Edison Charges Gas Market Manipulation

Southern California Edison filed a motion late last week with the California 
Public Utility Commission seeking emergency relief from high spot gas prices 
on which its power purchase rates are based. The company told the CPUC that 
Southern California Border (Topock, AZ) prices in the last month have risen 
by $2.50/MMBtu possibly because of market manipulation, in particular the 
withholding off of the market of pipeline transportation capacity between the 
supply basins and the California border. 

"[T]here is substantial and compelling evidence that the basis differential 
has been and continues to be grossly distorted by market power abuse, 
collusion and affiliate self dealing of out-of-state gas suppliers and 
merchants," Edison told the CPUC. 

The company noted the CPUC already has filed a Section 5 complaint with FERC 
regarding this issue and is seeking a recision of "certain allegedly 
collusive contracts which it contends have permitted out-of-state natural gas 
suppliers and their affiliates to drive up artificially California border gas 
prices by wrongfully withholding capacity." It notes the complaint 
"conservatively estimates that the anti-competitive manipulation of the basis 
differential has already damaged California gas and electricity users by $100 
million annually since the beginning of 1998." 

Edison seeks an expedited order authorizing it to use the posted gas price of 
$4.5133/MMBtu, which was applied to SCE's August 2000 avoided cost posting, 
to calculate its payment obligations to qualified power producers for the 
month of October and every month going forward. It estimated September 
bidweek border prices would average $7/MMBtu. If such prices were used in 
Edison's September avoided costs posting, its Transition Formula payments to 
certain independent power producers will be $29 million more than the month 
prior, the company told the CPUC. "No mechanism exists to recapture the 
increase in such payments if it is later determined by this commission or in 
another forum that the Topock border indices are unreliable at this time." 


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