Cal-ISO Chief Submits Proposal to Curb Profits on Power

The chief of the agency that oversees California’s high-voltage power grid on Friday proposed to protect consumers by curbing the profits of power producers and traders in California’s fledgling electricity markets.

His proposal aims to force both electricity generators and utilities that buy their power to make their transactions at least one day in advance and not wait until the last minute, when grid operators are forced to pay any price necessary for electricity to avoid blackouts.

Heavy reliance on that “real-time” market contributed to the estimated $5 billion in additional costs that California utilities paid this summer for electricity.

Without quick action to check soaring costs, the political backlash could endanger California’s 2-year-old competitive electricity market, said Terry Winter, chief executive of the Folsom-based California Independent System Operator. Cal-ISO is a nonprofit institution established to fine-tune the balance of supply and demand on the high-voltage grid serving 75% of California.

“I’m hoping we can give the generators a fair and reasonable return instead of having one that is so unreasonable and exorbitant that it kills the whole market,” Winter said.

His filing with the Federal Energy Regulatory Commission does not have the backing of Cal-ISO’s 29-member board of governors, which includes representatives of utilities and power plant owners. That board debated long and hard this summer over the price caps--anathema to free-market proponents--that now stand at $250 per megawatt-hour. Before a $500 price cap was imposed in June, generators at times earned more than $750 a megawatt-hour.

(A megawatt-hour is roughly enough electricity to supply 1,000 homes for an hour.)

Winter’s plan would fine power plant owners who did not make prior arrangements for at least 70% of their supply. Utilities such as Southern California Edison and Pacific Gas & Electric Co. could also be fined for failing to find a way to supply at least 80% of their customers’ demand outside of Cal-ISO’s last-minute market. In addition, generators that failed to schedule ahead would earn no more than $100 per megawatt hour--rather than the maximum $250--in Cal-ISO’s market.

Gary Ackerman, who represents electricity marketers as director of the Western Power Trading Forum, said Winter’s proposal would exacerbate California’s problems by encouraging electricity generators to sell their power to other Western states where prices are not capped.

Separately Friday, San Diego Gas & Electric filed a 17-point plan with FERC to fix problems in the California electricity market, including a wholesale price cap of $100 a megawatt hour on all electricity sold in the state. Before a temporary retail price cap was enacted, the utilities’ 1.2 million electricity customers saw their bills double and triple this summer as wholesale prices jumped to record levels.

“Despite the cooler weather and lower statewide demand we recently have been experiencing, the high wholesale electric prices our customers have endured this summer are not subsiding,” SDG&E; Chairman Edwin Guiles said.

*

Times staff writer Nancy Rivera Brooks contributed to this report.