Southern California Edison filed a motion late last week withthe California Public Utility Commission seeking emergency relieffrom high spot gas prices on which its power purchase rates arebased. The company told the CPUC that Southern California Border(Topock, AZ) prices in the last month have risen by $2.50/MMBtupossibly because of market manipulation, in particular thewithholding off of the market of pipeline transportation capacitybetween the supply basins and the California border.
“[T]here is substantial and compelling evidence that the basisdifferential has been and continues to be grossly distorted bymarket power abuse, collusion and affiliate self dealing ofout-of-state gas suppliers and merchants,” Edison told the CPUC.
The company noted the CPUC already has filed a Section 5complaint with FERC regarding this issue and is seeking a recisionof “certain allegedly collusive contracts which it contends havepermitted out-of-state natural gas suppliers and their affiliatesto drive up artificially California border gas prices by wrongfullywithholding capacity.” It notes the complaint “conservativelyestimates that the anti-competitive manipulation of the basisdifferential has already damaged California gas and electricityusers by $100 million annually since the beginning of 1998.”
Edison seeks an expedited order authorizing it to use the postedgas price of $4.5133/MMBtu, which was applied to SCE’s August 2000avoided cost posting, to calculate its payment obligations toqualified power producers for the month of October and every monthgoing forward. It estimated September bidweek border prices wouldaverage $7/MMBtu. If such prices were used in Edison’s Septemberavoided costs posting, its Transition Formula payments to certainindependent power producers will be $29 million more than the monthprior, the company told the CPUC. “No mechanism exists to recapturethe increase in such payments if it is later determined by thiscommission or in another forum that the Topock border indices areunreliable at this time.”
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