CA: Power Exchange Complaints Heat Up as Prices Soar : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

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Saturday, September 9, 2000

Power Exchange Complaints Heat Up as Prices Soar Energy: Sempra chairman calls on regulators to scrap 'broken' system. August figures quadrupled from year ago.

By CHRIS KRAUL, Times Staff Writer

Wholesale energy prices on the California Power Exchange continued to soar in August, pushing the state's utilities more than $3 billion into a financial hole and adding to calls for dismantling the state's deregulated power market.

The chairman of Sempra Energy, parent of San Diego Gas & Electric, called on federal regulators Friday to scrap the power exchange as unworkable and suggested a new system of price controls, generation incentives and mandatory metering. "I'm not confident that the current regulatory framework will work," said Stephen L. Baum. "The wholesale market is broken, malfunctioning, and prices have no relation to the cost of producing energy. The market is going to have to be changed." Edison International Chairman John Bryson has also described the PX as broken. Joining several state probes, the Federal Energy Regulatory Commission has launched an investigation of the California market and will open hearings Tuesday in San Diego. An indication of the market's problems was the price of 18.4 cents for a kilowatt hour of wholesale electricity purchased over the California PX in August, more than four times the 4 cents paid a year ago and 12% higher than the previous record set in June.

With Southern California Edison, Pacific Gas & Electric and SDG&E frozen at less than 9.4 cents per kilowatt hour, the utilities are racking up huge sums of "undercollections": the difference between what they can bill ratepayers and the spiraling wholesale prices they are paying on the state market.

The price spikes, experts agree, bear little correlation to the underlying rise in fuel costs, causing Baum, Bryson and others to declare the power exchange out of whack and unworkable. Price hikes have been blamed on a variety of factors, including shortages of California generating capacity and of hydroelectric power from the Northwest. Overloaded gas and electric transmission lines are also at fault. Moreover, generators are incurring higher prices to purchase the air pollution credits they need to keep California power plants running. Increasingly desperate utilities are clamoring for relief from the state to somehow unfreeze rates, a move that's being opposed by consumer groups.

For PG&E, the total of undercollections was about $2 billion at the end of August. SCE would not release up-to-date figures but said the total through July was $1.1 billion. SDG&E's stood at $185 million. PG&E spokesman Ron Low said Friday it is discussing ways with the state to recover its costs--which in practical terms would mean a lifting of the residential rate freeze--without causing the kind of shock that SDG&E customers got over the summer when rates spiked up. As the first fully deregulated utility, SDG&E passed along wholesale price rises to its customers until the Legislature capped them this month. Baum signaled that Sempra will go to court if necessary to recover the undercollections from customers, whose electric bills have been frozen by the state. "They can't take our property, our electricity. It's a legal and constitutional issue," Baum said. But consumer advocacy groups including The Utility Reform Network of San Francisco oppose such recoveries. Spokeswoman Mindy Spatt said it would be "bailing utilities out of a failed experiment." Baum said the FERC should impose regulated returns for generators at least until additional power-generating capacity is built and market balance is restored.

* * * Times staff writer Nancy Rivera Brooks contributed to this report

-- Martin Thompson (, September 09, 2000


$3 billion in regulated losses imposed on the utilities cannot last for long. PG & E lost $900 million in the month of August alone from these state-imposed rates. How long can this kind of thing go on?

-- Billiver (, September 09, 2000.

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