FYI

Press Release

California ISO Offers Market Stabilization Proposal

Calls for Forum for Reaching Consensus on Market Power Mitigation

FOLSOM, Calif.--(BUSINESS WIRE)--Oct. 20, 2000--Hoping to trigger consensus 
building that will lead to solutions to volatile energy prices, the 
California Independent System Operator (California ISO) filed a Market 
Stabilization Proposal with the Federal Energy Regulatory Commission (FERC) 
today, Friday, Oct. 20, 2000.

The plan was unveiled during a news conference at the ISO's Folsom Control 
Center this morning. California ISO CEO Terry Winter described the plan as a 
discussion platform -- a document not etched in stone but rather introduced 
as a means for putting the brakes on market prices and finding long-term 
solutions that will protect consumers from high bills while stimulating new 
investment in power plants.

The California ISO is asking FERC to consider the following regulatory steps:

Institute Payment Cap of $100 in all markets with the following exemptions:
Generators that can prove they will lose money if capped on that rate
Generators that contract 70 percent of their supply to serve California 
customers
Renewable generation -- Generation facilities less than 50 megawatts -- New 
power plants -- Imported power
The existing $250 per megawatt hour price cap would still exist and serve as 
the absolute price ceiling for suppliers exempt from the $100 payment cap.

``We cannot simply apply a short-term patch for market power, without also 
addressing the underlying problems causing sky-high prices,'' said California 
ISO CEO Terry Winter. ``Consumers have little control over how they can 
respond to high prices. There are traffic jams on the transmission systems 
that keep us from moving electricity efficiently around the state, not to 
mention the fact there are not enough megawatts to meet the needs of 
consumers. And, the lack of forward contracting scheduling means the 
California ISO is making up for huge shortfalls ten minutes before the power 
is consumed.''

Along with providing the incentive for generators (sellers) to sign formal 
contracts, the California ISO also recommends requiring utilities (buyers) to 
contract for 85 percent of their customer requirement for power in advance of 
when it's needed.

The lack of adequate forward contracting also adds to an operational problem 
facing the ISO -- the fact that 20-30 percent of total consumption is 
frequently bought and sold in the ISO's Real-Time Market, which was designed 
to handle only five percent of the electricity traded in wholesale markets. 
This problem -- known as under-scheduling -- is also addressed in the ISO's 
filing by a real-time trading charge.

``Because of the visibility of the ISO's markets -- the fact that we are so 
public -- and as a result of the distortion of the intended market design, 
the ISO has been called upon to take on responsibilities it was never 
intended to handle,'' said Winter. ``This proposal would take the ISO back to 
its original mission of operating the markets of last resort, allowing ISO 
operators to focus on maintaining reliability of the power grid.''

The California ISO is chartered by the state to manage the flow of 
electricity along the long-distance, high-voltage power lines that make up 
the bulk of California's transmission systems. The not-for-profit public 
benefit corporation assumed the responsibility in March 1998 when California 
opened its energy markets to competition and the state's investor-owned 
utilities turned their private transmission power lines over the California 
ISO to manage. The mission of the California ISO is to safeguard the reliable 
delivery of electricity and ensure equal access to an open-market electron 
highway that spans 12,500 circuit miles.


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Contact:

     California ISO
     Patrick Dorinson, 888/516-NEWS