Although California\u2019s wholesale power prices have dropped since the 2000-01 energy crisis, a fully transparent and efficient market is still out of reach, officials with the California Independent System Operator told federal regulators July 1. \u201cThe average wholesale costs have declined over a six-year period,\u201d Keith Casey, CAISO market monitoring director told the Federal Energy Regulatory Commission. Moreover, price markups in the state\u2019s small spot market for power are what he termed \u201cextremely moderate.\u201d However, he said the state would benefit from an active centralized day-ahead market, as well as nodal pricing in the wholesale market reflecting differing values for power based on localized conditions. FERC chair James Kelliher said he was \u201cimpressed with the steady progress in the organized markets\u201d in California and other parts of the nation in recent years. Yet, he added that FERC is still trying to \u201cidentify reforms that can set us down the path to more perfect competition in each market.\u201d Kelliher said that retail price changes are not the best measure of competition in the industry. \u201cThese movements are largely dictated by changes in capital and fuel costs and heavily influenced by state regulatory policy.\u201d The FERC chair urged measuring the effectiveness of market competition by a larger list of criteria, including such factors as ease of generation entry, fuel diversity, market and grid access, investment, market transparency, levels and opportunities for demand response, and the advent of new products and services. Yakout Mansour, CAISO chief executive officer, outlined additional criteria. Key among them, he said, were to create \u201ca multi-year framework\u201d for resource adequacy for utilities that \u201cwill allow a meaningful cost-benefit analysis\u201d of alternative resources, including new generating and transmission facilities and demand response programs. The current one-year requirement is too compressed to allow for adequate cost-benefit analysis of energy projects and programs that take years to plan to put in place. The average wholesale power cost in the state, when adjusted for varying fuel costs, declined from more than $80\/MWh in 2002 to less than $50\/MWh last year, said Casey. (In California, CAISO\u2019s wholesale market accounts for about 5 percent of trades.) That figure covers power purchases under both long-term agreements and in the spot market, as well as the cost of electricity utilities make themselves. The average \u201cprice-to-cost markup\u201d has not exceeded $10\/MWh over the past two years. Market stabilization and lower prices stem from a number of factors, including resource adequacy requirements imposed under state policy, long-term power purchase agreements, net increases in generating capacity with construction of new generation plants, transmission system improvements, and a reduction in forced outages at power plants, according to Casey. Mansour also said that the state has yet to fully take advantage of demand-response programs. Ideally, he said, energy users should be able to reduce their power bills \u201cevery day of the year\u201d by cutting their demand. He also said regional coordination throughout the West could help increase competition. Emerging environmental policies calling for renewable energy and greenhouse gas reductions make the moment \u201ccompelling\u201d for such coordination, said Mansour.