Feds place controls on California power sales

Associated Press

WASHINGTON — Federal regulators ordered an overhaul of California’s electricity market Friday to try to control skyrocketing prices that have pushed the state to the brink of blackouts this month.

The Federal Energy Regulatory Commission’s order will set a price cap on wholesale rates and let the state’s investor-owned utilities keep the power they generate rather than be forced to sell it on the open market, as they had to under California’s 1996 utility deregulation law.

San Diego Gas and Electric, Southern California Edison and Pacific Gas and Electric together generate 25,000 megawatts a day, about 60 percent of what the state uses on a busy day and 90 percent on a slow day, FERC said. The state Public Utilities Commission would then set the price the utilities could charge customers.

"Today’s order will stanch the hemorrhage and start rehabilitation" of California’s power market, FERC Chairman James Hoecker said.

All three privately owned utilities have been hit hard by soaring wholesale electricity prices, blamed in part on tight supplies and rising natural gas costs.

The San Diego utility’s customers have seen their bills double and even triple since summer; Southern California Edison and Pacific Gas and Electric, operating under state-imposed rate freezes as they move toward deregulation, say they are in financial danger.

Meanwhile, the Independent System Operator, keeper of California’s power grid, has found itself in an almost daily scramble to find enough megawatts in the West to prevent rolling blackouts. Friday marked the first day in nearly two weeks the state had enough electricity to avoid declaring a power alert.

The commission ordered a cap on wholesale electricity prices of $150 per megawatt hour. Suppliers offering to sell power in California at more than that price would have to file paperwork with FERC defending the higher price.

In an effort to encourage investor-owned utilities to avoid last-minute buying, FERC ordered them to buy 95 percent of their power more than a day ahead of when it is needed.

FERC also allowed them to enter into contracts with generators outside the state Power Exchange, which had been set up to oversee all power sales within the state.