FERC talks between California utilities, suppliers recessed

Dec. 21, 2000 — Talks among California utilities and independent power producers on terms of long-term power supply contracts were recessed until Jan. 3, by a Federal Energy Regulatory Commission administrative law judge, after 2 days of negotiations failed to produce an agreement.

Conducting the conference was part of a FERC order issued Dec. 15 to reform the California wholesale electric power market. The order has the effect of shifting electricity transactions into the long-term market from the spot market.

The commission ordered the parties to discuss how to structure long-term contracts, including how to treat hedging. Such contracts would help stabilize the utilities’ electricity costs in volatile markets. The contracts would allow California utilities to avoid buying all their power in the spot market, where wholesale prices have recently risen to $1,400/MWh from $35/MWh last December.

California utilities can enter into bilateral contracts under state law, but the price is subject to after-the-fact review by the California Public Utilities Commission (PUC). During its Thursday meeting, PUC Pres. Loretta Lynch conceded that particular provision could have the effect of discouraging such contracts. Instead, the commission voted to ask for public comment on a benchmark price that utilities can use in bilateral contracts.

In a statement, FERC Chief Administrative Law Judge Curtis Wagner called the 2-day Washington talks “extremely useful” as a forum for placing all issues on the table and beginning a dialogue among the parties.

He said statistics were gathered concerning available megawatt quantities and the needs of the investor-owned utilities over a 5-year period. The information was provided privately, Wagner said, and is not available to the public. Wagner said he will compile the information as needed.

Wagner said consumer groups will be invited to the Jan. 3 meeting. Consumer advocates were outraged at not being represented in the initial talks. Wagner said the reconvened talks will run from day-to-day until some resolution of the problem is reached.