Traders et al:

This is the best article I saw on what the FERC may do on Monday.

We are hopeful (and doing lobbying to push for) for no action outside of 
California, given the unworkability and meaningless-ness of price controls 
outside of CA.  This is an effort and not a promise, of course.

Some action in CA seems more than 50-50 likely  and the best bet seem to be 
extending the current proxy mitigation to all hours.  The article below 
raises the possibility of reissuing the refund orders (recall that they began 
in March 01 for the month of January 01) to cover all hours and not just 
during Stage 3.  Such reissued refund order could extend back to Oct 00.

Alan Comnes



Wednesday, June 13, 2001


Federal Panel May Extend Price Limits
 Utilities: Regulatory commission weighs expanding the plan beyond 
emergencies and throughout the West.


By RICARDO ALONSO-ZALDIVAR, Times Staff Writer

     WASHINGTON--The Federal Energy Regulatory Commission, responding to 
pressure from lawmakers, state officials and consumers, is considering a 
significant expansion of its plan to limit California electricity prices this 
summer, senior agency officials said Tuesday.
     Commissioners and staff members are engaged in intense negotiations in 
advance of a key meeting Monday to finalize an emergency plan for California 
and the West.
     According to several commission officials, the options being discussed 
include:
     * Extending FERC's current price limits--now in effect only during power 
emergencies in California--to 24 hours a day, seven days a week. The limits, 
intended to prevent price spikes, were invoked during two emergencies last 
month and resulted in immediate cuts in the price of wholesale electricity. 
FERC is also considering applying such limits throughout the West.
     * Requiring power generators in the entire Western region to sell 
available electricity to California or into their local power grids during 
emergencies, reducing the threat of blackouts.
     * Establishing a regional framework for large power users to sell 
electricity back into the grid during peak usage times. Some companies that 
have long-term power contracts at low rates may be able to make money by 
scaling back their operations and selling electricity.
     * Tightening rules on what energy marketers--firms that buy and resell 
power contracts much like stockbrokers trade shares--can charge for their 
electricity.
     * Expanding an order issued last year that authorized refunds for 
excessive markups during the most extreme power emergencies. That refund 
order would now apply to excessive prices during all power emergencies.
     The measures under consideration stop short of the price caps being 
sought by Gov. Gray Davis and California Democrats. But they may go far 
enough to provide an acceptable compromise.
     "The whole thing is in flux, but it is moving toward a much more 
effective price mitigation plan, not only for California but for the West," 
said an agency official.
     Strong political pressure from Senate Democrats and House Republicans 
appears to have galvanized FERC into taking a more decisive role. "We're sort 
of the last to get it," the official said.
     FERC has been bitterly criticized by Davis for abandoning California. 
FERC Chairman Curtis L. Hebert Jr. has responded by citing dozens of modest 
FERC actions to assist the state.
     But Hebert has resisted Davis' central demand that FERC use its legal 
authority to order a temporary return to fixed electricity rates. Such fixed 
rates, based on the cost of producing power plus an allowance for profit, 
were standard before deregulation.
     "The politics of the situation have changed significantly, and 
commissioners are not immune to politics," said another senior agency 
official. "The message from Capitol Hill has gotten stronger with a 
Democratic Senate. Even the Bush administration is saying we should make sure 
there is no price gouging."
     FERC members have been summoned to testify before the Senate 
Governmental Affairs Committee chaired by Sen. Joseph I. Lieberman (D-Conn.) 
a week from today. Meanwhile, Sen. Jeff Bingaman (D-N.M.), the new Senate 
Energy Committee chairman, has told FERC he will move legislation to cap 
electricity rates in the West unless it acts soon.
     Agency officials said commissioners do not want to face Lieberman next 
week empty-handed.
     House Republicans have also been prodding the agency. On Tuesday, Energy 
Committee Chairman W.J. "Billy" Tauzin (R-La.) wrote Hebert to urge 
Western-wide, round-the-clock price limits.
     "We strongly urge the commission to implement a comprehensive plan to 
mitigate wholesale prices and aggressively monitor wholesale sales of 
electric energy . . . within the entire Western Systems Coordinating 
Council," wrote Tauzin, referring to the Western power grid.
     FERC officials said a strong effort is underway to achieve a consensus 
on the five-member commission, lately riven by ideology but now bolstered by 
two new pragmatic commissioners who favor active oversight of industry.
     Commissioner William Massey, who for months has been a lonely dissenter, 
is continuing to press for the traditional price caps sought by Davis, 
officials said. Once marginalized, Massey apparently is now being actively 
wooed by the other members.
     S. David Freeman, an energy advisor to Gov. Davis, said Tuesday that 
expanding FERC's current price limits would be a positive step. But he added 
that the governor continues to advocate a return to traditional, fixed rates.
     "Any strengthening of the [FERC] plan is in the public interest," 
Freeman told reporters at a Washington news conference.
     FERC's price limits are not keyed to a particular dollar amount but are 
flexible.
     When a power emergency is called by the state, FERC's plan limits the 
price that generators can charge to what it costs to produce power at the 
least efficient plant running at that time. (The costs of all the plants are 
determined beforehand by California's grid operator based on data filed by 
the generators.)
     Another requirement of the FERC plan forces generators using the 
California grid to sell any power they have available during emergency 
conditions.
     When the price limits were tested in two emergencies late last month, 
prices came down quickly. But power sellers complained that the limits were 
too strict. And by the second emergency, there was evidence that some sellers 
had started finding ways around the limits.

Copyright , 2001 Los Angeles Times