Direct participation of electrical loads in the California independent system operator markets during the Summer of 2000

California's restructured electricity markets opened on 1 April 1998. The former investor-owned utilities were functionally divided into generation, transmission, and distribution activities, all of their gas-fired generating capacity was divested, and the retail market was opened to competition. To ensure that small customers shared in the expected benefit of lower prices, the enabling legislation mandated a 10% rate cut for all customers, which was implemented in a simplistic way that fossilized 1996 tariff structures. Rising fuel and environmental compliance costs, together with a reduced ability to import electricity, numerous plant outages, and exercise of market power by generators drove up wholesale electricity prices steeply in 2000, while retail tariffs remained unchanged. One of the distribution/supply companies entered bankruptcy in April 2001, and another was insolvent. During this period, two sets of interruptible load programs were in place, longstanding ones organized as special tariffs by the distribution/supply companies and hastily established ones run directly by the California Independent System Operator (CAISO). The distribution/supply company programs were effective at reducing load during the summer of 2000, but because of the high frequency of outages required by a system on the brink of failure, customer response declined and many left the tariff. The CAISO programs failed to attract enough participation to make a significant difference to the California supply demand imbalance. The poor performance of direct load participation in California's markets reinforces the argument for accurate pricing of electricity as a stimulus to energy efficiency investment and as a constraint on market volatility

California's Electricity Crisis

This paper discusses the political, regulatory and economic factors that led to California's electricity crisis in 2000 and 2001. It begins with a discussion of the origins of California's electricity restructuring and competition programs. It then discusses the structure of the wholesale and retail markets and associated transition institutions created in 1996-98 and the performance of these institutions during their first two years of operation. The discussion of the electricity crisis is then conveniently broken down into three phases: (a) May 2000 through September 2000, (b) October 2000 through December 2000, January 2001 to the June 2001. Each phase is discussed in turn. The paper concludes with a discussion of lessons about electricity market liberalization gained from the recent experience in California.

California's electricity crisis

The collapse of California's electricity restructuring and competition program has attracted attention around the world. Prices in California's competitive wholesale electricity market increased by 500% between the second half of 1999 and the second half of 2000. For the first four months of 2001, wholesale spot prices averaged over $300/Mwh, ten times what they were is 1998 and 1999. Some customers have been required involuntarily to curtail electricity consumption in response to supply shortages. While wholesale prices rose dramatically, retail prices were fixed until early in 2001. 2 As a result, California's two largest utilities -- Pacific Gas & Electric (PG&E) and Southern California Edison (SCE) -- were paying far more for wholesale power than they were able to resell it for at retail. Both effectively became insolvent in January 2001 and stopped paying their bills for power and certain other financial obligations. PG&E declared bankruptcy on April 6, 2001 and its reorganization is now before a federal bankruptcy court.Supported by the MIT Center for Energy and Environmental Policy Research

Enron and the California Energy Crisis: The Role of Networks in Enabling Organizational Corruption

We provide an analytically structured history of Enron's involvement in the California energy crisis, exploring its emergence as a corrupt organization and its use of an interorganizational network to manipulate California's energy supply markets. We use this history to introduce the concept of network-enabled corruption, showing how corruption, even if primarily enacted by a single dominant organization, is often highly dependent on the support of other organizations. Specifically, we show how Enron combined resources from partner firms with its own capabilities, manipulating the energy market and capitalizing on the crisis. From a methodological point of view, our study emphasizes the growing importance of digital sources for historical research, drawing particularly on telephone and email records from the period to develop a rich, fly-on-the-wall understanding of a phenomenon that is otherwise hard to observe

Electricity deregulation evidence analysis and public policy - Volume 2

The electricity industry is the most important utility; it influences the organisation of production and service delivery in all the other sectors in any economy, through that, it influences economic growth and development. That is why its efficiency attracts so much attention. The open question though, is whether unbundling, privatisation and deregulation, are the best policy dimensions that countries should follow to improve electricity sector efficiency. For the countries that choose to unbundle and to introduce competition into generation and supply segments, the regulatory reform is a very complicated process. It usually involves all the other sectors in the economy such as the judiciary, financial, the Treasury and Parliament. The interaction between these institutions during the regulatory reform influences the contractual framework, implementation processes and the initial policies that will be adopted for vesting a new regime; they also determine the successful transition to full competition in retail supply. Chile pioneered unbundling of electricity systems and the introduction of competition into generation and supply in the late 1970s (Fisher & Galetoviz, 1998). The lack of history and data on markets meant that the public policies, which most of the other markets that emerged shortly after used were based on the results from economic theory and simulation experiments. This thesis uses a historical approach of case studies to examine the outcomes in the privatised England and Wales' electricity industry. It also uses the experience from the regional power integration regime that the Southern African Development Community (SADC) implemented in 1995, as a basis to enhance our understanding of how the initial conditions of a country can determine the methodology and process for its regulatory reform. This thesis finds some results that allow me to raise some fundamental questions. Is there a guarantee that competition policy will lead to significant efficiency gains in ALL economies? Can price mechanism deliver production and allocative efficiency in electricity markets? Are there other options which some of the emerging and developing countries can use to improve efficiency in their electricity sector? This thesis reveals the likelihood that most Governments' will continue to play an active role in directing the conduct of the multiple agents in the system and the performance of electricity markets. They will use the Sector Regulators to do this; these agencies will use forms of limit pricing (see Joskow & Tirole, 2004) and fair-trading acts, to restrain high prices; and to prescribe codes of conduct between undertakings, in particular with regard to agreements that can inhibit the development of efficient competition. In addition to these, Governments should expect to invest a lot of regulatory input to achieve smooth transition of the regulatory reform, which means significant finance to ensure that competition regimes succeed. I find that the design, price rule and implementation methodologies that England and Wales adopted, exacerbated production and allocative inefficiency in the pool. The results suggest that the same problems might impede the success of competition policy in some of the emerging markets. Finally, I find that the inherent features of the nation states in sub-Saharan Africa (SSA), such as the unstable socio-politics, lack of institutional framework, poor economic indices and endemic corruption, are barriers to both the development of regional power pools and the entry of foreign investors into the electricity network capacity building. Therefore, I have used the experience from the UK, to develop a theoretic model, which the SSA member states can follow to introduce regional power pools. The model will also help them to develop an environment that might encourage foreigners, as well as some of the indigenous entrepreneurs, to invest in its electricity market. Nonetheless, in the course of this research, I have had discussions with some of the public servants who are directly involved in steering forward the privatisation initiatives in Nigeria. I am aware that the wave of privatisation, which is quite intense in the sub-region, will continue; and despite the issues raised, they confirm that new regional markets are likely to emerge within the next five years

