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PUC Says Futures Trading Could Undermine PX

Fortnightly Magazine - November 15 1997

The PUC added that use of the derivative instruments might give PG&E an incentive and opportunity to manipulate prices on new power exchange, which is set up to guarantee efficient pricing during the transition to a restructured electric industry. It said that such incentives might include increasing the amount of transition costs to be recovered under the restructuring plan and ensuring its derivatives are profitable. It also said that the utility might have to take or deliver electricity outside of the PX if it is unable to find a buyer before the maturity of the contract.

Pacific Gas & Electric had argued that controlling costs and managing electric portfolio price risk was especially important, given the rate freeze mandated under the state's new electric restructuring law. Re Pacific Gas & Electric Co., Decision 97-08-058, a.96-11-037, Aug. 1, 1997 (Cal.P.U.C.).

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