 market clearing price ‘breakpoint,” itnoted.

Susan Parker

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