FERC Declines to Reconsider Mountainview Deal

The Federal Energy Regulatory Commission rejected assertions that Southern California Edison?s Mountainview power plant would harm ratepayers and competitive markets. FERC defended its decision allowing Edison to contract for the output of the 1,054 MW plant?owned by a utility affiliate?for 30 years, saying it benefits Californians by accommodating the construction of new generation in the state with protections built in to ensure that costs are just and reasonable. Commission chair Pat Wood and members Joe Kelliher and Nora Brownell rejected the rehearing petitions challenging the deal October 29. Commissioner Suedeen Kelly recused herself from the vote. ?This decision sets a very bad precedent in California and remonopolizes utility procurement,? said Jan Smutny-Jones, Independent Energy Producers executive director. He warned that the ruling gives utilities an additional incentive to refrain from signing long-term contracts with generators and wait to buy power projects at rock-bottom prices. ?Perhaps FERC commissioners na?vely presumed that this would somehow bring peace between them and the state,? he said. Edison spokesperson Gil Alexander countered that nearly 70 percent of the power Edison delivers to its customers comes from contracts with independent generators such as Calpine, ?most of them competitively bid.? The Mountainview deal, he added, protects customers from market price fluctuations ?such as those seen during California?s energy crisis of 2000-2001, when our power portfolio included self-generation.? IEP, Calpine, and the Electric Power Supply Association challenged FERC?s decision last February approving Edison?s Mountainview power-purchase agreement with Sequoia Generating, which bought the project from AES. They alleged that FERC failed to address the market impact of Edison being the sole power buyer in its large territory. In addition, they claimed federal regulators failed to apply the commission standard used on long-term intracorporate agreements?known as the ?Edgar? review?which aims to protect against cross-subsidization at the expense of utility ratepayers. The petitioners also took issue with the reasonableness of the deal?s price tag, including the purchase price, return on equity, and interconnection and decommissioning costs. FERC determined that the project?s costs could be challenged when Edison submits information due by May 1 every year. Regulators added that their February 25 approval imposed conditions to minimize impacts on the California wholesale power market. The decision notes that the Edgar standard was not applied in this case because Edison ?may have argued with at least some force that we erred by applying a new policy retroactively where the parties had been proceeding in reliance on an established legal regime.? Furthermore, because the California Independent System Operator controls the transmission in Edison territory, competition is not shut out, the commission stated.

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FERC Declines to Reconsider Mountainview Deal

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