Wholesale Electric Market On Track for April

By Published On: February 13, 2009

After repeated delays, it appears that the California Independent System Operator’s reformed wholesale electric market remains on schedule for April 1. Based on the agency’s board meeting February 10, the day-ahead market, along with a congestion market and other refinements, still have some “issues” according to market participants. Grid operator staff, however, appeared confident that most of the bugs are out of the complicated system. In stress testing, for instance, the forecasted market could have “extreme prices caused by extreme market conditions,” according to James Bushnell, University of California Energy Research Institute director. Attorney and muni representative Tony Braun also used the word “extreme” in discussing the testing outcome, adding, that some of the results are “unexplained.” The high prices in the simulation of the new wholesale market occurred less than one percent of the time, according to CAISO spokesperson Stephanie McCorkle. Unlike during the 2000-01 energy crisis, when prices spiked to $9,999/MWh, the “granulation” for the new market is much finer. In place of the three zones for electricity pricing during the crisis, the new market design plans 3,000 separate zones, or “nodes.” Thus, said McCorkle, if there are price anomalies, they are expected to be isolated. In addition, federal regulators approved a $2,500/MWh price cap for power traded in the new market. The grid operator itself has a “soft” cap of $500/MWh, but if prices can be justified, that cap can be removed. The new market also is expected to partially replace the defunct and bankrupt California Power Exchange. That agency was mandated by the state to run a “day-ahead” bidding market for electricity. In the mid-1990s when it was set up, regulators expected competitive bids to lower the price of power. During the energy crisis, the grid operator managed about 35 percent of electricity transactions. Currently, it’s about 3 percent, according to CAISO. The agency expects the new system to manage less than 10 percent of wholesale electricity transactions.

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