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California Power Exchange May Lose Monopoly on Federal Ruling
Bloomberg, 11/04/00 Grp Urges Re-Regulation In Wake Of FERC Calif Pwr Order Dow Jones Energy Service, 11/03/00 FERC Leaves Calif Pwr Consumer Relief In Lap Of Congress Dow Jones Energy Service, 11/03/00 State Utilities Left With Burden of Reclaiming Costs From Crisis Energy: Issue will remain unsettled until next year when a new agreement is reached and flaws in deregulation are fixed. Los Angeles Times, 11/03/00 USA: Calif. gov. scraps Asia trip to deal with power woes. Reuters English News Service, 11/02/00 FERC Leaves Calif Pwr Consumer Relief In Lap Of Congress Dow Jones Energy Service, 11/02/00 Calif Legislators Urge FERC To Hold Nov Mtg In San Diego Dow Jones Energy Service, 11/02/00 USA: Calif. Senator Boxer wants more help for power markets. Reuters English News Service, 11/02/00 California Power Exchange May Lose Monopoly on Federal Ruling 11/4/0 11:56 (New York) California Power Exchange May Lose Monopoly on Federal Ruling Pasadena, California, Nov. 4 (Bloomberg) -- The California Power Exchange, the marketplace where the state's three investor- owned utilities must buy electricity, is on the brink of losing its monopoly following this summer's power-price surge. The Federal Energy Regulatory Commission this week proposed eliminating a state rule that PG&E Corp., Edison International and Sempra Energy purchase almost all their power through the exchange, which cost California consumers more than $100 million to create. FERC expects to issue a final order by year-end. Under the proposal, the utilities could buy electricity through other exchanges or directly from providers such as Enron Corp. and Dynegy Inc. FERC said the move would help fix California's ``seriously flawed'' market, where supply shortages forced utilities to cut power to some customers this summer. ``The role of the power exchange is going to shrink,'' said Josh Rokach, an adviser to FERC Commissioner Curt Hebert. ``People will rely more on bilateral contracts'' between utilities and generators, he said. Nettie Hoge, executive director of the Utility Reform Network, a San Francisco-based consumer group, went further: ``It's quite possible that the exchange will wither away if we follow everything FERC has ordered.'' Expansion Others aren't so sure. Though intended to serve only California, the exchange now handles one-fourth of the power delivered in the Western Systems Coordinating Council, whose members supply 14 western states, two Canadian provinces and parts of Mexico. Further expansion into areas such as Nevada, Arizona and Alberta, Canada, will offer local electricity buyers and sellers ``a well-developed market operator ready for competition,'' exchange President George Sladoje said in a statement. California lawmakers established the nonprofit exchange in 1996, as part of the deregulation of the state's electricity market. The utilities buy 80 percent to 90 percent of their electricity on the exchange, based in Pasadena, California. The three utilities together supply about 75 percent of the state's power, with the rest coming from cooperatives and municipal agencies. Long-Term Contracts The exchange is a day-ahead market, where buyers and sellers set prices for power to be delivered the next day. The California Independent System Operator, which oversees the state's grid, sells electricity in the hourly market, which fills last-minute needs. FERC wants to give the utilities the opportunity to lock in prices for power through longer-term contracts known as forwards. Arranging supplies in advance would reduce the amount of power that utilities must buy during periods of peak consumption, when prices can soar, FERC says. Though the exchange has operated a forwards market since July 1999, the utilities until recently were prohibited from using it. Even now, they must receive approval from the California Public Utilities Commission to enter such contracts, and the amount of electricity they can buy is limited. By comparison, municipal utilities such as the Los Angeles Department of Water and Power can freely enter into long-term contracts and don't pay the transaction fees charged by the exchange. Even if PG&E, Edison and Sempra are allowed to obtain supplies through alternative means, the exchange isn't likely to go away, said Jan Smutny-Jones, executive director of Sacramento- based Independent Energy Producers, a trade group that represents about 50 power producers. ``There will continue to be a need for a place for people to do day-ahead transactions,'' Smutny-Jones said. Transparency The exchange's ability to compete