Ose puts the blame where it belongs by pointing out that the ISO's favoritism towards DWR cost California billions in potential refunds.

ISO's role in sales is rapped: Critics challenge the independence of the power grid operator.
By David Whitney
Bee Washington Bureau
(Published Aug. 3, 2001)
WASHINGTON -- The independence of California's power transmission grid operator and its electricity sales to the state Department of Water Resources came under fire at a House of Representatives hearing Thursday.
But grid operators said there was no way that arms-length transactions with the Department of Water Resources could have been negotiated beginning in January when power blackouts were imminent and the state was the only buyer with money.
Rep. Doug Ose, R-Sacramento, chairman of the House Governmental Affairs energy policy panel, charged in a prepared statement to open the hearing that the cozy relationship between the DWR and the California Independent System Operator could result in the state forfeiting any claim to refunds for overcharges by power generators.
"The state's interference into Cal-ISO has possibly cost Californians billions of dollars in potential refunds," Ose said. "Moreover, it represents a serious violation of the Federal Energy Regulatory Commission's regulations."
At issue is the fact that the ISO is run by a five-person board appointed by the governor when, under federal law, it is supposed to be independent. Additionally, the ISO's biggest customer is the DWR, which buys power using state money to firm up power deliveries by utilities too cash-starved to buy it themselves.
Last week, the FERC determined that the DWR would not be entitled to any rate refunds on its power contracts. In reaching that decision, the commission cited the agency's special access to information that gave it a competitive advantage over other purchasers.
Terry M. Winter, ISO president and chief executive officer, said that at the time the Department of Water Resources began buying power in January under these unusual circumstances, there were no other buyers willing to step in to keep power flowing to homes and businesses.
"That occurred because the market was not functioning," Winter said. "They were the only creditworthy purchaser purchasing power."
But Kevin Madden, the regulatory commission's top lawyer, said the relationship between the ISO and the Department of Water Resources raises troubling questions.
"DWR buying on behalf of the state is a market participant," he said. "It shouldn't be in the ISO control room. It shouldn't be allowed to cherry pick" among power sellers.
Madden said he expects the commission to rule soon on whether the ISO should be reconstituted to ensure its independence.

The Bee's David Whitney can be reached at (202) 383-0004 or dwhitney@mcclatchydc.com <mailto:dwhitney@mcclatchydc.com<.

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