FERC OK's Edison's Long Term Power Contract

By Loretta Macktal, Executive Assistant to the Vice President, Government Relations

Capitol Update, Feb. 27, 2004 Share this on FacebookTweet thisEmail this to a friend

When California restructured its electric industry in 1996, the future looked bright for independent power generators. Utilities were ordered to divest at least half of their power plants and make room for the new kid on the block: non-utility "merchant" generators. Eight years later, the utilities seem to have the upper hand.

A recent ruling by the Federal Energy Regulatory Commission (FERC) clears the way for Southern California Edison (SCE) to enter into a long-term power purchase agreement (PPA) with its affiliate, Mountainview Power Company. The PPA commits SCE customers to pay for 1,054 megawatts of capacity for 30 years at rates based on the cost of service not market rates.

The CPUC gave a thumbs-up to the long-term deal last December. Opponents of the PPA, including CMTA, will have one more opportunity to argue their case when the FERC ruling is appealed in the federal courts.

SCE entered into the PPA with Mountainview, a wholly owned affiliate, without seeking competitive alternatives through a "Request for Proposal" process.

On January 9, CMTA made a filing at FERC in support of a protest by the Independent Energy Producers, noting that its members are interested in seeing that SCE procures the lowest cost and most reliable resources that are available, regardless of the source, and that the only way that SCE can demonstrate that this standard has been met is through an open and fair competitive bid process.

SCE and the state's two other investor-owned electric utilities, Pacific Gas & Electric and San Diego Gas & Electric, should also be required to conduct an open and fair competitive bid solicitation process to meet future needs.

The issue of whether California will have a competitive generation market may be decided this year in the Legislature. Two key energy bills, AB 2006 (Fabian Nunez, D-Los Angeles), sponsored by SCE, and AB 428 (Joe Canciamilla, D-Pittsburg, and Keith Richman, R-Northridge), establish a "core-noncore" electricity market structure and deal with an array of important issues, including utility ownership of power plants, cost recovery and the utility's obligation to serve.
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