4.1. SR 07-20-1998 - Laserfiche WebLink

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FERC asked to take emergency action Wild Midwest prices spur calls for a price cap Wild price spikes in the Midwest June 24-26 have brought calls for the Federal Energy Regulatory Commis- sion to take emergency action, which could include setting price caps, sus- pending all grants of authority to sell at market-based rates and investigat- ing whether refunds should be or- dered. Peak prices on the order of $2,000-$3,000/MWh were not uncom- mon, and there were unconfirmed rumors of one deal at $10,000/MWh. Tn a June 29 filing, Steel Dynamics ($DI) said the Midwest is in a state of crisis that constitutes an emer- gency and urged FERC to "use any and all applicable legal authority to address the crisis in the Midwest." The steel company specifically peti- tioned FERC to: ! institute an emergency price ceil- ing at $100/MWh (which SDI said is the highest price ever approved by the commission); ! suspend all grants of authority to sell electric energy and capacity at market-based rates; ! ensure that severe penalties are imposed for noncompliance; ! initiate an investigation into the P~bit~d~ver ??ufl~ilOUe f°r,' ' ".';.~ 'aCc'e~i'order. ' '~ FERc saYS DUke can,t ~ , rates' to recoup the preml~l~ · Paid for,three Callfom, !~''' ~ 9~Las,'Cru(~ed rejoices at FERC .~%';~ rec~mm~fldatlon on electric energy and capac- ity supply situation in the Midwest; II initiate an investigation to determine the reasons for the extraordinarily high prices; and I investigate whether re- funds should be ordered. Illinois Power Co. said June 29 it would file a simi- lar petition for a price cap during emergencies. "We're asking FERC to use its regulatory authority to curb market power abuses in the electric supply mar- ketplace,'' said IP Vice President Rich Eimer. Cinergy, Western Re- sources, NP Energy and Dynergyjointly petitioned FERC to act quickly to con- vene a forum "to gather the facts surrounding the market performance dur- ing this period to deter- mine whether any action from the commission is re- quired for the remainder of the summer to ensure Hour Price Temp Endin~ MWH (°F) 100 500 75 200 100 74 300 100 73 400 100 73 500 100 72 600 100 70 700 100 69 800 100 72 900 75 81 1000 52 86 1100 75 91 1200 100 93 1300 500 94 1400 1000 95 1500 1500 96 1600 2000 96 1700 2000 96 1800 2000 94 1900 1500 93 2000 1000 90 2100 700 86 2200 400 84 2300 200 81 2400 80 80 As the mercury rose on June 25, so did the price of power on the Ohio spot market. The chart shows the market price of hourly power, as understood by AMP-Ohio. It reached a high of $2,000 a megawatt-hour, chun co.nesr of AMP-Ohio the continued availability of electric- ity supply in the market at just and reasonable prices." SDI said the situation constitutes an emergency because, among other things, market prices "are 100 times the reasonable cost of production," "market manipulation and other mar- ket failures are occurring" and "price gouging is occurring." The market failure is most likely due to a number of factors, SDI said, including unusual weather; manipulation and gaming of a market that "is in its infancy and has a limited number of participants"; hoarding of electricity by companies with no obligation to serve; marketers unable to meet their obligations, with the regulatory arena failing to imple- ment proper oversight of market par- ticipants; and price gouging. The price spikes also prompted calls for rapid nationwide deregulation and retail competition from power mar- keters and others promoting fast (continued on page I0)