FERC To Examine Alleged Market Manipulation By Calif ISO.  FERC ,
 FYI.
Thought folks might be interested in the following story.
In addition, I've attached at the end for those that are interested a
CSFB report on PG&E's POR announced yesterday.
Very much enjoyed working with this group on a solution for California.
Perhaps, given were things stand, we'll have another shot at helping get
the market, California energy policy, and Edison, back on their feet.
Best,
Jeff

FERC To Examine Alleged Market Manipulation By Calif ISO
Updated: Friday, September 21, 2001 04:53 PM ET By Jason Leopold Of DOW
JONES NEWSWIRES
LOS ANGELES (Dow Jones)--Federal energy regulators may investigate
whether the operator of California's wholesale electricity market has
been manipulating its power-purchasing practices to reduce the costs of
power the state purchased under long-term contracts, according to
documents obtained Friday by Dow Jones Newswires Friday.
At issue is whether the California Independent System Operator has
violated its own market rules by purchasing expensive power secured by
the state under contracts rather than cheaper power available in the
spot market. The state's need to sell off surplus power secured under
those contracts has proven embarrassing for Gov. Gray Davis, who signed
$43 billion in deals to head off a summer of spiking prices and
blackouts that never materialized.
The Federal Energy Regulatory Commission will hold a meeting in
California Monday to address generators' complaints. The energy
companies say that the California ISO's purchasing decisions are
difficult to comprehend and out of line with the market, according to a
letter sent by Andrea Wolfman, lead FERC counsel for market oversight
and enforcement.
The letter was sent to the ISO, the California Department of Water
Resources - which has been buying power in lieu of the state's
struggling utilities since mid-January - and several generators, all of
which were to attend the meeting.
"Recently we have become concerned that the scheduling and dispatch
procedures of the California ISO, as they have had to change in the last
nine months, are not well understood or are not well suited to the
current market structure," Wolfman said in her letter. "The purpose of
the meeting is to develop agreement between the ISO and those that
participate in the scheduling and dispatch (generators, utilities, CDWR)
on appropriate practices and procedures."
ISO Procedures Need Explaining -FERC
The ISO's main responsibility is keeping power supply and demand in
balance on the state's electrical grid. As part of that job, the ISO
determines which power plants to call into service and which suppliers
to buy power from.
If the ISO can't explain how it makes its decisions, FERC may conduct an
audit of the organization and investigate the possibility it has
manipulated the market, Wolfman's office said.
"As discussed, FERC may schedule a technical conference and operational
audit of CAISO," a second letter from FERC's market oversight and
enforcement division states. "This unprecedented examination of CAISO
operations could lead to the belief that complaints by generators of
market manipulation and other practices by the ISO should be
investigated."
The ISO's operating rules generally call for it to purchase the cheapest
power first.
"The information that (generators) have provided all leads to a theory
that the CAISO is manipulating the market in order to purchase surplus
DWR power at high prices and protect Gov. Davis from political
embarrassment," the second letter says.
The ISO has said only that the market isn't operating as intended, and
declined to answer other questions about the allegations or discuss
Monday's meeting.
Generators Confused
Generators, including Mirant Corp. (MIR
<http://quicken.excite.com/investments/quotes/?symbol=MIR>, news
<http://quicken.excite.com/investments/news/?symbol=MIR>, msgs
<http://quicken.excite.com/investments/discuss/?symbol=MIR>), Reliant
Energy Inc. (REI
<http://quicken.excite.com/investments/quotes/?symbol=REI>, news
<http://quicken.excite.com/investments/news/?symbol=REI>, msgs
<http://quicken.excite.com/investments/discuss/?symbol=REI>), Williams
Cos. (WMB <http://quicken.excite.com/investments/quotes/?symbol=WMB>,
news <http://quicken.excite.com/investments/news/?symbol=WMB>, msgs
<http://quicken.excite.com/investments/discuss/?symbol=WMB>), Duke
Energy (DUK <http://quicken.excite.com/investments/quotes/?symbol=DUK>,
news <http://quicken.excite.com/investments/news/?symbol=DUK>, msgs
<http://quicken.excite.com/investments/discuss/?symbol=DUK>) and Dynegy
Inc. (DYN <http://quicken.excite.com/investments/quotes/?symbol=DYN>,
news <http://quicken.excite.com/investments/news/?symbol=DYN>, msgs
<http://quicken.excite.com/investments/discuss/?symbol=DYN>), have
bought apparently inexpensive power in the ISO's spot market only to
find weeks later that the price was much higher. That's because,
according to the allegations, the ISO is letting DWR supply expensive
power into the market as "out-of-market" purchases that aren't averaged
into the real-time prices that ISO market participants see.
DWR continues to buy out-of-market power regularly at the ISO's request,
DWR operations chief Pete Garris has said, but those purchases are being
made in the spot market and are never being satisfied by power from
DWR's long-term contracts.
The out-of-market purchases appear to be expensive, however. According
to the ISO's August market report, the average out-of-market price for
peak hours was $55.90 a megawatt-hour, compared with $26.49/MWh on the
ISO computerized market. Brokered prices of western electricity have
been lower than the out-of-market prices for months.
None of the companies mentioned was willing to comment on the record.
The meeting is scheduled to be held at the ISO's headquarters in Folsom,
Calif., and representatives from power producers, utilities and the
state are expected to attend. FERC will serve as facilitator, Wolfman
said. The meeting isn't open to the public.
The meeting will begin with a presentation by the ISO on its practices
and operational procedures, followed by adjustments that may be needed
to improve the market.
"The objective is to develop a written set of procedures that is agreed
to by all the market participants and that is consistent with good
utility practices," Wolfman said in the letter.
-By Jason Leopold, Dow Jones Newswires; 323-658-3874;
jason.leopold@dowjones.com <mailto:jason.leopold@dowjones.com>
    
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