Edison Yanks Long-Term Supply Request, Utility-Generator Policy Framework Still Brewing

By Published On: September 23, 2005

Southern California Edison withdrew its unprecedented proposal to spread the costs of new power plants beyond its service territory September 21. The utility’s proposed 10-year power deals had been tied to a regionwide customer allocation – – instead of the traditional utility service territory. The proposal had been pending at the California Public Utilities Commission. “We urge the commission to immediately initiate a proceeding to address the need and means to construct new generation to support Southern California grid reliability, including an examination of an adequate allocation of costs to all beneficiaries of new generation,” stated Alan Fohrer, Edison chief executive officer. Edison withdrew its application in response to commissioner Dian Grueneich’s September 9 scoping memo. She rejected passing the procurement tab onto non-Edison ratepayers in Southern California. “I am not comfortable having Edison buy power for non-Edison customers in Southern California,” Grueneich said the day the utility pulled its proposal. “But it is disappointing that they have therefore chosen not to buy on behalf of their own customers.” Regulators had problems with the plan from the get-go, declaring it “dead on arrival” (Circuit, June 3, 2005). Approximately 1,000 MW of a potential 1,500 MW that would have been bought were to be allocated to Edison’s own customers to satisfy its long-term procurement plan, according to Grueneich. The Utility Reform Network, which supported Edison’s novel plan because it would reduce costs for its ratepayers, also backs its withdrawal. “It’s nice to see a utility with the courage of its convictions,” said Mike Florio, TURN senior attorney. Gary Ackerman, Western Power Trading Forum executive director, applauded Grueneich. She was able “to pierce the veil of ‘need’ versus providing a public good for the under-resourced load-serving entities,” he said. The utility insists it has enough supplies to meet demand on extremely hot days but “continues to be very concerned about future generation and electricity supplies in the southern part of the state,” said Gil Alexander, Edison spokesperson. The utility will work with the commission and market participants to find other solutions, he said. The state grid operator and the California Energy Commission have warned about constrained supplies in Southern California – – a region that continues to grow at a steady clip. Federal Energy Regulatory Commission chair Joseph Kelliher has said the region “has the worst electricity supply in the country.” Jan Smutny-Jones, Independent Energy Producers executive director, questioned Edison’s motives. He noted that the utility was seeking one rate recovery scheme for third-party contracts and another for in-house deals or ones with an affiliate. For instance, he said, Edison sought no special rate treatment for its $680 million pending refurbishment of the San Onofre nuclear plant or developing the Mountainview power project with an affiliate. Edison ratepayers, not ratepayers in the Southern California region, will pay the costs of both those projects. Cost recovery for the different deals “should be on par,” he said. SIDEBAR Utility-Generator Policy Framework Still Brewing Policy being framed by a utility-generator coalition to get new power plants built is still moving ahead behind closed doors, according to some participants, although part of the plan is moot. The draft proposal created by a collaboration between two private utilities and six generators, which came to light in late August, had incorporated Southern California Edison’s plan to extend the costs of new generation to neighboring ratepayers. It was withdrawn this week. “We continue to work with the coalition in an attempt to find solutions to market issues,” said Pedro Pizarro, Edison senior vice-president. Since last month, the coalition has broken up into subgroups to tackle thorny issues, according to sources who asked not to be named. The topics include the nebulous capacity market, transitioning to a new cost-allocation paradigm such as the one just pulled by Edison, the retail power market, and must-offer obligations that require generators to feed power into the market when called upon by the California Independent System Operator. The group, headed by California Energy Commission chair Joe Desmond, originally included representatives from Edison, Pacific Gas & Electric, Duke, Dynegy, Mirant, NRG, and Reliant (Circuit, Aug. 26. 2005). After a draft reform policy paper was leaked, Mirant distanced itself from the proposal and Duke announced that it is selling its California power plants. PG&E spokesperson John Nelson confirmed that the coalition appeared to be forging ahead but was unable to provide specifics because Dan Richard, utility senior vice-president, and other PG&E participants were in a board meeting much of this week. Desmond did not return requests for comment before press time.

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