| FERC Expands Calif. Power Price Limits | |
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Dateline: 06/19/01
The Federal Energy Regulatory Commission (FERC) yesterday voted unanimously to extend its electricity "price mitigation" plan currently in effect only in California to 10 other Western states, effective 24 hours a day.
Under the expanded mitigation plan, the wholesale spot price for electricity during non-emergency periods in the 11 Western states cannot exceed 85 percent of the price charged during the latest "Stage 1" power emergency, declared when supplies drop below seven percent of total demand for power. Any sale of electricity at prices above the 85 percent limit must be justified before the FERC.
Setting the initial price ceiling at $107.9 per megawatt hour of electricity, the expanded mitigation plan goes into effect on June 20 and will remain in effect through 2002.
Power emergencies are declared by the California Independent System Operator (ISO), the body responsible for monitoring and control of most the Western power grid.
"The California ISO market clearing price for reserve deficiency hours will also be adapted for use in all western spot markets when reserves are above 7 percent. Prices during non-reserve deficiency hours cannot, absent justification, exceed 85 percent of the highest hourly clearing price that was in effect during the most recent Stage 1 reserve deficiency period called by the ISO." -- FERC Press Release of June 18, 2001
According to the ISO, electricity most recently sold to California from outside power generators cost about $115 per megawatt hour, but those costs had been as high as $1,500 per megawatt hour during the most severe power shortages. These soaring costs are, of course, ultimately passed on to consumers.
The plan approved by FERC does not impose fixed price caps as had been requested by California's Democratic Gov. Gray Davis and several Democrats in the U.S. Congress.
In California, where wholesale prices of electricity have increased tenfold in the last year, Davis has urged the federal government to address the states energy woes.
At a press conference held after yesterday's FERC action, Gov. Davis stated, "Today the FERC has finally taken a step in the right direction, but there is much more they should do."Davis also indicated that he remained wary of the FERC price mitigation plan and would direct state power industry experts to examine it closely for "loopholes" allowing power companies to continue to raise prices.
Rolling Blackouts May Return to California: California power managers warned that the state's next round of "rolling blackouts" may be necessary starting on Tuesday as the hottest weather of the summer sets in and power demands soar.
Intermittent, localized power blackouts throughout California have been occurring since December 2000.
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FERC
Press Release of June 18, 2001
Contains details of the energy price mitigation plan and the reasoning of FERC
in taking this action.
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