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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

plant sales and put the contracts at risk.-L.A.B. Land-Use Planning. The Pennsylvania PUC issued a policy statement explaining that it will now consider the impact of its decisions on local, comprehensive plans and zoning ordinances. .-L.A.B.

State Legislatures

Backtracking on Competition. Reacting to California's power crisis, the Virginia Senate voted 32-6 on Jan. 25 to amend the state's 1999 electric deregulation plan by implementing some consumer protections and setting up a method by which electric prices will continue to be set should competition not develop by the time the rate caps are removed.

The measure was expected to be approved by the House of Delegates. A separate bill to delay deregulation implementation by one year also was pending in the House. (Deregulation begins in the state in January 2002, and proceeds though mid-2007, when price caps will be removed.)-L.A.B.

International Markets

New Brunswick. The Canadian province of New Brunswick released a proposal at the end of January for opening the province to energy competition starting in April 2003. However, due to the problems with competition in California and Alberta, the province has avoided calling the process "deregulation." The ten-year blueprint for the future lays the groundwork for a deregulated system where the market sets electric prices and large industries can shop around for power suppliers. The government said it will announce plans later in the year for NB Power, the state monopoly electric utility, which is about $3 billion in debt.-L.A.B.

Purchased Power Costs. Utah regulators granted a $70 million interim electric rate increase to PacifiCorp d/b/a Utah Power and Light, pending a final decision in September, deciding that "unprecedented" increases in wholesale purchased power costs had impaired the company's financial performance in a manner inconsistent with its current "single-A" credit rating. The utility had asked for $142.2 million in rate relief, however. .-L.A.B.

Transmission & ISOs

Policing the Markets

The California ISO offers a plan, but some fear that rules themselves are the problem.

By Bruce W. Radford

The California ISO has filed a four-step draft plan to mitigate market power in California's wholesale power markets, providing a ready target for just about any industry player opposing police-type enforcement or just trying to re-design the market itself.

In particular, the ISO's plan raises the question: Is market monitoring best achieved through objective standards imposed before the fact, or by granting significant authority to regulators to review trading behavior after the fact and to impose fines and sanctions where fault is found.

The answer might be simple at first blush for a free-market economist, but think again. "Market power is much nimbler than it used to be," notes public power attorney and advocate Robert McDiarmid, representing the Northern California Power Agency. "Markets shift and redefine at a moment's notice, and many generators have the ability to track and swiftly react to those changes.

"It goes without saying," adds McDiarmid, "that in any market power analysis, market definition effectively drives the results."

McDiarmid is alluding to the problem of moving targets. No matter what the rules are, traders will find a way to