4.1. SR 07-20-1998 - Laserfiche WebLink

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?rice frenzy marked by price gouging, market failures (continued from page I) patcher. "It's whatever the marketwill in unbelievably high prices, he said. action on restructuring. "What we don't need is rapid deregulation, but regulatory constraints to protect con- sumers until we ge~t a market that functions properly, said APPA Ex- ecutive Director Alan Richardson. "Some marketers will argue that the high prices are appropriate because consumers need to be exposed to price signals so that the demand side, as well as the supply side, becomes part of the marketplace," SDI said. "Soph- istry. A price of $3,5007 MWh is equiva- lent to natural gas at $350/MCF and No. 6 fuel oil at $2,205 per barrel. What a price signal!" "Comments like, 'I would be sur- prised if there were actually any legiti- mate market power abuses,' after wit- nessing sellers asking for $10,000 per MWh and getting between $4,000 and ~5,000, when the previous emergency ~ergy cap of $100 per MWh was al- ready five to 10 times the running cost of production, are totally irrespon- sible,'' said APPA~ Deputy Executive Director Dave Penn. "What more proof do reasonable people need that consumers will get pummeled if the deregulation cart is put before the competition restructuring horse?" The market chaos Was spurred by a combination of factors, including a heat wave that stretched from the Midwest to Canada to Florida; thun- derstorms that downed transmission lines; the loss of many big power plants in the Midwest due to. planned and unplanned outages; and the reported default of a power marketer. The un- usual conditions affected power trans- mission in 16 states and two Canadian provinces. The Mid-America Intercon- bear. It'sjust insane." "We were quoted an estimated price The heat wavemcombined with a of $5,000 a MWh from our supplier tornado that knocked FirstEnergy's [Commonwealth Edison]" on June 26, Davis-Bessenuclearplantoutofcom- he said, though CornEd advised mission and outages at several Ameri- Schwartz on June 30 that the actual can Electric Power generating cost would be lower than that. Roch- plants--forced American Municipal elle could have purchased cheaper Power-Ohio to buy some very expen- power, but there "were no transmis- siveelectricity. Thejointactionagency sion lines to send it to us," Schwartz had to purchase power from Public said. "We were captive." In a meeting Service Electric & Gas in NewJersey~ on June 29, "our supplier didn't give for as much as $3,200 per MWh. The) us any reason to believe that [this type usual price at this time of year would/ of market volatility] wouldn't happen be about $60 a MWh. t again this summer," he added. PSE&G faxed the agency an invoice "I'm not sure of the numbers, but I on June 25 demanding payment of know we got hung with some" high roughly $780,000 by June 27. prices, said Marvin Carraway, general Asking $3,200 a MWh "borders on manager of Clarksdale, Miss., Public consumer rape," said Carroll Scheer, Utilities. Clarksdale purchased surplus vice president for generation and power from Entergy Corp. "There were transmission-dependentutilityservice some [utilities] paying $1,200 a MWh of AMP-Ohio. "I have serious prob- and turning around and selling it for lems with" a power market that com- $1,500," he said. mands those kinds of prices, he said. The city of Tallahassee, Fla.'s elec- At one point, a marketer called offer- tric utility .on June 26 netted nearly ing electricity to AMP-Ohio at $6,000 $400,000 on one deal, when it received a MWh. When he got no takers at that $850/MWh. The municipal system price, the marketer called back to netted roughly $1 million over the six- offer a new price: $3,800. Nothing day period ending June 26, said Roger had changed in the minutes between McDonald, Tallahassee's manager of those two phone calls to justify such a energy trading. Ifelectricitywere fetch- huge price difference, said the AMP- ing prices in the $70 to $80 range, "we Ohio dispatcher who took the call. probablywould have been a little more "Wesawonthebrokerscreenshourly cautious," he said. But when prices prices as high a $10,000," said Carl soar to the $200 to $300 range "every- Kohlrus, electric planning supervisor body starts scratching together sur- for Springfield, Ill., Utilities. Spring- plus generation" to sell on the open field fulfilled its system requirements market, said McDonald. without purchasing surplus power, but "We did well, very well," said Gary third-party, off-system load was nega- Zimmerman, general manager of the tively affected by the power shortage, Michigan Public Power Agency. "We he said. "When wholesale prices are 50 made money." The joint action agency times or 100 times more than retail, had 50 MW of excess capacity because' nected Network, one of 10 reliability there's a problem," he added, of a strike that stopped production at councils, asked utilities to impose eh- "The,deregulation bird has landed'~ General Motors, he said. MPPA sold ergy conservation measures on their andwe re seeing" what happens when I that energy to American Electric Power interruptible customers, market participants are more con- / at $1,340 a MWh, he said. AEP needed Some public power utilities weath- cerned with unloading generation \ power in part because its 2,000-MW eredthepowershortagewellandeven facilities than with meeting load re- ICook nuclear plant is out of service. had surplus capacity to sell. Others quirements, said Ray Schwartz, gen- ~ Zimmerman heard of prices in ~ encountered exorbitant electricity eral manager of ~ochelle, Ill., Mu- Iregionreachingnearly$5,000aMWh. prices that were 50 times or more nicipal Utilities. 'It's a supply and I"Those are amazing prices," he said. what would be expected, at this time of demand market, but everybody wants IWhereas usually i~oWn~nludeCdOoStnq~ .Ceen_ts year. "This is madness,' said one dis- to unload generation," which results ( ' p g 12)