Puget Sound asks FERC to reconsider west-wide price caps

Puget Sound Energy Inc. said the wholesale electricity price cap in effect in the West has hurt the utility financially, left the region vulnerable to decisions of the California Independent System Operator, and jeopardized energy supplies in the Pacific Northwest. The Bellevue, Wash., utility filed a request Thursday for a rehearing of the Federal Energy Regulatory Commission's order last month that imposed a west-wide price cap.


By Ann de Rouffignac
OGJ Online

HOUSTON, July 20 -- Puget Sound Energy Inc. said the wholesale electricity price cap in effect in the West has hurt the utility financially, left the region vulnerable to decisions of the California Independent System Operator, and jeopardized energy supplies in the Pacific Northwest.

The Bellevue, Wash., utility filed a request Thursday for a rehearing of the Federal Energy Regulatory Commission's order last month that imposed a west-wide price cap.

The price controls have left the utility with "unbalanced" purchases and sales of electricity and could cause a rate increase soon, company officials said. Other utilities in the region are also expected to file similar requests for rehearing with FERC, industry sources said.

The price controls FERC ordered in June are triggered by power emergencies in California, but they apply to the entire western region, resulting in unintended consequences, Puget Sound said. "The current FERC price controls need to be revised so other regions with different consumption patterns are taken into account," said Grant Ringel, Puget Sound Energy spokesman.

The Pacific Northwest is a winter peaking region and California a summer peaking area. The price controls help California right now but exacerbate problems in the Northwest, he said. The price controls affect the pattern of power sales and purchases in the wholesale market that in turn impact the utility's financial ability to maintain real time supply and balance load for its customers.

"We depend on sales of excess power to offset our purchases," said Ringel. "The FERC order throws that balance off."

The supply strategy is to use proceeds from electricity sales to offset the cost of the highest priced power in Puget's portfolio. Puget must buy high priced power during peak or bad weather or generation outages. It simply sells power at other times to offset those purchases.

The utility said it will be fundamentally harmed because the June order was a change from previous FERC orders that based price controls on a $150/Mw-hr break point. Puget planned its portfolio around that price.

"Such a change penalizes Puget for its responsible planning and its maintenance of a portfolio to meet its native load," Puget said.

The June price controls, which are based on market conditions in California, means the California ISO can "manipulate the market," according to the filing. The utility wants revisions to the order to prevent the California ISO from setting the market clearing price for the Pacific Northwest.

Moreover, Puget complained the order is discouraging generation in the region. "Since the June controls were implemented, 1,300 Mw of new generation projects have been canceled," Ringel said. "The market price must be sufficient to attract new generation."

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