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Date: Thu, 02 Nov 2000 12:03:14 -0600
From: "Tracey Bradley" <tbradley@bracepatt.com>
To: "Paul Fox" <pfox@bracepatt.com>, "Ronald Carroll" <rcarroll@bracepatt.com>
Subject: Reuters - Calif. utilities cautiously back FERC market changes
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Calif. utilities cautiously back FERC market changes


SAN FRANCISCO, Nov 1 (Reuters) - California's investor-owned utilities 
cautiously endorsed the Federal Energy Regulatory Commission's (FERC) 
proposed changes to the state's troubled power market Wednesday.

While the companies generally described FERC's plan as a starting framework 
to repair the market, they said more steps are needed before final changes 
can be adopted.

FERC said earlier Wednesday that a probe into California's newly deregulated 
electricity markets showed drastic changes were needed to prevent a 
repetition of this past summer's price spikes and near power blackouts.

Regulators, though declaring power prices charged this summer were not "just 
and reasonable," as required by law, said they did not have the legal 
authority to demand refunds from generators, some of whom have made huge 
profits selling power in the California market.

FERC also blocked a new price cap plan for wholesale electricity that was due 
to be implemented later this month by the California Independent System 
Operator, which oversees operation of most of the state's power grid.

Pacific Gas and Electric Co. (PG&E), the state's largest utility, called the 
FERC report "a sound beginning to the process of repairing the marketplace" 
but said more action is required at the state and federal level before "a 
working, competitive energy market can be realized in California."

PG&E, a unit of San Francisco-based PG&E Corp. , welcomed FERC's proposed 
temporary change to the auction process to set electricity prices.

Bids above $150 per megawatt hour could not set the market clearing prices 
paid to all bidders. That means traders would not be able to bid up prices 
for short-term supplies as they did last summer, when prices rocketed as high 
as $1,000 per megawatt hour in hourly markets, and to $695 per megawatt hour 
in the day-ahead market.

PG&E said in a statement the bid framework is "a creative attempt to fix the 
market and moderate prices, while still allowing competition to evolve."

Edison International's Southern California Edison (SCE) unit applauded FERC's 
findings but urged FERC to continue to investigate "market abuses by sellers" 
and to take steps to make the market "workably competitive and to stabilize 
electricity prices for our customers."

"Clearly more work is required here," Stephen Frank, chief executive officer 
of SCE, said in a statement, adding he was pleased that FERC was not closing 
the door on its investigation of past market power abuse, and that future 
electricity trading "would be subject to refunds in cases where abuses are 
determined."

Stephen Baum, chairman and CEO of San Diego-based Sempra Energy , called 
FERC's conclusions "bittersweet".

"We're unhappy there are no refunds, but happy they found the market was 
broken, which is what we've been saying all along," Baum told Reuters.

Sempra's San Diego Gas and Electric utility was the first to feel the full 
effects of the competitive marketplace, with its customers' monthly bills 
more than doubling this past summer, triggering a consumer revolt in the 
southern California city and calls for action to repair the market.