California ISO to ignore FERC order on board reorganization

By Sylvie Dale, Online Editor

Aug. 8, 2002 — The California Independent System Operator (ISO) has decided to go against an order from the Federal Energy Regulatory Commission (FERC) to restructure its ruling board.

Apparently at the urging of California Governor Gray Davis, the California ISO on Thursday voted unanimously not to follow FERC’s instructions to adopt a two-tiered system with an independent board plus an advisory committee of energy industry representatives by Jan. 1, 2003, the Associated Press reported.

Raising tension levels in a clash between the rights of the states and the federal authority of FERC, Gov. Davis had reportedly told the California ISO board to remember that its current structure was state-mandated.

On July 17, FERC raised a cap on electricity bid prices in California and other western states and called for an immediate overhaul of the California ISO board.

Delivering a stinging slap to the California ISO board, FERC said the board was in violation of prior orders and that it was not independent enough to operate its interstate transmission facilities and implement design proposals for electricity markets.

The orders were answered with immediate criticism from California ISO Chairman Michael Kahn.

“With regard to the FERC Order overhauling the California ISO Governing Board, I
strongly disagree with the statement by FERC that the Board is insufficiently independent to implement needed market design changes,” Kahn said in a statement released after the FERC order was received.

“The current ISO Board is responsible for helping the state heal from the energy crisis and I feel the decision on the governance issue is an affront to Californians.

FERC approved a series of market mitigation measures to replace those adopted in June 2001 which mostly follow the recommendations of the California ISO Market Surveillance Committee, an independent advisory group of economic experts who review the California market.

Citing the need for adequate infrastructure such as transmission lines, generating plants, and gas pipelines, FERC said that market rules and mitigation measures alone would not foster a competitive bulk power market with balanced market rules and market oversight and mitigation.

The commission set a $250/MWh bid cap for all sales in the Western Energy Coordinating Council (WECC) beginning October 1, 2002. In other organized power markets in the country, a $1000/MWh bid cap is in effect.

California ISO’s web page is at

FERC’s web page is at

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at

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