Washington state official wants FERC inquiry expanded

By the OGJ Online Staff

HOUSTON, May 8, 2001 — Washington state Atty. Gen. Christine Gregoire Monday asked federal regulators to expand an investigation into high electric wholesale prices in the West and to include natural gas prices.

In an Apr. 26 order, the Federal Energy Regulatory Commission said it would look only into wholesale prices charged on the spot market during periods in which electrical power reserves drop below 7%. The FERC investigation will determine if wholesale electricity prices within the WSCC or Western System Coordinating Council are “just and reasonable” and will seek to impose price mitigation plan similar to the one ordered in California.

FERC is limiting its inquiry to transactions on the real-time spot market up to 24 hours in advance and during times of electric emergency or when reserves fall below 7%. The commission stated in its Apr. 26 order it believes power prices outside California are not currently just and reasonable and should be modified. But it must conduct the investigation in order to act.

But Gregoire said wholesale electrical prices throughout the Northwest have been persistently high, not just when system reserves drop to low levels.

In papers filed with FERC, Gregoire said the agency has the “authority and statutory duty to ensure just and reasonable rates at all times, not just when supplies are tight.” The attorney general, who has independent authority to protect competitive markets and represent consumer interests, also urged an expansion of the FERC investigation.

Gregoire said federal regulators should look into the wholesale price of natural gas, which has a direct effect on electrical pricing since natural gas is often used to generate electricity.

Gregoire also urged that any remedies for unfair prices considered by FERC be crafted to meet differing market conditions throughout the West, since measures employed to deal with rates in the California market may not necessarily be suitable elsewhere.

The California price cap will vary depending on the individual costs of generators to run the their plants. The cap will be applied to in-state generators by the California Independent System Operator (ISO) when reserves fall below 7.5% during Stage 1 electric emergencies. During nonemergency times, prices will be set by the highest price bid by generators in an auction. Bids must be close to generators’ marginal costs or be justified in writing to FERC and the ISO.

The order is contingent on the California Independent System Operator submitting a plan to form a regional transmission organization by June 1.