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Perspective

Proper authority and market monitoring and mitigation could make the system work.
Fortnightly Magazine - September 15 2003
  1. 1999 Transmittal Letter, Docket No. ER99-33-000 (June 18, 1999) at 1, 3. available at www.caiso.com/docs/1999/06/18/199906181638404506.pdf.
  2. The Cal-ISO resolution provided for a reduction in the caps if by March 2000 it determined the markets not "workably competitive" or there were not "practicable demand side options." See minutes of Aug. 26, 1999, Board at http://www.caiso.com/pubinfo/BOG/minutes/docs/Minutes990826BOARDOFGOVERNORS.pdf.
  3. March 2000 Report on Competitiveness, Market Surveillance Committee, at http://www.caiso.com/docs/09003a6080/04/30/09003a60800430ed.pdf.
  4. The California legislature added the following provision to its 2000-2001 budget bill: "The Public Utilities Commission may investigate issues associated with multiple qualified exchanges. If the commission determines that allowing electrical corporations to purchase from multiple qualified exchanges is in the public interest, the commission shall submit its findings and recommendations to the Legislature on June 1, 2001. Prior to June 1, 2001, the commission shall not enact any decisions authorizing electrical corporations to purchase from exchanges other than the Power Exchange, as defined in Section 355 of the Public Utilities Code. Any decisions authorizing electrical corporation purchases from qualified exchanges enacted prior to the effective date of this section, but after June 1, 2000, shall not be enforced."
  5. The lack of data on systems outside of the Cal-ISO control area hampered investigations, however, since some games involved out-of-control area buyers and sellers, for which the Cal-ISO's information was limited, because its right to data (established by "contract" in the tariff) did not extend to other control areas.
  6. SEC Rule 10b-5, 13 FR 8183, Dec. 22, 1948, as amended at 16 FR 7928, Aug. 11, 1951.
  7. FERC is, essentially, relegated to enforcement through contract rights. It must design tariffs for public utilities to file that give FERC authority not clearly resident in the statute. Then, if it can induce market participants to join in the tariff, it has only a contract-based right to approve sanctions on behavior. While an ingenious attempt to reach a rational result, this is a Rube Goldberg approach to regulation. FERC needs greater authority for its own police and regulatory powers, and added authority to delegate it to MMUs. Finally, MMUs need to abide by the dictates of due process, if they are to be effective SROs.
  8. See New York Independent System Operator, 99 F.E.R.C. 61,246 (2002); see also Comments of David B. Patton dated Nov. 15, 2002, in Docket No. RM01-12-000.
  9. The CFTC has asserted jurisdiction over sales of electricity and natural gas as commodities, at least in the futures markets, having recently investigated some of the transactions that have turned up in the West Coast investigations as violations of the CEA.
  10. 15 U.S.C. 79a, et. seq. (PUHCA).
  11. 15 U.S.C. 717, et. seq.
  12. H.R. 6.


History Repeating Itself

The key to not repeating history is to learn from it. The necessary ingredients to averting the next California crisis, wherever it might occur, are:

  • Clear statutory authority for FERC and its delegates to exercise police power against market manipulation, such as already is vested in the SEC under the '34 Act and the CFTC in the CEA;
  • Unambiguous rules authorizing MMUs/RTOs to investigate and sanction those exercising market power; and
  • The political