lay ' s comments to ferc on power market note : the ferc meeting is today . see the link below that can be checked for
updates .
enron ' s lay urges bold solutions to power market woes
as the federal energy regulatory commission prepared to weigh in this morning
with the federal government ' s answer to california ' s be - deviled power market ,
free market advocates issued last minute warnings against taking the price
cap route espoused by the cal - iso . ferc ' s meeting is scheduled to start at 9
am est . ( check http : / / intelligencepress . com this morning for updates )
in a letter fired off to ferc chairman james j . hoecker yesterday , enron ceo
kenneth lay urged the commission to find a fix for the underlying structural
problems in the power market rather than follow the steps of policy makers
who have placed " price cap ' band aids ' over hemorrhaging wounds . "
lay told hoecker the power market is " halfway across a busy street in its
transition from monopoly to competition . it can ' t stand where it is . " he said
ferc has to make a choice between falling into the " same trap of political
expediency as california ' s iso , leaving the nation ' s electric system in the
lurch from one crisis to the next , [ o ] r it can take a big step toward
fundamental structural reform . "
at the same time the electric power supply association ( epsa ) called on ferc
to issue an emergency cease and desist order prohibiting the cal - iso from
" unilaterally implementing " any changes to its current $ 250 / mwh price cap for
wholesale electricity purchases . in a motion filed monday , the marketer group
specifically asked the commission to bar the cal - iso board of directors from
putting into effect its decision to impose a fiendishly complex
load - differentiated price cap of $ 100 or less during the off - peak season
effective nov . 3 . the plan was designed by the state ' s main utility consumer
group ( see daily gpi , oct . 30 ) . in addition , the epsa urged ferc to " state
explicitly " that the cal - iso does not have the authority to impose or extend
price or bid caps , unless expressly authorized to do so by the commission .
the cal - iso ' s current authority to set price caps expires on nov . 15 .
lay said the cal - iso ' s complicated new formula caps prices below the cost of
gas - fired generation , " making obvious errors such as failing to take into
account gas transportation costs between the henry hub and power plants in
california ; in doing so the bid cap makes it more economic for generators to
sell their gas supply , rather than use it to make electricity in california . "
the new formula also forces the iso into the market to buy power on an ad hoc
basis " to keep the lights on when the capped market fails to attract
sufficient supplies ( which it inevitably will do ) , " lay said . in addition ,
the capped formula " invites generators to shut in production , export power
out of state and deploy their turbines in other states or countries . "
he noted that the iso ' s chairman voted against the measure while all of the
state ' s utilities voted for it " presumably knowing full well that it simply
will not work . "
california is " just the latest failure of partial or compromised open
access , " said lay . " it ' s time for the commission to reject this approach .
" the power industry - - - the nation ' s most essential industry - - - is mired in
the transition from regulated monopoly to open access and customer choice .
every step forward has been compromised out of concern for alienating one
vested interest or another . as a result , utilities are free to slow the
interconnection of new generation , withhold equal access to the transmission
system , favor their own sales over those of competitors , miscalculated
available transmission capacity , and exercise control over supposedly
' independent ' system operators and reliability organizations .
lay predicted that installing price caps for political expediency would
" plunge markets into greater uncertainty and discourage new supplies and
conservation methods . . . "
ferc has to complete the work that it started , said lay . it has to ensure
that all parties have equal and fair access to transmission by " ending the
special priority for utility uses of the system . second , ferc must require
transmission owners to separate operation of the monopoly transmission assets
from their other businesses . third , ferc must take politics out of
transmission system operations by revising governance structures to ensure
independence . finally , ferc must end its reliance on shortsighted price caps
by putting in place the necessary reforms to allow these markets to operate
efficiently to encourage conservation and attract new supplies . "
epsa said the cal - iso board " acted in obvious disregard for the commission ' s
orderly processes . " it " cannot be permitted to make the commission ' s
decisions for it , or to alter so radically market rules , thereby injecting
more uncertainty and confusion in the market and subverting the process for
fashioning fair , effective and comprehensive remedies " for california ' s
" flawed " electric markets , the group noted .
the epsa believes that any remedial actions taken by ferc with respect to the
california markets will be " severely compromised " if the cal - iso board ' s
imposition of new prices caps is allowed to take effect .
