California governor proposes own plan for power market

California will encourage power plant construction, overhaul the boards of two state electricity agencies, and promote energy conservation, Gov. Gray Davis said Friday in a letter to the Federal Energy Regulatory Commission. He also reiterated his call for retroactive refunds to customers who paid high electric bills this past summer and said utilities should not be forced to sell off any more electric generating capacity, a condition of California's deregulation law.


California will encourage power plant construction, overhaul the boards of two state electricity agencies, and promote energy conservation, Gov. Gray Davis said Friday in a letter to the Federal Energy Regulatory Commission (FERC).

He also reiterated his call for retroactive refunds to customers who paid high electric bills this past summer and said utilities should not be forced to sell off any more electric generating capacity, a condition of California's deregulation law.

Gray was responding to FERC�s proposed order addressing problems in California's wholesale power markets. The comment period ended Nov. 22 and a final FERC order is expected before yearend. However, sources close to FERC say the commissioners wanted to consider Gray's formal comments before issuing a final order.

Davis made it clear he is not satisfied with the FERC staff report on its investigation into the California markets.

�Even though FERC had recently concluded that California�s market was dysfunctional, its draft proposal fails to include measures to stop out-of-state electric generators from price gouging, and would lead to higher prices next summer,� he said in the letter.

He hinted if FERC does its job by fixing problems in the wholesale markets, then his program will be transitional and limited in scope. He will not present his final report on the matter until after he has considered FERC�s final order.

For now, the governor proposes to:

� Introduce legislation that would change the boards of the Independent System Operator and the California Power Exchange to eliminate members who have �inherent conflicts of interest.� FERC recommended the action in its proposed order.

� Seek legislation that will allow emissions credits trading to help site new power plants.

� Promote distributed generation and cogeneration through the California Public Utilities Commission (PUC).

� Accelerate voluntary efforts to reduce energy demand during peak usage.

� Expand forward contracting by utilities to allow multiyear contracts to reduce price volatility and ensure reliability.

� Expedite the PUC�s investigation into demand reduction programs for commercial users and adopt new programs for voluntary interruptions of power during peak periods.

� Review new measures to coordinate power plant maintenance and operating activities.

� Require utilities to retain existing generation instead of selling it off until the market is competitive.

� Call on the PUC to develop real time price signals such as metering by large energy users to reduce their energy use.

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