California’s governor met with President Clinton in the WhiteHouse Wednesday and came away with an extension of the federalenergy secretary’s emergency order for another week, assuring thestate it can count on extra electricity supplies when needed. Thestate’s independent grid operator indicated it has been receivingabout 300 MW of power under the emergency mandate over the past twoweeks.

Gov. Gray Davis repeated his theme that the state’s electricityderegulation experiment is not working, and he now estimates itwill take a “minimum of two years” to get supply-demand back inbalance, which he said might allow deregulation to begin to work.

The governor’s meeting with the President was originallyscheduled in the context of Davis being the incoming head of theDemocratic Governors Association, but the power crisis changed theprimary focus of the visit, according to a White Housespokesperson. Earlier in the month, the governor briefedPresident-elect Bush on California’s energy problems and theypledged to work together.

In California on Wednesday, most of the state’s electricindustry stakeholders crammed into a standing-room-only stateregulatory hearing room in San Francisco for the first of two daysof fact-gathering prior to state regulators next week deciding whatsort of rate relief to give the state’s cash-strapped two largestelectric utilities.

Two administrative law judges (ALJs) presided at the hearing asa team, according to a California Public Utilities Commissionspokesperson. Three of the five commissioners attended, includingCPUC President Loretta Lynch. About 35 industry stakeholderstestified.

As part of the hearing process, the CPUC Wednesday announced ithas retained two auditing firms to audit the two utilities:Barrington-Wellesley Group will conduct a financial analysis andaudit of Pacific Gas and Electric Co., and KPMG LLP will do thesame for Southern California Edison.

“The commission will consider the results of the audit reportsin assessing the utilities’ claims that they are in severefinancial distress as a result of skyrocketing prices in wholesaleelectricity markets regulated by FERC,” the CPUC said in a preparedstatement announcing the auditors.

At the same time, the nagging daily power/price crunch thatpersisted through much of the pre-Christmas time in the nation’smost populous state eased considerably with the business slowdownthat usually accompanies the week between Christmas and New Year’sDay.

A Cal-ISO spokeswoman said her work environment has not beenthis quiet since before last summer’s electricity-crisis-a-daybegan. Some of her colleagues, however, were busy reviewing a”price-discrimination” complaint to FERC by Dynegy complaining thatCalifornia-based generators are having to accept lower prices forthe power they sell into the Cal-ISO’s real-time ancillary servicesmarket, compared to out-of-state generators.

“It is probably too early to comment on it,” said thespokesperson, who noted that it is not clear that there arenecessarily differences between the in- and out-of-state prices.”It depends on how the costs (for producing the power) arejustified.”

The state grid operator’s sister state organization, theCalifornia Power Exchange (Cal-PX), which operates a wholesale spotmarket that is being racked with changes from FERC’s Dec. 15 order,filed an emergency request with the feds Wednesday, trying to get astay of the so-called “soft” $150 price cap for California’swholesale power supplies. Cal-PX contends this gives competitorssuch as the Automated Power Exchange (APX) unfair advantages thateventually may drive the state-run operation out of business.

“At $150 (/MWh) you are going to scare off power from crossingthe border, and then we are really going to be in a pickle,” said aPasadena, CA-based spokesperson for Cal-PX. “The optimum would befor no price cap, but if you are going to create one, it shouldapply not just to our market, but anyone else (such as APX) who isplaying in this market.

“We have a two-ton heavy object around our necks, acting as ananchor on us, and yet we’re expected to swim,” said the Cal-PXspokesperson, noting that if his organization does not get FERC torelent, the Cal-PX eventually will go under. “One of the thingsthat the utilities should wake up to is that it is unclear whathappens to some of their existing long-term contracts in the faceof the $150 cap. What happens to long-term contracts alreadyscheduled (beyond April 30, 2001)? You then have a contract with atariff that no longer exists after the 30th.”

FERC’s earlier order lifted the requirement that utilities buyand sell all of their bulk power through the Cal-PX and allowedthose same utilities to begin retaining their remaining hydro andnuclear generation.

Pacific Gas and Electric Co. Wednesday for the first time boughta lot of its own power, which significantly decreased the Cal-PX’stotal market for the day by more than 120,000 MWhs, according to aCal-PX spokesperson.

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