2 Firms Fight Price Caps on Electricity

Dynegy Inc. and Houston Industries Inc., two energy companies that bought California power plants, are fighting federally endorsed price caps imposed after a supply squeeze sent electricity prices soaring to 620 times the 1997 regional average. California Independent System Operator, the state agency that oversees the power grid, imposed a cap of $500 per megawatt hour July 13 for small amounts of electricity it must buy for blackout protection. The Federal Energy Regulatory Commission provisionally approved the emergency cap July 17, prompting the two Houston-based companies to demand a reconsideration. Electricity prices for reserve power in California peaked at $9,999 a megawatt hour, prompting an investigation by federal regulators. Because of high prices July 10, Cal-ISO paid $9.1 million for reserve power because the only offers it got in Southern California were priced at that peak level. The companies oppose the caps on the basis that Cal-ISO is supposed to run network operations, not regulate prices. Cal-ISO is sponsoring a hearing today in Berkeley on price caps.