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News Analysis

Industry experts debate whether so-called "price mitigation measures" miraculously solved the California crisis.
Fortnightly Magazine - January 15 2002

says that FERC is considering some overarching general standardization for all markets. Although declining to say explicitly what areas the Commission is considering standardizing, the official suggested that staff summaries of the "RTO Week" meetings pointed toward some of the ideas under consideration for standardization subjects.

The test of market functioning could come as early as September, if the price measures are permitted to expire then. While no one would speculate on whether the caps would expire, several widely ranging predictions were offered if they do.

Ackerman says that from a trading perspective, nothing changes if the caps expire. "No one is taking the order into account, it just messes [the market] up for a few days."

If the caps expire in September, and the resource balance is still positive, McCullough predicts an immediate return to 2000-01 prices. "There have to be substantive changes. Either FERC has to steel itself to be a market disciplinarian, if it wants centralized markets, or face the fact that commodities don't have a central market," he says.

Stout fully expects more volatile prices, should the caps come off in September. He says "the answer to price caps is demand response." The market needs buyers to be in position to know real-time pricing, he says "The real key to fixing price caps is fixing demand."

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