California's Auction-Pool System: Sink or Swim (8/23/00)
A recent Wall Street Journal story describes how Californians have not received expected lower prices as a result of deregulation and compares their "auction-pool" system of energy trading to Britain's. Britain, in 1990, adopted the "auction-pool system" in which generators offer power to suppliers during half-hour slots for the following day. The National Grid Company accepts offers from the cheapest bid upward, but the price paid for each slot is determined by the last, most expensive bid accepted. California adopted a similar system when they deregulated their utilities market in 1998. Now generators there are being accused of "gaming the system," or taking advantage of scarce supply during peak periods, driving up the price of the final bids. Under the New Electricity Trading Arrangements (NETA), the regulator will effectively eliminate the pool system in favor of "bilateral agreements" whereby the generators deal directly with market makers and wholesalers. While the failure to build generation plants and transmission lines to meet increasing demand has created most of California's woes, the auction-pool system there has exacerbated the high prices and delivered a public relations black eye to California’s electric utilities. While the regulatory authorities in Texas have not defined a price structuring system for after 2002, it is expected that the "auction-pool" system will not be adopted. Nonetheless, under either system, the state will have ample generation and transmission capacity to prevent any possiblity of price gouging.
California Threatens Blackouts Again (1/17/01)
California, gripped in its worst-ever electricity crisis, was placed on a Stage Three power emergency yesterday (1/16). The California Independent System Operator came precipitously close to imposing rolling blackouts, or cutting service to entire neighborhoods for an hour at a time. In addition to the crisis of the state's natural gas shortage, the ISO spokesman said 10,700 megawatts of generation were off-line in California for repairs or maintenance. As darkness prepared to descend on California's customers, the financial woes continued for the state's two principal utilities. Moody's Investor Services yesterday cut the debt and credit ratings for SoCal Edison, while Standard & Poor's cut the ratings of PG&E to junk bond status. As an apostrophe to Gov. Gray Davis' appeal to the federal government for help, White House spokesman Jake Siewart told reporters yesterday that it was up to California's government officials, local utilities and power suppliers to "come up with some sort of solution."
"Trail Mix" of California Issues (1/29/01)
Here's a "trail mix" of items on the California power crisis: --Late last week, President Bush offered to let California roll back its air pollution requirements on power plants. California pollution control officials responded, saying that environmental restrictions have not interfered in power plants operating at maximum capacity. --Bush also said he would discuss the California crisis in his Feb. 16 meeting with Mexico president Vicente Fox. Boston-based InterGen is building a 765-megawatt gas-fired plant in Northern Baja, and hopes are that some of that generation can be exported to the U.S. --The California System Operator lifted a Stage 3 alert on Friday for the first time since Jan. 9, only to initiate it again a few hours later. Though supply was tight, as of 3:30 p.m. Friday (1/26), blackouts were not expected. --Federal Reserve Chairman Alan Greenspan, while offering a positive note on interest rates, had ominous words on California's effect on the economy. "It's scarcely credible that you can have a major economic problem in California which does not feed to the rest of the 49 states" he said in congressional testimony last week. --Is the "California Dreamin'" way of life to blame? Claudia Rosett's piece in the Wall Street Journal's "OpinionJournal.com" seems to think so. Check it out on the Internet.