Burned so badly that it subsequently got out of the gas andelectric marketing business, LG&E Energy nevertheless has urgedthe Federal Energy Regulatory Commission not to interfere with theinfant electric market by imposing price caps. The marketer, whichhad been among the largest in the business, said the price run-upin June to the neighborhood of $7,000 per MWh for gas deliveredinto Cinergy was part of the “growing pains” of an immaturecommodities market.
The market the week of June 22 “amplified tremendously themessages already being sent by the market regarding the generationand transmission capacity balance in the Midwest and the criticalimportance of managing marketplace and counterparty risk. Themarket already is self-correcting in response to these messages.Imposing price caps on wholesale power would blunt the effect ofthese important messages and diminish market participants’incentives for adjusting their business practices accordingly.”
LG&E, which announced at the end of July that it had lost$231 million in the second quarter due to the incredible volatilityin the power market, said the incident should prompt regulators toquickly open the market to competition. “The problem is not toomuch deregulation, but rather not enough deregulation.”
Several companies have asked the Commission to impose interimprice ceilings on electric transactions during system emergencies.Illinois Power said the ceiling should be $200/MWh while an enduser called for an emergency price ceiling of $100/MWh. Somemarketers have protested, saying that imposing FERC limits on thecompetitive market sets a dangerous precedent. The Commission hascalled for a public conference on the issue this Friday in Chicago.
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