California's three largest investor-owned electric utilities have submitted their proposals to the Federal Energy Regulatory Commission for implementing an independent system operator and power exchange for the state's restructured electric industry (Docket Nos. EC96-19-001 and ER96-1663-001).
Last November, the FERC had conditionally approved an "acceptable framework" submitted by Pacific Gas & Electric Co., San Diego Gas & Electric Co., and Southern California Edison (the trustee for the ISO and PX is S. David Freeman), but required more information in what it termed a "Phase II" proceeding.
The new March 31 filing highlights two dominant issues: 1) the independence and strength of the ISO and PX, and 2) the mitigation of market power. Under the proposal, transmission owners now would have an obligation to build transmission facilities the ISO decides are needed for economy or reliability. All existing contractual rights for transmission access would end in five years, except for financial and nonaccess terms.
Major steps to mitigate market power will be taken in symmetry with four-year recovery of stranded costs. The ISO will conduct an independent assessment of must-run plants with the goal of eliminating that category. A proposed rate freeze would limit the generation-related revenues the companies are allowed to retain. In four years the agreement that IOUs only buy and sell through the PX would end.