They’re Baaaacck: Electricity Auctions Restart Tomorrow

After 9 long years of trying to clean up after the electricity mess that we experienced at the turn of the century, the fearless energy regulators of our state are once again going to proceed with electricity auctions.

Nine years after its state-sanctioned energy auction went bust in the western energy crisis, California is preparing to launch another daily electricity auction on Tuesday that it hopes will be more successful.

The new “day ahead” energy market will line up electricity resources for delivery the next day. The market will have a price cap of $2,500 a megawatt hour, about 50 times the going price of electricity in California today. Even a high price is unlikely to wreck the market this time because the state is being divided into more than 3,000 separate pricing points called “nodes.” So high prices in one place won’t necessarily spill over into another. (Wall Street Journal 3/30/09)

At least they did some more thorough testing of the system this time, and have installed more safeguards. But given our history with electricity on the open market, you would think this would make some news here in California.  Perhaps there will be more stories as the actual auctions commence tomorrow, but you would like to see some advance notice for this kind of thing. (Note to media: I did a Google news search and double checked several sites. If you reported on the story, shoot me an email and I will highlight it.)

In theory, there are some decent reasons to believe a market based system would help. It points out flaws in the transmission system, and where we need more generation.  That being said, this project needs to be monitored like a hawk. The regulators have said that they will be vigilant in pursuing anybody who violates the rules to game our electricity prices. The fact that they did simulations is great, but computers have a way of underestimating the human capacity to stretch and outright break the rules in the name of greed.

If there are any developments surrounding these auctions, I’ll be sure to keep you updated.