Dynegy says California ISO grants sweetheart deals to out-of-state plants.
Claiming $2 million in loses since Nov. 1, Dynegy Power Marketing Inc. accused the California Independent System Operator of playing favorites when it goes looking for energy to cover imbalances or supply ancillary services for the next day during a "super peak," by going out of state to negotiate purchases from off-system generators at lucrative high market prices, while at the same time forcing in-state, on-system generators (like Dynegy), to honor their commitments under the Participating Generator Agreements and supply energy to the ISO on the ISO's demand through the remedial "Out-of-Market" (OOM) tariff procedure, at much lower preset prices.
In its complaint filed Dec. 22, Dynegy asked the Federal Energy Regulatory Commission to force the ISO, no later than March 1, to honor its "long-promised proposal" to create a third payment option (instead of the OOM rate or selling through an institutional auction like the California Power Exchange), that would permit a generator subject to OOM calls to elect to be paid its day-ahead pre-submitted bid or call price.
Meanwhile, the ISO insists that it is "willing to review" alternative payment approaches. But it says it will discuss the matter only if Dynegy will cooperate and respond when the ISO calls during an emergency to issue operating instructions for Dynegy's generating plants.
Dynegy's David Francis, vice president for western power trading, testified on Dec. 21 on why he thought the ISO was bending the rules:
"I AM RESPONSIBLE FOR, AMONG OTHER THINGS , monitoring the supply and demand in various markets administered by the California Power Exchange, the ISO, the Automated Power Exchange and other bilateral markets. ... I make my decisions ... based on my knowledge of the operating conditions in the markets. ...
"IN SEVERAL CASES I HAVE OBSERVED THAT THE ISO HAS ACCEPTED OFFERS from suppliers in the forward Super Peak markets administered by the PX and APX at prices that exceed the applicable bid cap in use by the ISO. In addition, I have witnessed instances in which Dynegy had offered energy at a compensatory price in these same markets, had the offer declined by the ISO, and then had the ISO order Dynegy to provide energy at a price dictated by the ISO's filed OOM cap, which price was in fact lower than the compensatory price that was required for the unit in question for the applicable time period.
"MY CONCLUSION FROM THESE OBSERVATIONS IS THAT THE ISO HAS BEEN WILLING to negotiate with the owners of generating units that are not located within the ISO control area, and thus do not have a Participating Generator Agreement, but that the ISO has not been willing to negotiate a price above the bid cap in any instance in which a unit also has a PGA contract. ...
"MOREOVER, I HAVE WITNESSED OTHER INSTANCES when the ISO has called upon an RMR [regulatory must-run] generating unit to supply energy at minimum load at the price called for under the RMR contract, and then required additional energy from