Fairness Issue Leads to Policy Change
The Davis administration agency charged with buying and selling electricity said Friday it will pull its traders from the state power grid control room, a response to federal inquiries into whether the grid’s operators are truly independent.
The half-dozen Department of Water Resources electricity buyers are expected to be removed from the California Independent System Operator nerve center in Folsom by Sept. 1, said Pete Garris, who oversees state power purchases.
The action comes amid mounting questions about the impartiality of Cal-ISO, which operates the state’s transmission system and is supposed to be run independently of any entity that participates in the state’s electricity market.
In January, under emergency measures approved amid blackouts, the grid operation was overhauled and Gov. Gray Davis was permitted to appoint the members of Cal-ISO’s board.
At the same time, when debt-laden state utilities no longer could buy electricity, the state water agency rushed in to keep the lights on.
As a result, one agency headed by Davis’ appointees is now the largest buyer of power in the West while another set of appointees governs the nominally independent Cal-ISO.
When the state began its power purchases, traders working for the administration were given exclusive access to the Cal-ISO control room, where secret bid data and sensitive market information are gathered.
State officials say the access was essential to ensure that adequate power was available.
But critics, ranging from power industry officials to federal regulators and Republican lawmakers, contend that the relationship has given state power buyers an unfair advantage over private firms and has violated federal regulations.
Rep. Doug Ose, a Sacramento Republican chairing a panel investigating the power crisis, charged during a hearing earlier this month that the cozy relationship allowed the state agency to improperly “cherry pick” electricity bids.
State officials deny that. But they do acknowledge the potential for some seepage of secret information.
“I don’t want to characterize it as nonexistent,” Garris said. “But I don’t want to characterize it as substantial.”
In testimony at Ose’s hearing, Terry Winter, Cal-ISO’s chief operating officer, said the presence of state traders is a problem, and he wanted them to go.
“We saw it as being a temporary arrangement,” said Cal-ISO spokeswoman Stephanie McCorkle.
In response to questions about the state traders’ activities at the grid operation, Cal-ISO has terminated control room access for 14 water agency employees and consultants.
Included among them were four traders fired last month for alleged conflicts of interest.
The others either were no longer working on the control floor or had failed to sign agreements to keep confidential any market information they obtained at Cal-ISO.
