The Federal Energy Regulatory Commission has called a special meeting for next Monday to address the multitude of requests for rehearing of its much-criticized market monitoring and mitigation plan that went into effect in late May for the California power market.

The plan, which was intended to provide some price relief to the ailing Golden State market, has come under attack from all sides in the ongoing drama: legislators on Capitol Hill, lawmakers in California, state regulators, and generators and marketers serving the state, as well as FERC Commissioner William Massey. Nearly all have challenged the April 26 order approving the monitoring/mitigation plan, citing a variety of reasons [EL00-95-031].

Specifically, Washington D.C. and California lawmakers assailed FERC’s decision to provide the price-mitigation relief only during times of energy reserve deficiencies, and to pay power generators prices that are based on the plants that are the costliest to operate. They further contend the Commission’s plan is chock full of holes, enabling power companies to easily circumvent it.

Power generators and marketers, on the other hand, argue that the mitigation plan’s biggest downfall is that it doesn’t allow them to recover their capital and fixed costs. Moreover, they claim that the California Independent System Operator (Cal-ISO), which is charged with establishing a proxy power price during emergencies under the mitigation plan, has been improperly carrying out FERC’s directives.

The mitigation plan, which replaced the soft price cap that was in effect in California, calls for the Cal-ISO to establish a single-market clearing price for real-time transactions in its market during times of reserve deficiencies (Stage I, II and III emergencies” in the state. During these periods, the Cal-ISO’s market price is to be limited to the marginal cost of the highest-cost generator called upon to run during an emergency. FERC directed the Cal-ISO to calculate the marginal cost for each generator, based on a unit’s heat rate and proxy gas and emissions costs, plus $2 added for operational and maintenance expenses.

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