FERC steps up moves aimed at power crisis
Staff -- Purchasing, 4/19/2001 2:00:00 AM
As the peak summer power demand looms, the Federal Energy Regulatory Commission (FERC) is stepping up action designed to help head off power shortages and price spikes throughout the West. In a series of actions last month, it 1) threatened to order tens of millions in refunds by California power suppliers, 2) ordered removal of obstacles to increased gas and electric supplies in the West, and 3) convened a conference with Western state utility regulators to discuss ways of avoiding power price volatility in their states.
Commenting on the steps to increase supplies, FERC cautions that they "will not solve the electricity crisis facing California and other areas of the West and will not prevent electricity blackouts in the summer of 2001" because the states have primary jurisdiction over licensing new generating and transmission. In brief, the FERC actions are summarized below.
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Refunds. In two cases FERC has threatened power suppliers with orders for refunds that could total as much as $80 million for charges to California utilities. FERC ordered two suppliers to California's Independent System Operator (CAISO), Williams Energy Marketing and Trading and AES Southland, to offer arguments why they should not pay back nearly $11 million for charges in April to May last year. FERC finds that the two suppliers might have violated the Federal Power Act by inflating prices and compromising the reliability of California's transmission network. Another 13 generators might be ordered to refund as much as $69 million for charges in January of this year if they do not submit data justifying prices above FERC 's calculated "proxy market clearing price" of $273/MW. In a later filing, CAISO claims the generators overcharged utilities $6.2 billion since May 2000.
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Increased gas and electric supply. For the rest of this year, FERC ordered a series of actions, including loosening of some of its own pricing and other regulatory controls. These include allowing industrial backup and self-generators and wholesale electric customers who reduce consumption to sell power at market-based rates. In addition FERC promised internal action to speed up applications for new gas pipeline capacity and urged all FERC -licensed hydroelectric generators to propose efficiency modifications that could boost their power output. FERC also asked for comment on a series of other actions it might take.
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Price volatility. FERC notes that its actions "are only a small part of the electric supply picture." Because state regulators have control over permits for additional generation and transmission facilities as well as measures to encourage reduced demand, FERC this month met with commissioners and other state representatives from Arizona, California, Colorado, Idaho, Montana, New Mexico, Oregon, Utah, Washington and Wyoming. Governors from these states drew up an action plan released last month that called for, among other measures in FERC 's domain, streamlining regulatory processes to enable retired generation to be reactivated and existing generation to increase output, provided this can be done without damaging public health or the environment.
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