Balancing in the Nordic Electricity Market

Työn tarkoituksena on selvittää sopivaa yhteispohjoismaista tasehallinta- ja taseselvitysmallia sekä samalla koota aihepiiriin liittyvää aineistoa yhdeksi kokonaisuudeksi. Työn taustalla on pohjoismaisten energiaministerien tavoite yhdentää pohjoismaiset sähkömarkkinat aina loppukäyttäjämarkkinoita myöten. Yhdeksi merkittäväksi esteeksi tavoitteen toteuttamiselle on havaittu erot tasehallinnan ja taseselvityksen toteutuksessa eri Pohjoismaissa. Aiempien selvitysten pohjalta ja työn aikana toteutetun tasevastaavien haastatteluiden perusteella työssä on päädytty ehdottamaan pohjoismaiseksi tasehallintamalliksi mallia, jossa tasepoikkeama laskettaisiin kokonaistaseesta ja lisäksi tuotannolle käytettäisiin omaa tasetta. Kokonaistasepoikkeaman hinnoitteluun käytettäisiin kahta hintaa. Tuotantotaseessa sallittaisiin poikkeamat tietyllä alueella, jonka ylittävistä poikkeamista veloitettaisiin volyymiperusteisesti joko kiinteällä hinnalla tai prosenttiosuutena spot-hinnasta. Tasetietoihin tehtävät muutokset tulisivat olla mahdollisia aina käyttötunnin alkuun saakka ja käyttötunnin aikaiset säädöt tulisivat olla mahdollisia kantaverkkoyhtiön luvalla. Esitetyn kaltainen malli kannustaisi tasepoikkeaman minimoimiseen, mahdollistaisi tasevastaaville joustavan toiminnan ja antaisi eri tasevastaaville tasavertaisemmat lähtökohdat toimia. Taseselvitystä ehdotetaan muutettavaksi pohjoismaiseen malliin enemmän Ruotsissa käytössä olevan mallin kaltaiseksi. Ehdotetussa taseselvitysmallissa jakeluverkonhaltijat toimittaisivat sähkön toimitustiedot suoraan kansalliselle tasesähköyksikölle, joka laskisi ja ilmoittaisi tasevastaavien tasepoikkeamat näiden tietojen perusteella pohjoismaiseen tietokantaan. Ehdotetun kaltainen menettely nopeuttaisi taseselvityksen valmistumista ja yksinkertaistaisi toimijoiden tiedonsiirtoa. Malli voitaisiin toteuttaa joko nykyisillä organisaatioilla tai yhteispohjoismaisella tasesähköyksiköllä.The purpose of this study was to determine the most suitable model for balance management and balance settlement to be used as a basis for the common balancing in the Nordic electricity market. Another purpose was to compile scattered information about the subject to a one volume. The background of this study lies on the objective of the Nordic Energy Ministers to unify the Nordic electricity market even on the end-user level. One of the major obstacles to reach this objective has been identified as the lack of harmonised procedures in the balance management and settlement in the Nordic countries. According to previous reports and interviews done during this study a model for common Nordic balance management was suggested. In the model one balance calculation would be used in balance settlement and in addition an extra balance calculation would be made for the generation. Two prices would be used for the total imbalance. Imbalances in the generation balance would be allowed within a certain dead-band. Imbalances exceeding the dead-band would be charged volume based either with a fixed fee or with a percentage of the spot-price. Changes to the balance information should be allowed until the operating hour and changes even during the operational hour should be allowed with the acceptance of the transmission system operator. Suggested model would give incentives to minimise imbalances, would allow balance responsible parties to make flexible adjustments to their balances and would give more equal basis for the balance responsible parties to operate in the market. Balance settlement is suggested to be changed for the common Nordic model to be more congruent with the Swedish model. In the model, distribution system operators would deliver the measurements of their network to the national transmission system operator who would calculate the imbalances and report them to a Nordic database. Suggested model would speed up the completion of the balance settlement and simplify data transmission. The model could be implemented either with the current organisational structures or with a common Nordic balance power unit

Federal Register

Daily publication of the U.S. Office of the Federal Register contains rules and regulations, proposed legislation and rule changes, and other notices, including "Presidential proclamations and Executive Orders, Federal agency documents having general applicability and legal effect, documents required to be published by act of Congress, and other Federal agency documents of public interest" (p. ii). Table of Contents starts on page iii