CalPX becomes first victim of Calif. power crisis Updated 9:12 PM ET January 19, 2001 By Nigel Hunt LOS ANGELES (Reuters) - The California Power Exchange, which ran the market that allowed the state's investor owned utilities to buy electricity, Friday announced it will be closing its doors, the first casualty of an electricity price crisis that has spiraled out of control.

"Today, CalPX finds itself immersed in a situation not of our making. The damage the markets have suffered has caused us to no longer be able to deliver the services we so well performed," the exchange said in a statement.

Volumes traded on its markets has plummeted in recent days, hurt partly by the near bankruptcy of its two leading market participants, utilities Pacific Gas & Electric and Southern California Edison.

San Francisco-based Pacific Gas & Electric is a unit of PG&E Corp. while Southern California Edison, which is based in the Los Angeles' suburb of Rosemead, is a subsidiary of Edison International.

Wholesale power prices started to soar in late spring 2000 as supplies struggle to keep pace with surging demand bolstered by a buoyant economy. The two utilities were not allowed to pass on their skyrocketing costs to customers due to a price freeze imposed under the state's deregulation laws and the burden has taken them to the brink of bankruptcy.

CalPX was launched in March 1998 under California's trailblazing deregulation legislation. It was designed to bring more openness to electricity trading, which has traditionally been conducted out of public view.

"While we begin the orderly transition out of this market, CalPX remains proud of the light it has shed on an industry that had been previously regulated in virtual secrecy for over 125 years," said President and Chief Executive Officer George Sladoje.

As the state's free market experiment started to fall apart the exchange faced considerable criticism from federal regulators who believed that utilities purchased too much of their power though CalPX's day-ahead market and should instead be signing long-term deals with producers.

The Federal Energy Regulatory Commission eventually issued an order last month seeking to prohibit the state's three investor owned utilities from participating in its markets and volume in the day-ahead market nosedived.

On Friday about 30,000 megawatt hours traded in the CalPX day-ahead market, less around six percent of the normal turnover at this time of year of about 480,000 megawatt hours.

"A final blow was the recent crippling order by the Federal Energy Regulatory Commission that caused tremendous and irrecoverable dislocation in the California electricity market. The negative effects of this recent action will be felt for some time," Sladoje said.

Sladoje said the exchange began Friday the orderly downsizing of its operations, starting with the layoff of 15 percent of its workforce with further job cuts to follow.

Mike Florio, a senior attorney for consumer group The Utility Reform Network (TURN) said in response to the news that CalPX was the "only good thing that consumers got out of deregulation."

He said in a statement that the exchange "provided a transparent market in which the small guys could purchase power as cheaply as the big guys" and had been the first to recognize the need for more long-term contracts.

"It's ironic and sad that the first organization to see the need, and then provide, long-term contracting in California is the first casualty of this out-of-control market. Consumers will miss the transparency and creativity of the PX (Power Exchange) in providing solutions for the marketplace," he said.

http://news.excite.com/news/r/010119/21/utilities-california-calpx

-- Martin Thompson (mthom1927@aol.com), January 21, 2001