would depend in part on whether rivals such as Enron and Dynegy, which sell electricity throughout the U.S., are required to list prices openly, exchange spokesman Jesus Arredondo said. ``Those folks don't have transparency right now,'' he said. ``If there isn't a level playing field, we're going to be at a disadvantage.'' Yet transparency on the exchange hasn't kept prices low. During this year's hottest months, as demand for air conditioning soared, the prices utilities paid for electricity through the exchange and the California ISO more than quadrupled from a year earlier. Utilities weren't able to respond to the price jump by cutting their purchases because they needed the power, noted Bob Levin, senior vice president of planning at the New York Mercantile Exchange, one of the exchanges hoping to attract business from California's utilities. ``FERC's proposal is a good way to start improving the market,'' Levin said. Not everyone thinks allowing companies to buy outside the exchange is without risk. State Senator Steve Peace, a Democrat from El Cajon who co-wrote the state's 1996 deregulation law, worries that oil and gas companies, big users of electricity for their refineries, might draw up supply agreements in secret and keep consumers in the dark about the terms. Monopoly's End He warned in an Oct. 3 letter to FERC Chairman James Hoecker that eliminating the exchange in favor of bilateral contracts ``would be disastrous, particularly for small commercial and residential consumers.'' Keeping California power prices a secret would be difficult, even without the exchange, some industry observers say. Publishing companies such as Platt's, the commodities division of Standard & Poor's, Financial Times Energy, and Bloomberg LP report energy prices from around the world. They would be expected to begin collecting more information in California as well if the market requires it, said Mark Palmer, vice president of communications for Houston-based Enron Corp., the world's largest trader of electricity. ``You'll probably see California price indexes,'' Palmer said. Spokesmen for Rosemead, California-based Edison and San Diego- based Sempra said their companies wouldn't comment on future of the exchange or their power purchases until FERC issues a final order. PG&E, based in San Francisco, is reviewing the agency's report, a spokesman said. Whatever FERC's decision, the exchange's future ultimately should be decided by the market, not the state, said Richard Bilas, a member of the California Public Utilities Commission. ``If the exchange is operating efficiently, it will survive on its own,'' he said. ``Not as a sanctioned monopoly.'' --Daniel Taub in the Los Angeles newsroom (323) 801-1261, or at dtaub@bloomberg.net, and Christopher Martin in Chicago, with reporting by Liz Skinner in Washington, through the Princeton newsroom (609) 279-4000/shf/alp Story illustration: For California Power Exchange prices, see {CAPX <GO<}. For a chart of California-Oregon border electricity prices for the past year, see {ELGFCOON <Index< GP D <GO<}. Grp Urges Re-Regulation In Wake Of FERC Calif Pwr Order 11/03/2000 Dow Jones Energy Service (Copyright © 2000, Dow Jones & Company, Inc.) WASHINGTON -(Dow Jones)- State regulators and legislators should re-regulate deregulated power markets after federal regulators left California consumers in the lurch, Public Citizen said Friday. The Ralph Nader-founded activist group decried an order by the U.S. Federal Energy Regulatory Commission Wednesday, which found electricity rates in California were unjust and unreasonable, but failed to find legal reason to refund money to consumers. FERC found that the "seriously flawed" state-mandated market structure was to blame, rather than deregulated power producers, for the sky-high power prices roiling the first-in-the-nation deregulated electricity market. "In short, FERC found that California consumers were robbed of billions of dollars - reportedly more than $5 billion. But the agency can't find the robber, and thus it can't protect the victims of the crime," said Charlie Higley, the group's energy research director. "FERC's inability to protect consumers from unlawful price gouging reveals that state electricity deregulation has created unregulated monopolies and cartels that are free to fleece consumers for billions without fear of retribution," Higley said. Public Citizen's reaction served to underscore concerns voiced by FERC regulators that the consumer backlash spurred by California's flawed market design will work against continuing efforts by federal and state policymakers to further deregulate U.S. electricity markets. Public Citizen also called for the U.S. Justice Department to launch an investigation "to determine who is responsible for the unlawful abuse of California ratepayers by greedy power suppliers." Power producers angrily reject such characterizations. They say market forces, environmental regulations, hot weather, depressed hydropower supplies and record-high natural gas prices are behind the state's electricity-supply and market-volatility woes. -By Bryan Lee, Dow Jones Newswires, 202-862-6647, bryan.lee@dowjones.