Power Market Rules Altered

Federal regulators, rejecting some objections from Congress, approved changes Thursday to California’s wholesale electricity markets intended to fix flaws that contributed to the state’s 2000-01 power crisis.

Commission staff members said the revisions, which have been in process for six years, would address three key factors that contributed to the Western power crisis: lack of adequate power supplies, flawed rules and what regulators have described as widespread market manipulation by Enron Corp. and dozens of other power companies.

Among the changes would be the reestablishment of a day-ahead market for power, which disappeared when the California Power Exchange collapsed in early 2001.

The new market design also would switch from pricing power at three zones in the state to pricing power at hundreds of points on the grid.

The changes would affect companies buying and selling power in California, including the state’s two largest electricity utilities, Pacific Gas & Electric Co. and Southern California Edison Co.

Rosemead-based Edison called the 380-page order “a positive step” toward redesigning California’s power markets.

FERC Chairman Joseph Kelliher said the new rules would close loopholes that exacerbated the Western power crisis, but he warned that shortages still could occur, especially in Southern California.

“The West is better off because the improved market rules ... finally correct flaws that were identified years ago,” Kelliher said.

Some members of Congress have likened the changes to the commission’s standard market design proposal, which attempted to establish national rules for wholesale power sales. The commission abandoned that approach in 2005 after congressional outcry.

The California proposal could “cause instability in Western electricity markets,” according to a letter to Kelliher from 15 members of Congress. “Our concerns are made more acute by the lack of analysis” by California of the effect of the changes on electricity markets outside of the state, the members wrote.

Kelliher said the commission had heard concerns about “seams” between California and neighboring states and would hold a technical conference to allow parties to meet and consider those problems.

The California Independent System Operator, which manages power markets in the state, says the proposal “fixes flaws” in its markets. Thursday’s order set Nov. 1, 2007, as the effective date for the new market design.

The vote came at the first open meeting attended by three new commissioners -- Philip Moeller, Jon Wellinghoff and Marc Spitzer.