- -
lay ' s comments to ferc on power market
note : the ferc meeting is today . see the link below that can be checked for
updates .
enron ' s lay urges bold solutions to power market woes
as the federal energy regulatory commission prepared to weigh in this morning
with the federal government ' s answer to california ' s be - deviled power market ,
free market advocates issued last minute warnings against taking the price
cap route espoused by the cal - iso . ferc ' s meeting is scheduled to start at 9
am est . ( check http : / / intelligencepress . com this morning for updates )
in a letter fired off to ferc chairman james j . hoecker yesterday , enron ceo
kenneth lay urged the commission to find a fix for the underlying structural
problems in the power market rather than follow the steps of policy makers
who have placed " price cap ' band aids ' over hemorrhaging wounds . "
lay told hoecker the power market is " halfway across a busy street in its
transition from monopoly to competition . it can ' t stand where it is . " he said
ferc has to make a choice between falling into the " same trap of political
expediency as california ' s iso , leaving the nation ' s electric system in the
lurch from one crisis to the next , [ o ] r it can take a big step toward
fundamental structural reform . "
at the same time the electric power supply association ( epsa ) called on ferc
to issue an emergency cease and desist order prohibiting the cal - iso from
" unilaterally implementing " any changes to its current $ 250 / mwh price cap for
wholesale electricity purchases . in a motion filed monday , the marketer group
specifically asked the commission to bar the cal - iso board of directors from
putting into effect its decision to impose a fiendishly complex
load - differentiated price cap of $ 100 or less during the off - peak season
effective nov . 3 . the plan was designed by the state ' s main utility consumer
group ( see daily gpi , oct . 30 ) . in addition , the epsa urged ferc to " state
explicitly " that the cal - iso does not have the authority to impose or extend
price or bid caps , unless expressly authorized to do so by the commission .
the cal - iso ' s current authority to set price caps expires on nov . 15 .
lay said the cal - iso ' s complicated new formula caps prices below the cost of
gas - fired generation , " making obvious errors such as failing to take into
account gas transportation costs between the henry hub and power plants in
california ; in doing so the bid cap makes it more economic for generators to
sell their gas supply , rather than use it to make electricity in california . "
the new formula also forces the iso into the market to buy power on an ad hoc
basis " to keep the lights on when the capped market fails to attract
sufficient supplies ( which it inevitably will do ) , " lay said . in addition ,
the capped formula " invites generators to shut in production , export power
out of state and deploy their turbines in other states or countries . "
he noted that the iso ' s chairman voted against the measure while all of the
state ' s utilities voted for it " presumably knowing full well that it simply
will not work . "
california is " just the latest failure of partial or compromised open
access , " said lay . " it ' s time for the commission to reject this approach .
" the power industry - - - the nation ' s most essential industry - - - is mired in
the transition from regulated monopoly to open access and customer choice .
every step forward has been compromised out of concern for alienating one
vested interest or another . as a result , utilities are free to slow the
interconnection of new generation , withhold equal access to the transmission
system , favor their own sales over those of competitors , miscalculated
available transmission capacity , and exercise control over supposedly
' independent ' system operators and reliability organizations .
lay predicted that installing price caps for political expediency would
" plunge markets into greater uncertainty and discourage new supplies and
conservation methods . . . "
ferc has to complete the work that it started , said lay . it has to ensure
that all parties have equal and fair access to transmission by " ending the
special priority for utility uses of the system . second , ferc must require
transmission owners to separate operation of the monopoly transmission assets
from their other businesses . third , ferc must take politics out of
transmission system operations by revising governance structures to ensure
independence . finally , ferc must end its reliance on shortsighted price caps
by putting in place the necessary reforms to allow these markets to operate
efficiently to encourage conservation and attract new supplies . "
epsa said the cal - iso board " acted in obvious disregard for the commission ' s
orderly processes . " it " cannot be permitted to make the commission ' s
decisions for it , or to alter so radically market rules , thereby injecting
more uncertainty and confusion in the market and subverting the process for
fashioning fair , effective and comprehensive remedies " for california ' s
" flawed " electric markets , the group noted .
the epsa believes that any remedial actions taken by ferc with respect to the
california markets will be " severely compromised " if the cal - iso board ' s
imposition of new prices caps is allowed to take effect .
- -