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Power Exchange Politics: Weighing the Regulator's Role

Fortnightly Magazine - October 1 1999

power through the CalPX. Moreover, in its answer at FERC filed Aug. 16, SDG&E agreed to continue to sell its San Onofre nuclear generation through the CalPX, along with its in-system resources from qualifying cogeneration and small power production facilities. Thus, it would narrow its request to lift the buy-sell requirement only for sales of off-system-purchased power resources.)

Lynn Miller, chief financial officer at PX, says that SDG&E should not be allowed to leave the PX before the four-year mandate ends because that would make it more difficult for the PX to become competitive at the end of the mandate. Miller explains that the PX's financials were drawn up with the expectation that the three IOUs would sell through the PX for four years.

At the rival APX, Cazalet argues that the PX fully anticipated the possibility of early transition and that the primary voice against SDG&E leaving is the PX. "They have been concerned all along about the fact they would lose volume to competition because of their extremely high costs as opposed to what brokers charge."

Attorney Fels sees SDG&E's departure as no threat: "SDG&E is a small participant in a large market. The company has no market power requiring regulatory control of its participation in the market, having divested itself of 80 percent of its generating capacity in the San Diego Basin."

In its answer filed Aug. 16, SDG&E witness William Hieronymus (a consultant with PHB Hagler Bailly) countered arguments that the CalPX had seen thin trading volumes and claimed instead that allowing SDG&E to sell outside the PX would not have any significant impact.

"The total amount SDG&E currently sells through the CalPX is, at most, 1,349 megawatts, including 430 MW of San Onofre [SONGS] nuclear generation, 334 MW of QF contacts and 625 MW of purchased power contracts. This is only 6 percent of the average [of] 21,576 MW per hour of transactions that went through the PX in its first year and less than 10 percent of the minimum market-clearing quantity of the PX in any hour during April-December 1998."

Attorney Fels echoes that claim: "The only generation owned by SDG&E - its SONGS capacity - is only 430 MW, or about 2 percent of the amount of energy that is actually sold through the PX on an average day."

Ann Cohn, assistant general counsel at Southern California Edison, agrees that market power issues should no longer pose any concern.

"It is my belief that restricting the obligation to buy and sell from the exchange is only related to stranded-cost recovery," she says. Cohn adds that after the period of recovery of stranded cost, SCE should be able to procure energy where it wants.

"People can always buy from the [California] Power Exchange, but the obligation disappears," she says.

Cohn says any decision on the merits before FERC has precedence; however, it doesn't necessarily follow that a decision against SDG&E in its application would have any impact on SCE.

Block that Forward?

A Look at New Products

On May 26, the FERC granted an application by