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Special Report Developing Competitive Power Markets: The Planning Stages

Fortnightly Magazine - August 1996

and municipal utilities (see sidebar).

Nevertheless, some of the principles could prove problematic. For example, Falcone predicted a lot of "drop outs" if utilities were required to merge their control areas, because they do not want to give up their independence entirely (see Principle #3). Also, while they agree on the need for a planning function (see Principle #11), the utilities are still debating the extent of that function. Falcone said that one side believes ISOs should be able to override plans made by transmission owners; the other side believes ISOs should only coordinate the planning function and concede to owners.

Large Industrial Customers

"Residential customers are not going to save any money. It's a lot of nonsense. It's a fiction of the British regulator and the British government."

That comment came from Henney during a discussion over how to put the California restructuring together in 18 months.

Barbara Barkovich, principal at Barkovich and Yap, looked at the other side: what the large industrial customers want from restructuring. First, they want fair, comparable, open-access to the transmission grid without preferential treatment. Second, they want the functions of the power exchange and the ISO separated. Forcing the two to work together will allow the market to decide which method works best. Barkovich also noted that large customers like bilateral transactions, because that's how they are used to doing business.

In addition, stranded cost recovery or rate design changes to achieve unbundling should not involve cost-shifting. Customers should not be allowed to shift their responsibility onto other customers, Barkovich said. Also, industrial customers crave

certainty as to when customers will stop paying for stranded-cost recovery.

Fair and expeditious phase-in of direct access is another goal of industrial customers, although a one-time implementation is preferred. And aggregation strategies must be worked out. For example, is each McDonald's a separate customer? Barkovich noted it will be a challenge to work out a phase-in schedule fair enough to escape challenges in the legislature.

Metering issues have also become extremely important, because meters tend to be unsophisticated. This has created a call for load profiling, which makes large customers nervous because of spill-over effects, Barkovich observed.

California's Restructuring

California's electric rates are 150 percent of the national average, but seem worse because the state is located next to states with below-average rates, lamented Daniel Fessler, CPUC Commissioner.

He said the California restructuring is "on track and on target." However, he noted that the process is "fraught with risks," because CPUC's staff have decided that the implementation strategies must be designed and employed by the stakeholders. In addition, Fessler said that disagreement among California utilities has led municipal and public power utilities to assume nonfiling status. Further, the three investor-owned utilities disagree on transmission pricing. t

Lori A. Burkhart is an associate legal editor of PUBLIC UTILITIES FORTNIGHTLY.

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