Redesign of Power Market Has Initial OK

Federal regulators on Tuesday gave initial approval to the California power grid operator’s redesign of its wholesale market, which was shut down more than two years ago after pushing the state’s biggest utilities to insolvency.

The California Independent System Operator in July proposed to start day-ahead power trading by June and asked the Federal Energy Regulatory Commission for approval of the main elements of its market design.

The commission said in Tuesday’s order that it approved “in principle” many aspects of the California plan.

“It looks like a step in the right direction,” said Stephanie McCorkle, a spokeswoman for the California grid operator. “We’re pleased with the support.”

California is proposing a market that would more closely resemble markets in the Northeast, in which prices are set within a utility’s grid and then balanced by shipments into or out of that grid.

California plans to use the existing grid of PG&E; Corp., Edison International and Sempra Energy to set up so-called locational marginal pricing. This would be a “vast improvement over the California ISO’s current congestion management system,” according to the commission’s order.

FERC Chairman Patrick H. Wood III directed the grid operator to submit a more detailed plan for its market after consulting utilities, regulators and other market participants.