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California Rides the Tiger

Fortnightly Magazine - January 1 1995

States, opposes any concept if:

1) all physical delivery must take place through a pool, and 2) all physical deliveries occur in the spot market, as opposed to trading in a forward market. A PoolCo would restrict development of a cash market and the liquidity required for futures trading, Levin said. NYMEX sees numerous delivery mechanisms and pricing points developing in the West. They expect to apply for a futures contract later this year, but a launch date depends on the right timing, Levin observed. Jeffrey Skilling, managing director for Enron Capital & Trade Resources, strongly opposes Edison's pooling concept. A PoolCo "will inhibit or constrain the development of a deep liquid cash market," Skilling said.

The final hearings indicated a move toward some consensus, however. Skilling said he could support an alternative concept proposed by Hogan, called "OpCo," which is neither a PoolCo nor a pure bilateral market. As in the natural gas industry, where pipelines still serve as operators for nominations and scheduling, OpCo would create grid operators for dispatch and services. This would get the regulated utilities "out of the business of designing and operating a competitive commodity market," Skilling noted.

Another alternative would allow bilateral markets and PoolCo's to develop simultaneously in California. Dubbed the "Tehachapis compromise," after a small mountain range that bisects the state, Edison and SDG&E would be permitted to pursue their PoolCo concepts in southern California, but PG&E would be free to participate in bilateral markets in the north. PG&E proposes to implement direct access in 1996 for large customers, phasing in all other customers through 2008.

As the CPUC continues its re-structuring effort in the new year, it will welcome a new member. Commissioner Patricia Eckert, the senior member of the CPUC, completed her six-year term in December and chose not to seek reappointment. Gov. Pete Wilson (R) has promised to appoint a replacement as soon as possible. With this latest appointment, Wilson will have named each of the commission's five members. t

W. Lynn Garner is senior writer of PUBLIC UTILITIES FORTNIGHTLY.

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