When the final chapter on this is written, Cal ISO will look the dirtiest of them all. I don't think anyone disputes that the power producers tried to get around the restrictions imposed by California law. They had to, in order to produce power and make a profit. They also were able to make huge profits through some of those tactics.
None of that would have been possible if true deregulation had been implemented.
Cal ISO, though, engaged in numerous practices that were an attempt to rip off the producers, not only because they felt they were at war with them, but because they were under political instructions to do so. Some worked, but many backfired.
The only way to get the system working so that this is not repeated is to get Cal ISO out of Governor Davis's back pocket.
Davis is using this as a political issue, but it's really an economic issue of national scope.
WHEREAS, on January 17, 2001, I issued a Proclamation pursuant to the California Emergency Services Act (Gov. Code § 8550 et seq.) declaring a State of Emergency due to an energy shortage in the State of California and ordered the Department of Water Resources to purchase electric power as necessary to mitigate the effects of the emergency; and
WHEREAS, thereafter in February 2001, significant funding was advanced for such purchases from the State's General Fund to the Department of Water Resources Electric Power Fund established by Water Code section 80200, and the Department was authorized to sell revenue bonds to finance the purchase of electric power needed to mitigate the effects of the emergency (Stats. 2001, 1st Ex. Sess. 2001, ch. 4 (AB1X)); and
WHEREAS, on June 18, 2001, I issued Executive Order D-42-01 pursuant to the Proclamation of a State of Emergency and the California Emergency Services Act, authorizing the Department to accept loans and utilize the proceeds to make payments to purchase electric power and natural gas to generate electric power to mitigate the effects of the emergency, and to pay costs related thereto, and to fund capitalized interest and reserves for the loans; and
WHEREAS, pursuant to Executive Order D-42-01, the loans were to be used to purchase power pending the sale of, and to be repaid from, the bonds issued by the Department; and
WHEREAS, the proceeds of these loans were not used to repay the General Fund for the advances made to the Department of Water Resources Electric Power Fund or to pay for the purchases of power made prior to issuance of the Executive Order; and
WHEREAS, the Department anticipates that it will soon issue the bonds to repay such loans and advances from the General Fund; and
WHEREAS, the Department has determined that allocation of the proceeds of the Department's loans to expenditures made by the Department prior to Executive Order D-42-01 will assist in mitigating the effects of the emergency by enabling the Department to reimburse the General Fund and repay the loans at significantly lower cost;
NOW, THEREFORE, I, GRAY DAVIS, Governor of the State of California, by virtue of the power and authority vested in me by the Constitution and statutes of the State of California, including Government Code section 8648 of the Emergency Services Act, and in furtherance of the Proclamation of State of Emergency issued January 17, 2001, hereby issue this order to become effective immediately:
IT IS ORDERED that Paragraph B of Executive Order D-42-01 is amended to read: "The Department is authorized and directed to utilize the proceeds of the loans to make payments to purchase electric power and natural gas for generation of electric power to mitigate the effects of the emergency, or to reimburse the Electric Power Fund for expenditures made prior to the date hereof for such purchases, and for costs related thereto and to fund capitalized interest and reserves required in connection with such loans."
I FURTHER DIRECT that as soon as hereafter possible, this order be filed in the Office of the Secretary of State and that widespread publicity and notice be given to this order.
IN WITNESS WHEREOF I have hereunto set my hand and caused the Great Seal of the State of California to be affixed this the fourteenth day of August 2002.
/s/ Gray Davis
Governor of California
If I were on the FERC staff, that would be the heart of my argument and is probably the real reason why FERC wants to change the balance of the ISO board. Should make for some interesting reading of accounts of the court case.