By the OGJ Online Staff
HOUSTON, Apr. 19 -- Citing a series of "half-baked" market reform proposals, a merchant energy trade group Thursday asked federal regulators to replace Gov. Gray Davis's appointees to the California Independent System Operator board and reject the ISO's proposed market stabilization plan.
"The consequences of the political power being exercised over the CAISO are palpable," the Electric Power Supply Association said in a filing with the Federal Energy Regulatory Commission. EPSA asked FERC to enforce a Dec. 15 order mandating an independent ISO board.
Following the Dec. 15 order, the state disbanded the existing stakeholder board and replaced members with appointees named by Davis. Since then the ISO has taken positions before the FERC unrelated to the reliability of the transmission system, and that "unashamedly" favor the California Department of Water Resources (DWR), now the dominant power buyer, over other market participants, EPSA said.
"A continued witch hunt for evidence of market power, together with continuing credit problems, now pose the greatest obstacle to the promise and potential of robust competitive markets and the enhanced reliability they will provide," EPSA said.
It said the ISO blames high prices on market power without documenting any illegal behavior or accounting for the full cost of capacity value, opportunity costs, scarcity value, transmission constraints, emission offsets and risks, including credit risks, in California's supply constrained markets.
Because of the regional nature of the wholesale power markets in the West, the association said it is vitally important FERC insure all market participants are treated fairly and comparably.
The ISO's "half-baked" market stabilization plan makes use of counterproductive price controls and bits and pieces of eastern ISO market, EPSA said. The "radical" proposals include elimination of the requirement for balanced schedules, elimination of capacity bids for ancillary services, and use of centralized unit commitment and multipart bidding by generators.
In addition, the association said the ISO still hasn't filed a congestion management plan, despite FERC's clear direction and an urgent need to do so. EPSA said the market stabilization plan proposes to curtail exports from California without making it clear how the process will be administered.
EPSA also criticized the ISO's plan to create a day-ahead and hour-ahead energy markets as contrary to FERC's order encouraging utilities to sign long-term forward contracts. EPSA said the ISO proposal will allow the utilities to submit unbalanced schedules into the grid operator's new spot markets to buy energy.
The approach will also shift the authority to oversee those markets away from FERC to the state of California through the governor-appointed ISO board, EPSA said in the filing.