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. FERC Leaves Calif Pwr Consumer Relief In Lap Of Congress 11/03/2000 Dow Jones Energy Service (Copyright © 2000, Dow Jones & Company, Inc.) (This article was originally published Thursday) WASHINGTON -(Dow Jones)- Members of Congress representing the San Diego area expressed disappointment Thursday that federal regulators found they couldn't order refunds to power consumers hard by the state's high-flying power market. The U.S. Federal Energy Regulatory Commission Wednesday issued an order in response to chronic power-supply problems in California that have sent wholesale power prices soaring. While the order called for a sweeping restructuring of the market to lessen wholesale power price volatility, the commission found it lacked authority to refund money to consumers. "Clearly federal legislative action is necessary because FERC didn't take the authority I think it has," said Rep. Bob Filner, R-Calif. "All the consumers and utilities are still on the line (to absorb soaring power costs) because FERC couldn't find any culpability anywhere," Filner said. "FERC should have found some specific culpability here." Rep. Brian Bilbray, R-Calif., who has made the power price shock an issue in his re-election campaign, criticized the commission for blaming the market structure dictated by state legislators, rather than power providers, for the soaring costs. "I've never known a federal agency to override a state legislature like that," Bilbray said, accusing FERC of shrugging its shoulders by recognizing that market abuses occurred, but blaming the state lawmakers for it. "FERC's pointing the fingers at the state and not the power companies," he said. The commission's conclusion will make it all the more difficult to prod Congress to provide relief for California consumers, said Bilbray, who like Filner has sponsored a windfall profits bill in Congress. Bilbray suggested that California Gov. Gray Davis should call back the state Legislature in emergency session to address the problem. If he doesn't, then Congress will need to step in, he said. Filner said he is drafting legislation based on FERC's conclusions to give FERC the authority to refund consumers the windfall profits of the state's deregulated power producers. The bill would allow FERC to provide refunds in cases like California's where the commission found rates to be unjust and unreasonable, but found no specific companies to blame for the situation, Filner said. FERC Chairman James Hoecker anticipated disappointment as the commission discussed its order Wednesday. "Those eagerly anticipating this order expected two things, a lynching and a transfer of large amounts of money," Hoecker said. "Round up the bad guys ... and order digorgement of all their ill-gotten gains." Hoecker noted that if he were a retiree on a fixed income or a small business owner in San Diego, "I'd want my money back." But, he said, it's "not as simple as all that." Instead, Hoecker put the onus on Congress to act legislatively if the commission is to respond for consumers. FERC's ability to order retroactive refunds "ultimately rests with Congress," he said. -By Bryan Lee, Dow Jones Newswires, 202-862-6647, bryan.lee@dowjones.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Business; Financial Desk State Utilities Left With Burden of Reclaiming Costs From Crisis Energy: Issue will remain unsettled until next year when a new agreement is reached and flaws in deregulation are fixed. CHRIS KRAUL; NANCY RIVERA BROOKS TIMES STAFF WRITERS 11/03/2000 Los Angeles Times Home Edition C-1 Copyright 2000 / The Times Mirror Company The $6-billion wrecking ball that is waiting to slam either California consumers or the utility industry is back in the control of state officials after a federal commission this week failed to even address the problem. The Federal Energy Regulatory Commission declared Wednesday that California has defects in its deregulated electricity market and proposed sweeping changes, but declined to deal with one of the most serious problems. The summer's electricity crisis forced the state's three investor-owned utilities to