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Scheduling Coordinators: Market Fears and Profit Margins

Fortnightly Magazine - January 15 1998

system," he says. Protocols, which, in trying to guarantee fairness and equality, add layers of complexity to the market and more cost than it is interested in bearing, he says.

"I foresee a lot of simplification and moving things back to a time like today where the wholesale transactions are done on a fairly routine basis," he says. F

Joseph F. Schuler Jr. is senior associate editor with Public Utilities Fortnightly.

Startup Funding for the PX and the ISO

Would a CTC Bailout Hurt SCs?

THERE'S a section in AB 1890, California's restructuring law, that

could butcher competition between the power exchange and SCs, according to market participants.

Section 376 concerns startup costs incurred to help implement direct access and fund the PX and the independent system operator. It reconciles such costs with the competition transition charge and the rate cap imposed on investor-owned electric utilities under AB 1890.

If the Federal Energy Regulatory Commission or the California Public Utilities Commission should approve PX or ISO startup costs for recovery through the CTC, but if such recovery would force utilities to back off recovery of costs for stranded generation investment in order to come in under the rate cap, Section 376 allows the utility to defer cost recovery until after Dec. 31, 2001, to the extent that such costs are not recovered from the PX or the ISO.

In November, the PUC told the three major electric IOUs to file plans to identify such costs by March 31 (Decision 97-11-074). On Dec. 3, it discussed a possible early termination to the rate freeze, which would speed up recovery startup costs. It voted 5-0 to force the IOUs to recover CTC costs as early as "feasible," including costs otherwise eligible for deferral under Sec. 376, and in any case to deny "complete flexibility" to the IOUs in managing cost recovery (Decision 97-12-039, Application 96-08-001). Some $85 million in PX startup costs are at stake, plus millions more in ISO costs. John Scadding, an advisor to PUC President P. Gregory Conlon, says the FERC has undertaken to review PX startup costs. The case (Docket ER98-210-000) was on the agenda for Dec. 17, the FERC's last meeting in 1997.

The prospect of this PX "subsidy" has SCs irate.

"We went to all this effort to separate the ISO from the PX and now to have the PX basically kill off all competition because its rate can be lowered by the fact that a competitor has to subsidize it - that doesn't make a lot of sense," says Carl Imparato of Tabors, Caramanis & Associates, whose primary client is Enron Corp.

Gary Ackerman, president of the Scheduling Coordinator's User's Group, is worried the $85 million would be recovered in rates.

"The amount of load which will flow through the power exchange yields an uplift charge or PX administrative charge of 31 cents per megawatt-hour," Ackerman says. That charge doubles if the $85 million is financed over five years and is included in rates, he says. "The scheduling coordinators get a credit against the PX. If the