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SACRAMENTO, Calif., July 7, 2003 -- A recent vote by the California Independent System Operator Corp. (CAISO) may put California in danger of a power shortage like that of 2000 and 2001, the California Municipal Utilities Association said.
The CAISO was established in 1998 to provide open access to high voltage transmission systems. Recently the CAISO approved a new market structure that has two basic principles: (1) reliability services should be provided by market-based bids rather than assured through a cost-based regime; and (2) scarce transmission, akin to space on crowded interstate freeways, should be made available to the highest bidder.
"By its vote [June 26], the CAISO Board essentially affirmed that the market experiment commenced by the state legislature with AB 1890 in 1996 was the right thing to do. We disagree," said Jerry Jordan, Executive Director of the states association of publicly owned electric utilities, the California Municipal Utilities Association.
"California is once again breaking new ground and adopting a market structure that is not being adopted by anyone else in the Western United States. The 11 western states operate one interconnected electric system. California's adopting a market structure which ignores the practices in the rest of the West is a huge gamble. This is doubly true when applied to California's electricity grid, which is short of transmission and generation in key locations. The state-appointed CAISO Board is taking a big chance with California's energy future."
The CAISO action came in its approval of Market Design 2002 (MD02). MD02 is based upon the Standard Market Design advocated by the Federal Energy Regulatory Commission (FERC), but which has been rebuffed by several states. It is based on a system of financial derivative transmission rights that attempts to replicate the traditional system of assigning physical transmission capability to consumers.
"The FERC and CAISO proposal is not a good idea at this time, because now California can not afford another energy market experiment, especially when state energy officials are predicting shortfalls right about the time MD02 would go into actual operation." Jordan said.
CMUA is a non-profit association that represents 28 publicly-owned electric utilities that serve about 30% of the electricity needs of California.
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