Posted on 08/01/2002 3:20:51 AM PDT by snopercod
WASHINGTON - Gov. Gray Davis and federal energy regulators are once again on a collision course, this time over who will govern the state's power grid.
Davis is balking at a recent federal order that would disband the board he appointed to oversee the California Independent System Operator, which manages the grid. It would be replaced by a board ostensibly "independent of market participants," under the order by the Federal Energy Regulatory Commission.
While the clash lacks the sizzle of Davis' previous confrontations with FERC over electricity price controls and refunds from power sellers accused of gouging, it goes to the heart of who will control the direction of California's wholesale power market.
FERC remains committed to developing a nationwide competitive marketplace for electricity and views independent grid managers as necessary to achieving that goal. Davis and other California officials moved to exert more authority over the market in the wake of the state's 2000-01 power crisis.
While FERC claims jurisdiction over the ISO as a "public utility," a state law gives Davis power to appoint the board.
Power sellers have complained the current board cannot be an impartial arbiter, especially since the state has become the largest electricity buyer in California. FERC agreed, contending the arrangement is hampering the state's ability to attract needed power plants and violates earlier commission orders.
"We find that the Board's lack of independence presents a significant impediment to a well-functioning Western energy market," FERC said in its July 17 order. "It will be difficult, if not impossible, for the current Western energy market to foster badly needed infrastructure development and maintain just and reasonable prices unless the (ISO) has an independent Board and a formal stakeholder advisory process that takes into account the concerns of all market participants."
The Davis administration contends the current setup protects consumers from predatory energy companies and makes the board publicly accountable.
"The board has showed independence and guided the state back to energy sanity," said Davis spokesman Steve Maviglio. "We're formulating our strategy (on the FERC order) at this point. I think we'll use every tool in our toolbox to fight it."
That could range from an administrative appeal of the FERC order to a court battle.
The Folsom-based ISO manages the flow of power over 25,526 miles of transmission lines, balances power supplies with demand, allocates transmission space and monitors prices. The once-obscure organization was catapulted to prominence during the power crisis as it confronted severe electricity shortages that prompted it to order rolling blackouts on several occasions.
As the crisis took hold, the ISO was governed by a 26-member board representing power companies, energy traders, utilities and consumers. Critics said the board was ineffectual and dominated by the power industry.
In January 2001, the California Legislature passed a law that disbanded the board and replaced it with a five-member body appointed by Davis.
That same month, the California Department of Water Resources, or DWR, started buying power on behalf of the state's private-sector utilities, which no longer were able to afford the sky-high prices being charged for wholesale electricity.
Power sellers since have leveled a variety of complaints about the ISO. For instance, electricity buyers for the water resources department were given access to the ISO's control room, where the sellers alleged they were privy to sensitive price and demand information that gave them an edge on power purchases.
State officials defended the practice as necessary to help stem the power crisis. They ultimately agreed to remove the buyers.
"You can exert market power as a buyer through your control of the grid," said Mark Stultz, a spokesman for the Electric Power Supply Association, an industry group. "I think the (sellers) out in California think there is evidence they've been doing that."
State and ISO officials dispute that.
"The only people who think the ISO board is not independent are the generators and marketers - Enron and people like that," said Michael Kahn, a San Francisco attorney who heads the board.
FERC commissioned an outside audit of the ISO that concluded its independence had been compromised. The auditors recommended the creation of "an independent, 'corporate type' (board) which consists of qualified professionals that do not have any financial or political ties to any of the parties."
Under FERC's order, the current ISO board would be replaced by Jan. 1 through a complex selection process.
A committee made up of ISO "stakeholders" - including power sellers and consumer groups, but not the state – would elect a Board Selection Committee. The selection committee would hire an executive search firm to come up with a list of candidates unaffiliated with market participants for a new nine-member board.
If the search firm recommends more than nine candidates, the selection committee would vote on which ones to seat. Board members would serve three-year terms and could serve a maximum of six years. They would be subject to removal "for cause" by the selection committee.
Two board advisory bodies would be formed, one consisting of ISO stakeholders and the other made up of members of the California Electricity Oversight Board.
This guy needs to spend more of his time on earth, a less wandering around in space.
"We find that the Board's lack of independence presents a significant impediment to a well-functioning Western energy market," FERC said in its July 17 order. "It will be difficult, if not impossible, for the current Western energy market to foster badly needed infrastructure development and maintain just and reasonable prices unless the (ISO) has an independent Board and a formal stakeholder advisory process that takes into account the concerns of all market participants."
FERC has just said that with the Cal ISO operating as it has in the past, there will not be a functional Western (i.e. beyond California's borders) energy market. The Cal ISO has messed things up so badly they have wrecked power markets from British Columbia to Arizona and Wyoming! FERC understands that the Cal ISO needs to be fixed for any of the western states to have a reasonable chance at preserving their reliability and reasonablness of power costs.
Let's see FERC vs. California in a FERC Administrative appeal......I bet on FERC.
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