FERC makes no-fault finding, bevy of angry responses ensue

An informal investigation of the California market by the Federal Energy Regulatory Commission (FERC) brought good news to state operators: FERC has found no evidence of direct exercise of market power or regulatory fumblings.

“Examination of bid patterns in the PX and ISO replacement reserve markets and a review of ISO out of market purchase activity does not suggest substantial or sustained attempts to manipulate prices in these markets,” the staff report concluded.

Initiated by a series of complaints, including one filed by San Diego Gas & Electric (SDG&E) in August, the FERC study team reviewed public data and the general framework of both the individual California market and the entire Western Systems Coordinating Council (WSCC). They interviewed a number of sources, including market participants, regulators, economists and consumer representatives as well.

The study emphasized that it was not a formal investigation into the market, but rather an attempt to trace the cause of California’s summer power woes.

They found that demand for power this summer increased across the board as far as the WSCC was concerned-mostly weather-related. Also, the amount of power exported rose while imports saw little change, resulting in a decrease in net imports by approximately 3,000 MW over the peak May-August period. Other findings:

  • outages were on the upswing;
  • a significant chunk of power was left to float through the unscheduled day-ahead and hour-markets;
  • non-hydro power was stressed more than in 1999;
  • power prices were high throughout the West, but were felt more acutely in California;
  • fuel costs increased;
  • NOx credit prices increased; and
  • price caps may have increased summer exports in July and August.

Most of the findings were new to neither participants in the so-dubbed “California energy crisis” nor followers of the drama. However, there have been a number of responses to the FERC findings since the report’s release in November.

Consumer watchdog group Public Citizen-founded by former Green Party presidential hopeful Ralph Nader-released a statement chiding the commission for their conclusions.

“We are extremely disappointed that FERC…couldn’t figure out who was responsible for jacking up electricity prices in California to sky-high levels,” one release commented.

Calling on U.S. Attorney General Janet Reno to launch another investigation, Public Citizen rallied for re-regulation, claiming that deregulation has led to a bevy of “unregulated monopolies and cartels that are free to fleece consumers for billions without fear of retribution.”

But consumer groups aren’t the only people up in arms about FERC’s informal conclusions. SDG&E, one of the first to file a complaint, is pushing for FERC to up deadlines and reconsider refunds to their customers-to go farther than their study allows.

William Reed, vice president and chief regulatory officer for Sempra Energy echoed the sentiments of Public Citizen when he stated that, if regulators don’t get on the ball, “the California market will continue to be dysfunctional and permit huge transfers of wealth from California consumers to [power] producers.”

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