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California Electric Restructuring The San Diego Experience and Related Events

Discover the San Diego experience and related events in electric restructuring, including challenges, causes, and recommendations for effective implementation. Learn about the goals of electric restructuring and the necessity of proper preparation to mitigate market issues.

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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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