Although FERC is pulling out the stops to address problems inthe bulk power market, with an emphasis on California, ChairmanJames J. Hoecker yesterday made clear most of the responsibilityfor correcting the dysfunctional power market lies with theCalifornia legislators and regulators who created it.

“I think the…..immediate solutions to that problem lie largelywith the Public Utilities Commission in California and thegovernor,” which have taken “some steps that I think are perfectlyappropriate,” he noted. Citing the state’s move to cap retailelectric prices and order $100 million in refunds to San Diego Gasand Electric (SDG&E) customers, Hoecker said “I think they’rebeginning to do what they can to ameliorate some of the pain.”

Some critics have been quick to blame FERC and its deregulationof the wholesale electric market as the source of California’sproblems this summer, but he countered that the state’s legislatorswere the ones that decided in 1996 to deregulate the market.”…..[W]e didn’t decide that,” he said in an interview with DailyGPI.

SDG&E is one company that’s looking to federal regulatorsfor answers. In addition to seeking a $250/MWh price cap on allelectricity sales, the utility has taken out full-pageadvertisements with FERC’s phone number in the San DiegoUnion-Tribune.

“I don’t think that laying this issue…at the door of federalregulators is an appropriate response.” Nor should all the blame bepinned on deregulation, Hoecker noted. “Whenever you have pricespikes and the kinds of rate shocks that southern Californians havefelt during peak periods because of supply shortages, heat —whatever the cause is — everybody’s first inclination is to pointthe finger at deregulation and say, ‘I told you so’.”

He believes lack of generation capacity is at the root of mostof California’s problems. “Fundamentally what California’s got is asevere supply-demand imbalance. They don’t have enough generation.”

Hoecker said he has asked FERC staff to “accelerate” its reviewof California’s bulk power market, which is being conducted inconjunction with its overall investigation of the nationwidewholesale electric market. “We’ve got our staff people on theground in California collecting data, interviewing marketparticipants and staying in touch with the governor and theattorney general,” he noted.

“When we ascertain whether some problems in the wholesale marketare responsible for this price volatility [in California], we’lltry and fix the structure of the market.” But, he added, “I don’tknow if we can provide any immediate relief.”

In a recent letter, California Gov. Gray Davis asked PresidentClinton for his help to speed up the Commission’s probe of the bulkpower market. Hoecker, however, said he hadn’t “formally” beencontacted by the White House about the situation yet.

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