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Fortnightly Magazine - July 15 1998

Power went so far as to lay blame with the FERC for approving market-based pricing for bulk power: "The Commission found that the sellers lacked market power ... This finding, however, did not take into account ... a system emergency, in which the franshised utility -- with a legal obligation to serve firm retail load -- has deficient generation within its control area to meet that load. In this circumstance sellers plainly have market power, and as we have seen last week, will price gouge." (Motion of Ilinois Power Co. to Intervene, Docket EL98-53, June 30, 1998.)

Rumor and Hearsay

When asked to comment on allegations of price gouging, Director John Anderson, of the Electricity Consumers Resource Council, replied, "That's typical when there is no retail competition."

"It's amazing to me," said Anderson, "that we're having brownouts this time of year. It's not as if utilities didn't know it was going to get hot in June and July. This clearly demonstrates the need for federal legislation and the establishment of independent system operators."

Actually, from what I hear from utilities and from officials at the reliability councils, the utilities have not had to resort to rolling blackouts, whether in Ohio, ECAR or the eastern U.S.

Steve Brash, spokesman for Cinergy: "We did not conduct any voltage reductions. We've gotten very good cooperation from our customers on our requests for voluntary conservation."

"And even though we filed the petition, we're not specifically criticizing anything at this point. We felt that with all the conjecture, rumor and hearsay that's out there, it would be better to launch a fact finding."

Why did Dynegy, a prominent power marketer, join the Cinergy petition? It seems that Dynegy wants in to keep the utilities honest, to make sure they don't sabotage competition, according to Dynegy spokesperson Maripat Sexton.

"We believe that an examination of the facts will reveal that the runup in prices was caused not by deregulation, or by retail wheeling, or by customer choice programs, but instead by the lack of deregulation, transition access and customer choice."

Julie Simon, policy director for the Electric Power Supply Association, who spoke with me on July 2, voiced concern over price controls.

"Price caps are really problematic," Simon declared. "They distort the market. Nobody wants to see wild swings, but ... the market worked. Within two days we had prices returning back down.

"Nevertheless, part of the problem is that the current regime sends very mixed signals. We have members that would love to build power plants, but there are regulatory structures in place, particular in the Midwest, that don't permit that at this point."

By late Thursday afternoon, July 2, FirstEnergy had restored two of the downed lines and Davis-Besse was back up to 15-percent power. At ECAR, Brant Eldridge could find no reason to open a special investigation. He saw the matter as a shortage of generating capacity, caused by a number of outages (whether forced or unforced) at units at plants such as Gavin, Beaver Valley and Zimmer. When I spoke with him on July