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Perspective

The ISO takes on critics of its new market design.
Fortnightly Magazine - September 15 2002

applied as a credit toward the following year's rates. In fact, what the ISO has been encountering this past year is under collection. For example, permitting and encouraging self-provision of ancillary services, combined with the reduced reliance on the spot energy market, has resulted in reduced volumes to support the costs associated with one of the three major GMC service categories. To this end, we will be revisiting the ISO's rate structure later this year and expect to have a revised rate structure in place for 2004.

While volumes may decline, the ISO is being asked to deliver more services and be more of an information clearinghouse than ever contemplated. Extraordinary costs related to litigation and crisis response add up to at least 11 percent of ISO spending in 2001 and 2002. These include the costs associated with arguing the California refund case before FERC, and also the cost of monitoring and responding to market power abuse. The ISO looks forward to the day when these costs can be reduced or eliminated. Meanwhile, the ISO is keeping the lights on and keeping a tight lid on spending.

In short, the California ISO is creating a fair and level playing field in the market, while managing costs that are fair to all parties and approved by FERC. The average monthly residential utility bill in California is about $76. The ISO's costs account for less than half of one percent of that typical bill, or about 50 cents. Services rendered by the California ISO should be considered a bargain-not a burden.

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