FERC yesterday ordered a formal investigation of the electricrates and the structure of the California’s Independent SystemOperator (Cal-ISO) and Power Exchange (Cal-PX), as well asmarket-based sellers in the state.

The formal investigation will be carried out in conjunction withthe Commission staff’s previously announced nationwide fact-findingprobe of the bulk electric markets and this summer’s price spikes,which will be completed this fall. Yesterday’s order directs staffto focus that fact-finding probe as soon as possible on Californiaand the western region, and also launches a separate formalinvestigation into the California bulk power market.

The California investigation is in response, in part, to acomplaint from San Diego Gas & Electric (SDG&E). “SDG&Ehas asked us to limit what it believes to be excessive rates in theCalifornia wholesale market. We did that three weeks ago. Today, weaffirm that action. This order demonstrates that the Commission iscommitted to reasonable rates for consumers of power,” saidChairman James Hoecker.

But “we do not find finger-pointing to be helpful at thisjuncture. Rather, the Commission recognizes the importance ofgetting all the facts before passing judgment on how thiscircumstance could have been avoided or what we must do to ensurethat power markets function well in the future,” he noted. As partof its investigatory effort, the Commission said it plans to holdat least one hearing in San Diego.

In addition to the California investigation, FERC deniedSDG&E’s request for an immediate broad $250/MWh price cap onall electricity sellers in California. The California utility didnot provide evidence that all potential sellers in the state havemarket power, nor did it show why a broad price cap would be anappropriate response, the order said. The order, however, doesn’tdisturb the California ISO’s recent decision to set the maximumpurchase price cap for imbalance energy and ancillary services at$250/MWh.

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