Dynegy losing money on power sales to California ISO
Ann de Rouffignac
OGJ Online
In a complaint filed with the Federal Energy Regulatory Commission, Dynegy Inc. claims it has lost $2 million and could lose �tens of millions of dollars" in its dealing with the California Independent System Operator (ISO).
Dynegy alleges in the Dec. 22 complaint the ISO pays less for power from in-state generators, while paying higher market-based rates for out-of-state power during emergencies. The Houston-based energy merchant says the tariff paid under these conditions is less than its short-term marginal costs to operate its plants. The ISO can impose the tariff when it has declared a situation of short supply.
If the ISO�s operations are not changed, the company stands to lose �tens of millions of dollars more,� Dynegy stated in the filing.
The complaint alleges the ISO is manipulating its tariffs as a cost cutting method. The ISO can negotiate terms with in-state or out-of-state generators, if it receives insufficient bids of power for the next day. Or instead of negotiating, the ISO can also use its authority under this tariff and direct the in-state generators to run and be paid according to �out-of-market� or OOM provisions.
The price paid for electricity under the tariff is not higher than $150/Mw-hr. But Dynegy says that natural gas costs and NOx emissions costs are above what the ISO pays even during non-peak hours.
�There is absolutely no basis for asking a participating generator to run at a loss, and there is absolutely no will among ISO stakeholders to change the tariff in order to pay generators a compensatory rate for services required by the ISO,� Dynegy states in the filing.
False emergencies
Instead of first exhausting competitive offers for power, the ISO requires in-state generators comply with the tariff, Dynegy says. All in-state generators must sign an agreement called a Participating Generator Agreement. The generators agree to run and be paid rates according to the provisions of the OOM tariff when called upon. Out-of-state generators do not sign such agreements.
Dynegy says it doesn�t understand why the ISO negotiates rates for out-of-market purchases from out-of-state generators and then refuses to negotiate with Dynegy�s in-state generators.
Dynegy wants FERC to instruct the ISO not to declare emergency shortages of power when bids have been submitted and then rejected. Dynegy says the ISO can�t conclude there is an emergency by rejecting bids that physically could satisfy market demand.
Alternately, the company also suggests if the ISO imposes the tariff a fair rate be paid that covers short-run costs, plus 15% to cover fixed costs. Finally, another payment option should be available when a generator is called to operate. It should be paid its day-ahead presubmitted bid, even if the bid is above the �soft� cap of $150/ Mw-hr. Dynegy said it will comply fully with the reporting requirements to FERC to justy bids above the cap.
Patrick Dorinson, spokesman for the ISO, says Dynegy is not being treated any differently from other in-state generators. All in-state generators are required to sign the Participating Generator Agreement.
�Maybe they are just the first to complain,� says Dorinson.
Interventions in the case must be filed with FERC by Jan. 11. So far no other filings have been received at FERC, according to docket information.