purchase wholesale electricity costing $6 billion more than what they could charge consumers under existing rates. Southern California Edison and Pacific Gas & Electric now want consumers to pay the full cost of those purchases in the form of monthly surcharges over the next five years--a plan that would push into the distant future any hope that deregulation would bring relief to the high-cost California electricity market. But state officials and Wall Street experts doubt the industry has any realistic chance of collecting all $6 billion. Despite their confident public stand, the utilities will likely settle with consumers. "I'd say the chances of utilities being made whole is zero, and the chances of them eating all the undercollections is zero," said Steve Fetter, an analyst with debt raters Fitch of New York. Fetter is former chairman of the Michigan Public Service Commission. A high state official who asked not to be named said a majority of the Public Utilities Commission believes that utilities are not entitled to the $6 billion under current law. "The commission has interpreted the law the same way five times in a row," the official said. "So if anything is to change, the legislature will have to write new law." And yet division within the PUC has been evident lately, adding to the confusion. Despite repeated PUC declarations that SCE and PG&E cannot raise rates under the current deregulation law, the utilities were encouraged when PUC President Loretta Lynch said on Oct. 17 that "the basic assumptions underlying AB 1890 are ripe for reconsideration." The electricity cost issue is a political hot potato that California politicians and regulators clearly hoped the Federal Energy Regulatory Commission would handle by declaring costs "unjust and unreasonable" and by ordering generators to give back profits. But FERC said it found no evidence of specific market abuses and that it lacked the legal authority to order refunds of federallysanctioned wholesale rates in the absence of market-power evidence. Early next year, after a new state Legislature is sworn in and Gov. Gray Davis appoints his third of five members on the state Public Utilities Commission, lawmakers, officials and stakeholders will have to hammer out an agreement, which will probably require a new law. Wall Street is already signaling its impatience. "Our position has been that it is an unsettled situation as far as utilities are concerned," said Richard Cortright, a director at Standard & Poor's debt-rating service that downgraded its outlook on California utility debt to negative last summer. Consumer groups on the one side are clamoring for the utilities and power companies to pony up for the costs of a failed experiment in a free market for electrons, while on the other side the utilities who want full restitution from customers for the electricity they dutifully delivered at going market rates. "What FERC effectively did was say to California: You guys have to choose between utilities and consumers," said Douglas Heller, consumer advocate at the Santa Monica-based Foundation for Taxpayer and Consumer Rights. "It's up to Gov. Davis and the Legislature to do the right thing and stand up to these utility companies." FERC's proposed order "really passed the buck" and left the PUC with clear jurisdiction over the utilities' transition costs, said Bob Finkelstein, a lawyer with The Utility Reform Network. The San Francisco consumer group has proposed that the PUC require the utilities to use sharply increasing profits earned through deregulation, such as from the sale of power into the market, to pay off the cost of electricity that they have not been able to pass along to customers. Utilities will argue just as strenuously that to make them absorb the unexpected costs of a vital service is unfair and would impinge on needed investments in electric infrastructure. PG&E and SCE have each petitioned the state Public Utilities Commission for permission to begin collecting those billions of dollars by approving rate increases. In SCE's case, the proposed rate increase would be no more than 10%, which would add about $5.50 to the typical monthly residential bill. Although wholesale electricity rates have risen dramatically, SCE and PG&E customers are still protected by a rate freeze until utilities pay off costs related to "stranded assets" such as nuclear, wind and other noneconomic assets, or until March 2002. San Diego Gas & Electric got out from under the rate freeze after paying off its stranded assets early in 1999, and began passing along wholesale electricity costs directly to customers. But the state legislature imposed a rate cap last summer after wholesale rates doubled and tripled, causing a political firestorm. Steve Baum, chief executive of SDG&E parent Sempra Energy, said Thursday that he was disappointed that the FERC did not open the way for refunds from the power generators. "This is going to make Wall Street less than happy," Baum said. "They say they have no basis for refunds but that door is not slammed shut." Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Calif. gov. scraps Asia trip to deal with power woes. 11/02/2000 Reuters English News Service (C) Reuters Limited 2000. SACRAMENTO, Calif., Nov 2 (Reuters) - California Gov. Gray Davis Thursday scrapped a planned trip to Asia this month to remain at home to cope with the state's increasingly troubled power market, officials said. "The Asia trip has been postponed. We do not have a date for rescheduling," spokeswoman Hilary McLean said. Davis had been due to visit Singapore, Brunei, Beijing, Shanghai between Nov. 11-18. Instead, he now intends to remain in California to tackle the energy problems head-on. The Federal Energy Regulatory Commission's (FERC) this week said that a probe into California's newly deregulated electricity markets had shown that drastic changes were needed to prevent a repetition of this past summer's price spikes and near power blackouts. But the regulators, though declaring power prices charged this summer were not "just and reasonable," as required by law, said they did not have the legal authority to demand refunds from generators, some of whom have made huge profits selling power in the California market. McLean said that Davis "has been very focused on California's electricity problems, and wants to make sure that California's electricity supply is reliable and affordable." "The governor is going to be needed to here to continue to engage in this issue," she said, without providing any further detail. (Andrew Quinn in San Francisco bureau, 415-677-2541, andrew.quinn@reuters.com). Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. FERC Leaves Calif Pwr Consumer Relief In Lap Of Congress 11/02/2000 Dow Jones Energy Service (Copyright © 2000, Dow Jones & Company, Inc.) WASHINGTON -(Dow Jones)- Members of Congress representing the San Diego area expressed disappointment Thursday that federal regulators found they couldn't order refunds to power consumers hard by the state's high-flying power market. The U.S. Federal Energy Regulatory Commission Wednesday issued an order in response to chronic power-supply problems in California that have sent wholesale power prices soaring. While the order called for a sweeping restructuring of the market to lessen wholesale power price volatility, the commission found it lacked authority to refund money to consumers. "Clearly federal legislative action is necessary because FERC didn't take the authority I think it has," said Rep. Bob Filner, R-Calif. "All the consumers and utilities are still on the line (to absorb soaring power costs) because FERC couldn't find any culpability anywhere," Filner said. "FERC should have found some specific culpability here." Rep. Brian Bilbray, R-Calif., who has made the power price shock an issue in his re-election campaign, criticized the commission for blaming the market structure dictated by state legislators, rather than power providers, for the soaring costs. "I've never known a federal agency to override a state legislature like that," Bilbray said, accusing FERC of shrugging its shoulders by recognizing that market abuses occurred, but blaming the state lawmakers for it. "FERC's pointing the fingers at the state and not the power companies," he said. The commission's conclusion will make it all the more difficult to prod Congress to provide relief for California consumers, said Bilbray, who like Filner has sponsored a windfall profits bill in Congress. Bilbray suggested that California Gov. Gray Davis should call back the state Legislature in emergency session to address the problem. If he doesn't, then Congress will need to step in, he said. Filner said he is drafting legislation based on FERC's conclusions to give FERC the authority to refund consumers the windfall profits of the state's deregulated power producers. The bill would allow FERC to provide refunds in cases like California's where the commission found rates to be unjust and unreasonable, but found no specific companies to blame for the situation, Filner said. FERC Chairman James Hoecker anticipated disappointment as the commission discussed its order Wednesday. "Those eagerly anticipating this order expected two things, a lynching and a transfer of large amounts of money," Hoecker said. "Round up the bad guys ... and order digorgement of all their ill-gotten gains." Hoecker noted that if he were a retiree on a fixed income or a small business owner in San Diego, "I'd want my money back." But, he said, it's "not as simple as all that." Instead, Hoecker put the onus on Congress to act legislatively if the commission is to respond for consumers. FERC's ability to order retroactive refunds "ultimately rests with Congress," he said. -By Bryan Lee, Dow Jones Newswires, 202-862-6647, bryan.lee@dowjones.