If the new rules of electric industry competition don't permit stranded-cost recovery, the credibility of the U.S. government would be seriously undermined. Or so an executive of one of the...
feet. You have to look at the total delivered price, including the transmission price."
Another source notes that SoCalGas will also lose gas load because WEPEX will make more efficient dispatch decisions. "Interestingly," he adds, "Enron is taking no stand on the issue, apparently estimating that drops in its pipeline throughput and gas sales will wash out against increased revenue for its electric operations outside California."
Back at Edison, grid dispatch manager John Balance wants full value for his company's transmission system: "If a utility is bringing more load into the ISO than transmission capacity, then it needs to pay a fee. I don't know how to track distance in a network transaction. He [Fred John] is trying to allocate sunk costs in a variable rate." Edison's CEO John E. Bryson accuses SoCalGas of wanting to "build a wall" around California.
Schiori at SMUD sees bypass: "Utilities would have a motive to avoid paying that [access] fee, and might operate certain inefficient plants to supply generation to support transmission to avoid paying the fee."
"I don't see a resolution," says Fred John. "I see an impasse."
The Last Refuge
Reliability is the last refuge of the scoundrel.
Another issue concerns generating plants labeled as "must-run" and "must-take." (Must-run plants energize the grid and maintain reliability. Must-take plants include nukes and qualifying facilities that are guaranteed a market).
Must-run plants presumably will operate under some sort of performance-based regulation (PBR) that virtually ensures cost recovery. During load-load conditions, must-run and must-take plants threaten to cover the market, leaving no room for bids from competitive generation.
Testifying before the FERC, Jan Smutny-Jones (executive director, Independent Energy Producers Association) noted how must-run and must-take plants can steal the market:
"Incredibly, SDG&E has indicated that approximately 2,000 Mw of its generation [equal to its peak load] are must-run units. PG&E indicates in its PBR and market-power filings that approximately 94 percent of its generating units should be handled in whole or in part outside the market. ... Edison has proposed that approximately 5,500 Mw (over 50 percent) of its fossil units located within its service territory are 'must-run' for reliability purposes."
Keith R. McCrae, representing the California Manufacturers Association, notes that some must-run plants will operate in must-run status only for a few hours during the year, under call contracts that cover their fixed costs. "Thus, at other times, these same plants will be free to bid into WEPEX for competitive dispatch, knowing that their fixed costs are already covered. That's a problem."
"Must-run plants have market power no matter who owns them," says Vikram S. Budhraja, senior vice president for Edison's power grid business unit.
Generation and transmission are often interchangeable. In documents filed on July 15, Edison reportedly told the FERC that it will eliminate must-run status for many units by upgrading transmission by 1/1/98. If so, then who should oversee transmission upgrades? Who decides if a plant is must-run?
Back at the FERC, I swear you could see visions of turf dance in front of the commissioners' eyes as the debate continued between