In an emergency request filed Wednesday, Pacific Gas andElectric (PG&E) delivered a strongly-worded ultimatum to FERC -either revoke the authority for sellers to charge market-basedrates in the out-of-control California bulk power market and takeother actions by “no later than the close of business on Dec. 21,”or it will seek relief from the D.C. Circuit Court of Appeals inWashington. At press time Thursday, the Commission had notresponded to the utility’s demands.

PG&E’s emergency filing seeks rehearing of the Dec. 15 orderin which FERC attempted to overhaul the flailing California powermarket by allowing utilities to keep their power rather than havingto purchase supplies on the spot market [EL00-95-005]. But PG&Econtends the fixes fell far short. The Commission’s action “failsto correct [the] dire situation” in California, as the marketcontinues to “spiral out of control, with massive transfers ofwealth and dislocation occurring daily.”

Southern California Edison filed an emergency request forrehearing as well, charging that the Commission “abdicated” itsresponsibilities under the Federal Power Act (FPA) by not setting”just and reasonable” prices for power sold in the Californiawholesale market. Instead, FERC “permitted sellers to chargewhatever the market will bear in a market that the Commission foundto be dysfunctional,” Edison said. It also threatened to go to theD.C. Circuit Court of Appeals for relief if FERC didn’t respond toits request by Dec. 20, which it hasn’t.

PG&E criticized the Commission for retaining “market-basedrates and market-based pricing authority while the overwhelmingevidence demonstrates that the market is incapable of restrainingthe market power of sellers of power in California.” This move byFERC “violates both the spirit and the letter of the law it ischarged with upholding.”

FERC has failed to protect consumers as required under the FPA,the utility said, adding that this is “legal error, plain andsimple.” This alleged dereliction, when combined with theCalifornia Public Utilities Commission’s refusal to end the retailrate freeze, “has already caused, and continues to cause,irreparable harm.”

Absent “immediate and decisive Commission action to correct itslegal error, PG&E will be compelled to seek relief in thecourts,” it said. “The current emergency cannot withstand furtherregulatory inaction.”

In addition to eliminating market-based rate authority, PG&Eurged the Commission to immediately revoke market mechanisms in theCalifornia Independent System Operator (Cal-ISO) and CaliforniaPower Exchange (Cal-PX) tariffs and require immediatecost-of-service filings for all sellers wishing to sell into thestate. Moreover, it called on FERC to make all power sales intoCalifornia subject to refunds, the amount of which would hinge on”just and reasonable” rates to be determined later by theCommission.

This “relief is necessary to stave off grave injury to PG&Eand electric consumers served by PG&E,” the utility said.”PG&E is rapidly using up its cash reserves, and is uncertainwhether those reserves can be replenished to allow payment ofupcoming bills. PG&E’s gas and electric suppliers are beginningto demand assurances of credit from PG&E, and PG&E will notbe able to provide such assurances unless an immediate halt isimposed on the currently flawed market.”

The utility’s present “financial situation quite simply makes itimpossible for PG&E to continue to finance the currentdysfunctional market. PG&E can no longer stand ‘in the middle’absorbing losses as various government agencies attempt to ‘fix’ amarket in which sellers have unrestrained market power and theload-serving entities (like PG&E) are prohibited fromcollecting their prudently incurred costs in retail rates,” itnoted.

“Today, every kilowatt of power provided by PG&E to itsretail customers is sold at a significant loss. PG&E can nolonger afford to pay more for power than it, in turn, is paid byits customers,” the utility told FERC.

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