October 16, 2000
WASHINGTON, D.C., Oct. 16, 2000-Southern California Edison (SCE) today filed a joint petition urging the Federal Energy Regulatory Commission (FERC) to take immediate action in response to unjust and unreasonable wholesale electricity prices by authorizing a $100/MWh cap in the markets run by the California Independent System Operator (Cal-ISO) and the California Power Exchange (PX). Pacific Gas and Electric Co. (PG&E) and The Utility Reform Network (TURN) joined SCE in filing the petition.
In addition to immediate relief, the filing asked for an expedited proceeding to provide the fact finding needed (a) to adopt comprehensive market-power mitigation measures that would replace the $100/MWh cap and (b) to determine refund responsibility.
"Even though the peak demands of the summer are behind us, electricity prices in the wholesale market remain unreasonably high," said SCE Senior Vice President for Regulatory Policy & Affairs John Fielder. For example, on Sunday, September 24, prices reached $150/MWh even though demand was relatively low (about two-thirds that seen during a peak summer day).
"Each day that passes, the consumers, utilities and economy of California are unfairly burdened with excessive electricity costs," Fielder said. "We reiterate Governor Gray Davis' request that FERC act without delay to address the problems in the wholesale market."
Specifically, SCE, PG&E and TURN asked FERC to make an immediate finding that California's electricity market is not workably competitive and that resulting prices are unjust and unreasonable.
"Numerous studies from independent analysts have provided ample documentation of the many problems that plague the California market," Fielder said. For example, in a report dated Sept. 6, 2000, Cal-ISO's Market Surveillance Committee found that prices in June of this year were nearly three times the level that would be experienced in a properly functioning competitive market.
SCE and the other petitioners asked FERC to provide immediate relief from these unjust and unreasonable rates by authorizing a $100/MWh cap in the day-ahead, hour-ahead, day-of and real-time markets run by Cal-ISO and PX (a $250/MWh cap currently is in effect only in the Cal-ISO markets). In the past, FERC has used a $100/MWh rate as a standard in cases where neither cost-based nor market-based rates apply, such as emergency service. The filing demonstrated that this price level was sufficient to cover costs for most plants, but also allowed generators and energy traders to seek a higher rate from FERC. This higher price would be paid only to the individual seller on a unit-specific basis; it would not set the market clearing price.
In addition to this immediate emergency relief, the filing also asked FERC for an expedited hearing on intermediate steps that can be taken until long-term changes to the California electricity market can be implemented.
The petitioners asked FERC to require sellers of electricity (other than "must-take" units) to submit cost-of-service information to the Commission within 30 days.
The filing noted that FERC could use this information to replace the $100/MWh cap with market-power mitigation measures tailored to address the precise problems identified in the hearing process. These measures could include the temporary imposition of cost-of-service pricing; contracts through which generators would commit a percentage of their capacity to the ISO at cost-based rates; unit-specific bid caps; or market-wide caps that vary based on the operating cost of the unit expected to be on the margin at different load levels.
While the market-power mitigation measures will ensure just and reasonable rates in the future, the filing also asked FERC to investigate past pricing and determine whether refunds from electricity sellers are appropriate.
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An Edison International company, Southern California Edison is one of the nation's largest electric utilities, serving more than 11 million people in a 50,000-square-mile area within central, coastal and Southern California.