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Agency Sets Price Cap on Electricity Reserves

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The nonprofit corporation that oversees the flow of electricity for most of the state enacted a temporary price cap on reserve power in the wake of recent heat-wave-driven price spikes. The California Independent System Operator reduced its price cap from $750 per megawatt to $500, effective Saturday through Oct. 15. The cap enacted late Wednesday affects only so-called real-time, ancillary services. Most electricity is purchased the day before it is needed or through long-term contracts. Utilities buy additional power in hourly markets to adjust for weather conditions throughout the day. The $500 cap applies to those purchases. The new cap will not affect the price of the vast majority of electricity sold and used in the state, which is traded on the California Power Exchange. Folsom-based Cal-ISO, which took over the power grid in 1998 under the sweeping restructuring of the state’s electricity industry, controls 75% of long-distance transmission in California.

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