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News Digest

Fortnightly Magazine - December 2000

the FERC to explain and justify their higher requests.

The FERC also proposed other remedies to correct California's power markets, which it described as not workably competitive:

  • Buy/Sell Rule. Release the state's three major investor-owned utilities from obligations imposed under state law to sell into and buy only from the California PX, encouraging them to rely more on bilateral trading and forward markets.
  • Penalty Charges. Impose a penalty charge for under- or overscheduling of load in excess of 5 percent of hourly requirements.
  • ISO Governance. Remake the membership structure of the ISO board from the ground up, along guidelines provided by the FERC.
  • Plant Interconnections. Require the ISO to draw up a tariff governing interconnections of new power plants with the transmission grid.

Commissioner Massey concurred, but he questioned the $150 figure for the soft price cap, saying that changes in natural gas prices might justify a lower ceiling. Commissioner Hébert also concurred, but said he would rather just abolish the single-price auction altogether, and criticized the commission for imposing any particular organization on the ISO Board, warning of a needless constitutional showdown. .

Pacific Northwest Price Caps. Taking a page from California, Puget Sound Energy asked the FERC to set a cap on prices for electric energy or capacity sold at wholesale into the Pacific Northwest at a level identical to any price cap it might approve in California markets, arguing that the two regions each are part of the "substantially integrated wholesale power market" consisting of the entire Western Interconnection.

PSE added that any one-way price cap in California markets would be "fundamentally unfair," as it would expose wholesale purchasers in the Pacific Northwest (such as PSE) to uncapped prices when they need power to meet winter demand, but yet "hobble" their ability to offset the costs of such purchases with uncapped prices when they have surplus power to sell to California, such as during periods favorable to hydroelectric generation. .

New York Price Caps. Citing delays in developing a new "market protective mechanism," which would trigger "circuit breakers" in the event of market disruptions, the New York ISO asked the FERC to extend the life of its current bid cap of $1,000 per megawatt-hour through the winter until April 30, otherwise set to expire on Nov. 1.

The ISO described the price cap as "a blunt instrument" with "undesirable consequences," but stressed that caps were needed to counteract market imbalances that it said were caused by delays in licensing and siting of much needed new generating facilities.

"Our staff estimates that there are 74 [generating] projects indicating a desire to build in New York [but] only one of these (Athens) is likely to be complete during the next three to four years. This situation is an invitation both to severe reliability problems and to price disruptions. ... It is unacceptable." .

Functional Separation. California Power Exchange president George Sladoje wrote to FERC chairman James Hoecker to offer several reasons why the PX should not combine with the state's Independent System Operator, after Hoecker had asked for comment on the