Richardson cuts California price cap, extends order

In an order that appears to set up a conflict with the Federal Energy Regulatory Commission, US Energy Sec. Bill Richardson Friday lowered the price cap on wholesale electricity sold in California, and ordered the state to cut peak demand 5%, under extension of an order that requires generators and marketers to make power available in California. FERC put a $150 Mw-hr price cap in place in a Dec. 15 order, with similar conditions.


In an order that appears to set up a conflict with the Federal Energy Regulatory Commission, US Energy Sec. Bill Richardson Friday lowered the price cap on wholesale electricity sold in California, and ordered the state to cut peak demand 5%, under extension of an order that requires generators and marketers to make power available in California.

The order prohibits the California Independent System Operator (ISO) from agreeing to pay more than $64 Mw-hr for electricity purchased in the spot market, or equal to the price the California Public Utilities Commission is permitting Southern California Edison Co. (SCE) and Pacific Gas & Electric Co. (PGE) to charge their retail customers.

If the parties can't agree on a price, the Federal Energy Regulatory Commission (FERC) will determine the just and reasonable rate at a later date, Richardson said. FERC put a $150 Mw-hr price cap in place in a Dec. 15 order, with similar conditions.

Further complicating a growing financial and legal morass, the ramifications of Richardson's order are unclear and put in question which price controls generators are subject to�DOE's or FERC's.

In a statement, Richardson urged FERC to closely scrutinize the rates proposed by power suppliers to ensure that they are justified by production and capital costs.

PGE and SCE have pushed FERC to institute cost-based for wholesale electricity prices, but FERC has demurred. On Friday, a federal appeals court denied SCE's request for a emergency motion ordering FERC to institute cost-based electric rates.

DOE said the order does not represent a finding the $64 Mw-hr price approved by the PUC for pass through to consumers is a fair and reasonable price.

Rather, said DOE, it means any price above that should be just in a public proceeding given the current supply emergency.

Also, Richardson gave California until 9 a.m. PST Tuesday to certify action will be taken to reduce peak demand by 5% for the emergency order to remain in effect and Jan. 15 to explain how the state will cut demand. Richardson said California Gov. Gray Davis has indicated he will be proposing a series of conservation measures designed to achieve this goal.

Over the weekend, Gray recapped a number of energy conservation measures that were initiated earlier this year and reported a ninth power plant had been licensed since 1999, but he did not mention what, if any, new steps the state will take to cut peak demand.

Richardson's emergency order requires if the ISO certifies it has been unable to obtain an adequate supply of electricity in the marketplace, 75 generators and marketers have to make excess electricity available to the ISO.

More in Government