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News Digest

Fortnightly Magazine - October 15 2000
  • Yet the FERC did identify one problem area-the increasing reliance on real-time markets at the ISO in place of longer-term markets at the PX. "In some hours," said the FERC, "as much as 25 percent of system needs were met in the ISO real-time market ... this increasing level raises significant reliability and economic concerns. ... [T]he ISO must procure additional supplies out-of-market at the last minute ... such spot-market purchases are not subject to the ISO's buyer cap."
  • Placing Blame. The FERC noted a failure of risk management but declined to place blame. On the one hand, as it observed, "SDG&E appears to be the only major investor-owned utility in California that had not sought state commission authority to hedge its price risks through forward contracts designed to 'lock-in' a specific price." But the FERC hedged its own comments: "It is unclear whether SDG&E's failure to purchase hedging instruments for its retail operations is due to state regulatory policies or its business decisions." .

ISO Price Caps. The California Oversight Board asked the Federal Energy Regulatory Commission to direct the California Independent System Operator to maintain bid caps at no greater than $250 per megawatt-hour for energy, $250 per megawatt-hour for ancillary services, and $100 for replacement reserves, until the FERC determines that markets are workably competitive. .


Gas Pipelines

Liquidity in National Markets. Speaking on behalf of the American Gas Association at the Sept. 19 conference held by the FERC to discuss liquidity on U.S. natural gas markets, Leo Cody (manager of federal regulatory affairs for Boston Gas) urged the FERC to change policy in two ways.

First, Cody asked the FERC to repeal its "shipper must have title" policy, and instead allow local distribution companies (LDCs) to control and use pipeline capacity for the benefit of their customers and to better deal with state-imposed requirements under retail unbundling programs.

Second, he urged the FERC to require pipelines to further segment capacity and allow customers to buy capacity from the wellhead to upstream hubs, separate and apart from capacity from hubs to consuming areas.

"LDCs are not free riders," said Cody. "Unbundling reduces the amount of gas purchased by the LDC for resale, and it becomes increasingly difficult to ensure that the necessary volumes will be received at the required points.

"Repealing the title policy," he added, "would allow the LDC to use market area transportation to move third-party gas from a citygate with an excess of supply to citygates with a lack of supply." .

Reverse Flow Storage. Despite many objections from gas shippers, markets, and winter-peaking local distribution companies (LDCs) in the Midwest, plus the commission's own concerns over physical damage to aquifer fields that require cycling of injections and withdrawals, the FERC authorized Natural Gas Pipeline Co. of America (NGA) to boost the seasonal volume limit for its proposed and discounted "firm reverse storage service"-a new idea designed to accommodate the summer-peaking electric generation market by allowing gas shippers to withdraw gas from storage from May 15 to Sept. 30, and then make up the difference