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Generators ask FERC to enforce order against California ISO


By Ann de Rouffignac
OGJ Online

HOUSTON, Feb. 23, 2001—California’s biggest generators Thursday asked federal regulators to enforce a Feb. 14 order that would relieve them from a requirement to sell electricity to the California Independent System Operator (ISO) without compensation.

Duke Energy Corp., Dynegy Inc., Mirant Corp., Reliant Energy Inc., and Williams filed a request for an emergency order that would compel the ISO to comply with the Federal Energy Regulatory Commission (FERC) order.

The Feb. 14 FERC order said the ISO could not relax creditworthiness provisions of its tariffs, if the change shifts an “unacceptable financial risk” to third party suppliers. The ISO proposed an amendment to its tariff, effectively relaxing creditworthiness requirements imposed on financially strapped California utilities as buyers of power. FERC rejected that amendment.

“Less than 24 hours after the issuance of the Feb. 14 order, the ISO announced that it had no intention of complying with the commission’s decision,” according to the filing. It says the ISO has conducted “business as usual.”

The ISO interpreted FERC’s Feb. 14 order to mean the credit standards only applied to forward market transactions or prescheduled transactions. All other transactions, including real-time and emergency dispatch orders to provide power, are not subject to credit conditions of the ISO tariff, under its interpretation.

The ISO buys electricity from generators in the day-ahead and real-time markets and provides it to the utilities which are supposed to guarantee payment for the power. But Southern California Edison Co., a unit of Edison International, and Pacific Gas & Electric Co., a unit of PG&E Corp., are near bankrupt and have ceased paying for power purchased on their behalf since mid-January.

When the generators balked at continuing to sell power because of the high risk of not being compensated for it, the ISO sued the generators in federal court in Sacramento to force them to continue selling power to the utilities.

U.S. District Judge Frank Damrell issued and extended until Friday a temporary restraining order which forces generators to continue providing the ISO power. Sources speculate the parties could reach a settlement Friday. Should that happen, the judge could dismiss the lawsuit based on the terms proposed by the parties.

Whatever the outcome of today’s hearing in Sacramento, the generators are expected to pursue settlement of the creditworthiness issue through FERC, which oversees bulk power markets. Sources close to the generators say they are most concerned about conditions of power sales in California over the long term.

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