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No California market abuses, FERC concludes

OGJ Online

Nov. 1, 2000à‚–At a meeting today of the Federal Energy Regulatory Commission, the staff concluded it found no evidence of electricity market power abuses in California, even though prices were “unjust and unreasonable.”

But the commission in its proposed order to address problems in wholesale electricity markets in California stopped short of ordering refunds to consumers for legal reasons. FERC Chairman John Hoecker said the commission did conclude the California market was flawed structurally.

“The commission is prepared to do whatever needs to be done to nurse this market back to health,” Hoecker said.

FERC released the staff report Wednesday and proposed an order with several remedies. The proposed order and staff report is the result of a 3-month investigation into the power markets in California prompted by a complaint filed with FERC from San Diego Gas & Electric Co, a unit of Sempra Energy.

Hoecker noted the problems in California were exacerbated by tight demand and supply, existing emergency conditions, increased load, unplanned outages, and below normal hydroelectric imports. All these conditions sent electricity prices combined with higher costs of environmental compliance credits to record levels.

Under federal law, FERC has jurisdiction over wholesale power markets, including insuring wholesale prices are reasonable and fair. But commissioners noted FERC’s mandate makes no exception for whether prices are set by the market or under a cost-based system.

To address problems in California the commission proposed the following:

ࢀ¢ Eliminate the requirement the three investor-owned utilities sell into or buy all power in the California Power Exchange within 60 days.

ࢀ¢ Penalize buyers of power who purchase more than a certain percentage of their load in the real time market.

ࢀ¢ Eliminate the stakeholder boards of the California Independent System Operator and the California Power Exchange.

ࢀ¢ Modify the single price auction mechanism so any bid above $150 Mw-hr will not set the market clearing price for all other bidders. Bids below the $150 Mw-hr will set a market clearing price.

ࢀ¢ No refunds will be awarded consumers for the prices charged this past summer. Going forward sellers will be subject to refund order for any prices determined “unfair and unjust.”