[BETA] Fortnightly

THERE ARE NO FUNDAMENTAL FLAWS. Our systems are functional."

So said CEO Dennis Loughridge, of the California Power Exchange, in announcing nevertheless on Dec. 22 that the opening of the state's day-ahead electricity market, planned originally for Jan. 1, would be delayed because software and systems testing could not be completed satisfactorily.

"California's electron highway is the fifth largest in the world. We need to take the time to make the transfer¼ seamless," added Gary Heath, executive director for the state's electricity oversight board.

In a news conference held Dec. 29, Loughridge joined Jeffrey Tranen, CEO of the California Independent System Operator, to project a new March 31 startup - a date, said Tranen, "that we reasonably believe we can meet." Nevertheless, that date must remain contingent until the both Tranen and Loughridge, and the CEOs of the three affected utilities (PG&E, Edison, and San Diego Gas & Electric) each certifies to the Federal Energy Regulatory Commission that "all of the necessary features" are in place to ensure "reliable grid operations" at the moment the ISO and PX commence operations.

You're probably thinking: "Does this mean I can bypass the CTC?"

Actually, it looks better than that. The three-month delay may end up going down as the ultimate win-win for consumers.

First, the calculation of the "nonbypassable" competition transition charge depends entirely on the PX price. No PX, no CTC.

Second, however, and even more important, the delay will not postpone the 10-percent rate cut that state lawmakers promised for residential and small business customers in Assembly Bill 1890. In an emergency order issued Dec. 23, Public Utilities Commissioner P. Gregory Conlon made sure to that. He noted that the rate freeze and the 10 percent rate cut would continue "regardless of the status of the ISO and PX." In similar fashion, despite the delay, utilities go ahead and collect "headroom" revenues to offset transition costs.

So the longer the delay, the smaller the CTC.

• • •

Did anybody anticipate that California's market would fail to open on time? Speaking to reporters on Dec. 29, ISO CEO Tranen emphasized that the Jan. 1 startup was a "political end-date." One might argue that it was unrealistic from the get-go. In our last issue, where we polled a number of experts on their impressions of California's direct-access plan, no one mentioned the words "software," or "computer." Perhaps we selected the wrong focus group.

When the news first came out, it brought to mind something I'd read a couple months back. Rummaging through my files, I located a set of comments filed last August California Energy Commission on final reports issued by the direct-access workshops on (1) retail settlement and information flow, and (2) meter and data communications standards. There, buried in the comments on information standards and protocols for electric metering, lies an insight that I believe explains the reasons behind California's software failure and market delay. In short, the CEC saw too much emphasis on the supply side - not enough attention paid to customers and their needs. Here's what the CEC