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News Digest

The California ISO offers a plan, but some fear that rules themselves are the problem.
Fortnightly Magazine - March 15 2001

the FERC to approve an additional monthly trading product in New York, and also to approve similar monthly, weekly, and hourly products in New England and in PJM. . .-B.W.R.

Third-Party Liability. Led by Coral Power and Enron, and including utilities Arizona Public Service, Avista, PacifiCorp, and San Diego Gas & Electric, a group of energy companies filed a complaint at the FERC attacking the practice of the now defunct California Power Exchange to assess "chargebacks" to go after third-party power producers in an attempt to satisfy uncollected receivables for transaction fees and other charges owed to the PX by Pacific Gas & Electric and Southern California Edison.

The complaining companies say the "chargeback" mechanism, as approved by the FERC, was expected to be used principally to secure the delivery of energy into the Cal PX market, not to recoup large defaults by Cal PX utility buyers. The complaint also draws analogies with financial emergencies in other industries:

"A similar practice," the complaint said, "produced an untenable scenario in the savings and loan debacle of the 1980s, known as a 'death spiral' that ends only when it reaches the last man standing." .-B.W.R.

Purchased Power Contracts. The FERC directed PacifiCorp to continue to extend power deliveries to Cheyenne Light, Fuel and Power Co. beyond the Dec. 31 termination date of the their long-term power sales agreement, citing PacifiCorp for failing to file its notice of contract termination in time, because, according to the FERC, CLFP had a reasonable expectation that service would continue beyond the contract end date.

PacifiCorp had sought to terminate the low-cost contract and instead sell wholesale requirements power to the Wyoming utility at prevailing market rates, representing a huge increase in price. .-L.A.B.

Gas Pipelines

So. Calif. Gas Imports. Citing the recent release of previously redacted and confidential market data disclosed only to the California PUC and other governmental parties to the case, and declaring that such data reveals clear violations of law, both Pacific Gas & Electric and Southern California Gas have asked the FERC to open a new phase in the complaint by the California PUC against the El Paso companies, and to move swiftly to rescind the February 2000 sale of natural gas pipeline capacity rights by El Paso Natural Gas to affiliate El Paso Merchant Energy Company.

According to SoCalGas, the delivery capacity in question (some 1.2 billion cubic feet per day) was purchased "well below market" and has been "manipulated to increase the price of both El Paso capacity and California border commodity prices through a conspiracy of affiliates." Adds PG&E, "the secret information, which was available only to el Paso Merchant during the bidding process, confirmed the availability of a steep rate discount." .-B.W.R.

Market Center Development. The FERC, on remand again, has rejected the claim by Reliant Energy Gas Transmission Co. that the use by Tennessee Gas Pipeline Co. of a system-wide cost of service improperly included production area costs in its market area rates and thus inhibited the development of market centers at interconnections with competing pipelines, including an interconnection