It will be interesting to judge CERS's trading acumen going forward now that it doesn't have inside information from the CAISO.

 -----Original Message-----
From: 	Blair, Kit  
Sent:	Wednesday, November 14, 2001 9:24 AM
To:	Comnes, Alan; Hall, Steve C. (Legal)
Subject:	FW: article



 -----Original Message-----
From: 	Nelson, Kourtney  
Sent:	Wednesday, November 14, 2001 9:22 AM
To:	Blair, Kit
Subject:	article

Lawmakers examine relationship between state's grid and traders
By JENNIFER COLEMAN

11/13/2001 
Associated Press Newswires 
Copyright 2001. The Associated Press. All Rights Reserved. 
SACRAMENTO, Calif. (AP) - California grid officials said Tuesday they will stop providing state power buyers with aggregate price information that's not available to other participants in the state's energy market . 
Following a five-hour hearing of the Senate Select Committee to Investigate Price Manipulation of the Wholesale Energy Market , officials with the California Independent System Operator said they would cut off that information as of midnight. 
The committee was examining the trading practices of the state power grid, which generators complained gave preferential treatment to the state's energy buyers with the California Department of Water Resources. 
Generators said the ISO, a state-created independent agency that was intended to ensure the smooth operation of the deregulated market , abandoned its independence when it agreed to give DWR additional market information. 
DWR has been buying power for three utilities since January when high wholesale prices brought the companies to the brink of bankruptcy. The ISO can only buy power to balance the grid if a "creditworthy" buyer backs the purchase. DWR stepped in to back those purchases. 
ISO officials said they gave DWR traders some information not otherwise available, but DWR requirements forced them to do it. 
In order to buy the cheapest energy for consumers, DWR required that ISO let it know how much energy will be needed in the next hour and approximate prices, so it could shop outside the grid for the best price, said Pete Garris, acting deputy director of DWR's trading arm. 
But that violated the ISO's tariffs and the Federal Power Act that require grid managers to treat all parties equally, said Robert Hayes of Mirant Inc. 
Though FERC has jurisdiction over the generators' complaint, Sen. Joe Dunn, D-Santa Ana, said he called the committee hearing on the same subject "to get a full understanding of what exactly has occurred." 
It's not the generator's only beef with the state's energy traders. 
Hayes said the ISO has also been bypassing bids for available power in order to buy out-of- market energy at higher prices. 
"There is substantial evidence that, at times, the ISO and DWR bypassed lower-cost power available in the real-time market in favor of higher, out-of- market power ," Hayes said. 
A majority of those out-of- market purchases were from the Canadian firm Power -Ex, which is the marketing arm of British Columbia Hydro, said Larry Drivon, an attorney for the committee. 
Last week, FERC intervened in another battle between generators and the state, ordering California to pay power suppliers $1.2 billion for energy sales to California since January. 
FERC said it would lift a key component of the commission's effort to stabilize California 's power market if the state does not quickly settle its bill with power generators. 
At issue is the "must-offer" requirement that prohibits generators from withholding power from the wholesale electricity market in a bid to drive up prices. FERC imposed it in April after months of soaring power prices and rolling blackouts in California 's deregulated electricity market . 
FERC said generators no longer will be required to do business with the ISO manager of much of the state's electric grid, if ISO does not arrange for prompt payment of past power sales. 
"The must-offer requirement assumes a matching must-pay requirement," commissioners said in their order. 
ISO has said it will comply with the order, under which the agency has 15 days to bill the DWR. 
California and federal energy officials said the "must-offer" requirement has played a big role in calming the state's previously unsettled energy market . 
"I give the must-offer requirement a lot of the credit for the current lower prices," FERC commissioner William Massey said in his dissent from parts of last week's order. 
But Massey agreed with the three other commissioners that something must be done to compel payment or risk a return to a "dysfunctional" market in California . 
ISO spokesman Greg Fishman said up to 13,000 megawatts of power a day have been out of service for maintenance in recent weeks, without any blackouts. Last spring, before FERC required generators to sell all their available power , similar outages resulted in blackouts, he said. 
"Today, because of the must-offer requirement, we've been able to meet the demand," Fishman said.