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California Electric Restructuring The San Diego Experience and Related Events

California Electric Restructuring The San Diego Experience and Related Events. Oklahoma Corporation Commission Deliberations Staff’s Electric Restructuring Status Report No. 9 September 6, 2000. Goals of Electric Restructuring Similar for All States. Decreased regulation

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California Electric Restructuring The San Diego Experience and Related Events

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  1. California Electric RestructuringThe San Diego Experience and Related Events Oklahoma Corporation Commission Deliberations Staff’s Electric Restructuring Status Report No. 9 September 6, 2000

  2. Goals of Electric RestructuringSimilar for All States • Decreased regulation • Allow market to set price of generation • Robust generation competition • Reduced generation prices for consumers • Encourage new generation market participants • Stimulate economic development OCC Deliberations Sept. 6, 2000 - Staff's Electric Restructuring Status Report No. 9

  3. Problems in San Diego • Average cost of generation goes from 4 cents/kWh in June 2000 to 17.6 cents/kWh at the end of August 2000 • California wholesale generation costs as of June 29, 2000 had increased by 700% over the same date in 1999 • California wholesale power market not producing just and reasonable prices • No alternative generation providers available (existing utility is SDG&E) OCC Deliberations Sept. 6, 2000 - Staff's Electric Restructuring Status Report No. 9

  4. Problems in San Diego • Severe transmission constraints and congestion - plans for new transmission are expensive, would be paid for San Diego customers, and would increase SDG&E’s generation market power • Only two transmission lines into San Diego, both owned by SDG&E or its parent company, Sempra • Generation is deregulated but the generation market remains highly monopolistic OCC Deliberations Sept. 6, 2000 - Staff's Electric Restructuring Status Report No. 9

  5. Some Causes of the San Diego Problems • No significant new generation over the last 10 years • No significant expansion of the transmission system over the last 10 years • A hotter than normal summer • Significant load growth overall (33% over the last five years, with an additional 15% expected in the next five years) OCC Deliberations Sept. 6, 2000 - Staff's Electric Restructuring Status Report No. 9

  6. Some Causes of the San Diego Problems • Withholding of instate and out of state generation from the market • Reported restrictions on access to and pricing for transmission service by the utilities • Electric restructuring - AB 1890 - Some have said that the price increases in San Diego are a direct result of this legislation OCC Deliberations Sept. 6, 2000 - Staff's Electric Restructuring Status Report No. 9

  7. The San Diego Problems and California Electric Restructuring • Allowed full recovery of stranded costs (about $28 billion) • Mandated 10% rate reduction discouraged new generation suppliers from entering the market (coupled with a 5-year rate freeze) OCC Deliberations Sept. 6, 2000 - Staff's Electric Restructuring Status Report No. 9

  8. The San Diego Problems and California Electric Restructuring • Regional transmission planning, expansion, and interconnection not fully addressed • Market structure is fatally flawed • Consumer education inadequate & ineffectual • Market power not properly addressed • Nixed PUC oversight of the market and its operation, including corrective measures OCC Deliberations Sept. 6, 2000 - Staff's Electric Restructuring Status Report No. 9

  9. The San Diego Problems and California Electric Restructuring • Ignored existing research on load growth and need for new generation • Did not establish pilot programs • Did not allow for adequate preparation (e.g., research on market design/structure/prices, infrastructure modifications) • Did not provide the means to remove utility created market barriers OCC Deliberations Sept. 6, 2000 - Staff's Electric Restructuring Status Report No. 9

  10. The California Situation (San Diego) Compared to Oklahoma OCC Deliberations Sept. 6, 2000 - Staff's Electric Restructuring Status Report No. 9

  11. The California Situation (San Diego) Compared to Oklahoma OCC Deliberations Sept. 6, 2000 - Staff's Electric Restructuring Status Report No. 9

  12. California and Oklahoma Electric Restructuring OCC Deliberations Sept. 6, 2000 - Staff's Electric Restructuring Status Report No. 9

  13. California and Oklahoma Electric Restructuring OCC Deliberations Sept. 6, 2000 - Staff's Electric Restructuring Status Report No. 9

  14. California and Oklahoma Electric Restructuring OCC Deliberations Sept. 6, 2000 - Staff's Electric Restructuring Status Report No. 9

  15. Recommendations:What Needs to be Done Prior to Restructuring Legislation • Infrastructure • Transmission Issues • Generation Issues • Market structure and rules • Monitoring of market operations and market power mitigation OCC Deliberations Sept. 6, 2000 - Staff's Electric Restructuring Status Report No. 9

  16. The Proper Restructuring Model Must: • Ensure proper preparatory work (e.g., infrastructure, market structure, market power) • Foster effective generation competition • Provide for effective, objective, and timely consumer education • Provide for customer protection • Quality of service • Prices caps • Provide for reasonable monitoring & oversight OCC Deliberations Sept. 6, 2000 - Staff's Electric Restructuring Status Report No. 9

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