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Calif Legislators Urge FERC To Hold Nov Mtg In San Diego 11/02/2000 Dow Jones Energy Service (Copyright © 2000, Dow Jones & Company, Inc.) LOS ANGELES -(Dow Jones)- Seven federal legislators from California are urging the Federal Energy Regulatory Commission to hold its scheduled Nov. 9 public hearing on California's electricity problems in San Diego, not Washington. At the hearing, FERC will announce proposed remedies based on a FERC report issued Wednesday that found California's electricity market seriously flawed. The legislators said in a Nov. 1 letter to FERC chairman James Hoecker that FERC should hold its hearing in San Diego because that is where people affected by proposed remedies live. The letter was signed by Sens. Dianne Feinstein and Barbara Boxer; and Reps. Bob Filner, Brian Bilbray, Ron Packard, Duncan Hunter, and Randy Cunningham. San Diego residents were the first in the nation to be charged deregulated rates, and many saw their bills double and triple this summer due to a spike in wholesale power prices. FERC held hearings in San Diego in August to determine why those prices were so high. The letter asked that a supplementary hearing be held in San Diego if the Washington hearing couldn't be moved. "Clearly, the electricity crisis has caused more than a ripple in San Diegans' lives - a tsunami is more like it. For that reason, your Commission should hear of the real impacts that your order would have on the people and institutions of San Diego," the letter said. Nobody at FERC could be reached for comment. -By Jessica Berthold, Dow Jones Newswires; 323-658-3872; jessica.berthold@dowjones.com USA: Calif. Senator Boxer wants more help for power markets. By Patrick Connole 11/02/2000 Reuters English News Service (C) Reuters Limited 2000. WASHINGTON, Nov 2 (Reuters) - California Sen. Barbara Boxer on Thursday said she was "distressed" that U.S. regulators did not provide immediate relief for her state's power consumers when they backed draft measures on Wednesday for fixing the troubled electricity system there. Democrat Boxer, in a letter to U.S. Federal Energy Regulatory Commission (FERC) Chairman James Hoecker, urged the commission to take stronger actions before their draft order becomes final next month to aid consumers. "It is imperative that FERC act promptly to address California's energy crisis," Boxer wrote to Hoecker. Boxer wants FERC to approve a regional price cap throughout the 14 Western states on electricity price rates, order utilities to provide refunds to California customers and convene the next FERC meeting on the issue in San Diego on Nov. 9 so that California consumers can weigh in on the matter. San Diego consumers were most impacted by a sharp price rise in California's wholesale power markets this summer, since under the state's deregulation plan they were forced to pay market rates without a safety net. FERC did not order refunds as part of its draft remedies announced on Wednesday, saying they legally did not have the power to do so. The Nov. 9 meeting is scheduled at commission headquarters in Washington D.C. The commission approved measures on Wednesday to establish independent oversight boards for the California Independent System Operator and Power Exchange (PX). Both entities help balance power supplies for state utilities and act as auction houses for buying and selling last-minute power. Other measures would eliminate the need for the three largest California utilities - Pacific Gas and Electric, San Diego Gas and Electric and SoCal Edison - to have to sell power to, or buy power from the PX. San Diego Gas & Electric is a unit of Sempra Energy , SoCal Edison is a unit of Edison International and Pacific Gas is owned by PG&E Corp. . The three are based in the San Diego, Los Angeles and San Francisco areas, respectively. Other changes backed by FERC would allow the three investor-owned utilities to manage risk by allowing long and intermediate-term power supply contracts and would temporarily modify market auction bid processes. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.
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