California Gov. Gray Davis late last week had the state add yet another series of formal appeals to an already long list of federal filings seeking wholesale power price relief, along with focusing his latest ire and jawboning on the state’s 30 municipal utilities. The Federal Energy Regulatory Commission filings keep the heat on prior to the governor’s anticipated meeting with President Bush Tuesday.

Six filings were made late Friday by separate agencies – the Electricity Oversight Board, California Public Utilities Commission (CPUC) and Independent System Operator (Cal-ISO). One filing seeks rehearing of FERC’s proposed order to limit prices during power alerts (Stages 1-3); and three others object to FERC’s proposal to allow surcharges on electricity rates to pay for back generator debts. The filings also ask the federal regulators to revoke authority for Williams and AES to charge market-based wholesale power rates.

“This is a full frontal attack on FERC’s generator-friendly policies grounded in the agency’s ideological devotion to California’s failed theory of electricity deregulation,” Davis said.

With the munis, Davis concluded that the public sector utilities selling excess bulk power to the state on the emergency spot market will lower their prices considerably this summer and provide all the power they can to the state. Negotiations with the state water resources department (DWR) will begin today (May 29). Davis arranged a meeting with many of the leading local government-run utilities to tell them face-to-face that they have been price-gouging the state on the emergency spot market worse than private-sector merchant generators that have been publicly castigated by the governor for months.

The political maneuvering and regulatory complexity grew thicker than traffic on southern California’s notorious freeways, involving both major political parties, along with state legislative and Congressional members. The governor seized any opportunity to announce several hundred megawatts of temporary peaking generation and a three-tiered early warning system for rolling blackouts to help mitigate the impact of tight supplies this summer.

With whirlwind fact-finding trips to Chicago and spur-of-the-moment press conferences, the governor got out ahead of his own newly constituted oversight board for the state transmission grid operator, Cal-ISO, on his blackout warning pronouncements, prompting a carefully worded written statement from Cal-ISO board chairman and close Davis political adviser, Michael Kahn.

Kahn said the governor has given the grid operator “a unique and difficult challenge.” He then noted that “balancing the supply and demand of electricity in California is also a unique and difficult challenge.” While noting that Cal-ISO will work with the governor to provide as much notice as possible (without committing to two- and one-day early warnings), Kahn said that might not always be possible because “the dynamic nature of the (state’s) grid outpaces our efforts at communication.”

In another forum, the CPUC took several actions related to blackout preparation and the summer’s expected supply crunch, approving programs to allow business and industrial electricity users to voluntarily shed parts of their load during peak demand time in exchange for payment at a fixed 10 cents/kW rate. A program allowing more business to apply for exemptions based on public health and safety impacts was also launched.

Wherever the governor or his people were, and whatever the prime subject, the state officials reiterated their pleas for the Bush Administration to force FERC to provide wholesale price relief — for both electricity and natural gas. The governor also is pushing for discounts from generators from both the private and public sectors.

Houston-based Reliant Energy offered to substantially lower its spot market prices to the state in exchange for relief from air emission limitations on the number of hours some of its plants can run annually. There was no immediate response from Davis or his people aside from a commitment to review the offer.

Davis’s swipe at the municipals for price-gouging marked the first time during the now almost year-old power crisis in California that the governor has included the municipals when criticizing generators. The largest of the group and the nation’s largest, the Los Angeles Department of Water and Power (LADWP) is owed about $300 million in spot purchases to the state, and it was until this month headed by S. David Freeman, who helped the governor’s team negotiate long-term power contracts this past winter and is now the governor’s chief energy adviser and likely candidate to head the state’s new power authority.

Following the meeting last Thursday, he said he “made great strides in finding common ground.”

“We all agreed that since we are in this together, we must work together to bring more power on line and promote conservation. I believe the prices municipal utilities have charged the state during the past are unconscionable. There was a strong commitment made (May 24) from the municipal utilities to provide the state with excess power at lower, reasonable costs whenever possible. Already, the LADWP is taking the first steps to offer power to the state at a price slightly above their cost, and I expect other municipal utilities to follow suit in the wake of this meeting.”

The governor did not name all of the munis represented, but said those attending the Thursday afternoon session in the governor’s office agreed to work with the state to make most of their excess power available this summer to the state through contracts at prices Davis described as “significantly lower than those being charged on the spot market.” The munis also have agreed to join the governor’s unending quest to jawbone the federal government into providing “immediate temporary natural gas and electricity price relief. Like the state, municipal utilities are facing soaring natural gas costs and are being gouged by private generators when they need to import power,” Davis said.

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