Power Supply Association Says California ISO Must Go

WASHINGTON -- The Electric Power Supply Association (EPSA) has told federal regulators that a lack of political and market independence in the governance of the California Independent System Operator (CAISO) is the first of several fatal flaws in the grid operator's proposed market stabilization plan. "EPSA believes that the time has come for the commission to enforce its Dec. 15 order mandating a truly independent CAISO," the association said in a filing with the Federal Energy Regulatory Commission (FERC). "The first step in such enforcement is to replace the incumbent CAISO board with an independent board." According to the comments, the CAISO continues to be transformed from an "independent operator" of interstate transmission resources to a partisan advocate for the state, now the dominant marketplace buyer through its Department of Water Resources (DWR). "Because of the conflicts inherent in the politicization of the CAISO, there exists a more urgent need for the commission to remedy the situation than was the case in November 2000," said EPSA, citing the lack of an independent ISO board as the source of a series of other fatal flaws in the market plan. "Rather than presenting a well thought out, comprehensive market-stabilization plan, developed with meaningful stakeholder input, the CAISO has proposed a half-baked radical restructuring of the California market, recycling calls for counterproductive price controls and suggesting the implementation of bits and pieces of eastern ISO markets." Because of the regional nature of the wholesale power markets in the West, the association also said it is vitally important that FERC ensure that all market participants are treated fairly and comparably. "The consequences of the political power being exercised over the CAISO are palpable. The CAISO has taken positions before the commission, unrelated to the reliability of the transmission system, which were unashamedly intended to favor the interests of the State of California and DWR over other market participants in negotiations for the sale of energy." "While it may be politically expedient to blame high prices on 'market power,' market stabilization and repair must focus on the critical issues of poorly designed markets, inadequate generation resources and deficient infrastructure," according to EPSA's filing. "A continued witch hunt for evidence of market power, together with continuing credit problems, now pose the greatest obstacle to the promise and potential of robust competitive markets and the enhanced reliability they will provide." "Equally important, establishment of an independent CAISO is vital to the long-term resolution of California's energy problems and the stability of the entire western region," EPSA said. EPSA is the national trade association representing competitive power suppliers, including independent power producers, merchant generators and power marketers. EPSA members provide reliable, competitively priced electricity from environmentally responsible facilities in U.S. and global power markets. EPSA seeks to bring the benefits of competition to all power customers. Source: Electric Power Supply Association Washington Mark Stultz 202-628-8200