Some electric utilities refused to allow others access to their power lines during a Midwestern heat wave last summer in order to take undue advantage of astronomical prices for electricity on the open market, federal regulators found.
The Federal Energy Regulatory Commission called such practices "questionable" and said they "diminish confidence that market institutions are working in a fair and nondiscriminatory manner" in the emerging wholesale electricity market.The conclusions, included in FERC's review of the June energy crisis, are being presented at a Senate Energy and Natural Resources Committee hearing today.
The FERC said it had no direct evidence that the unidentified utilities' behavior caused the crunched electricity supply and zooming prices. Instead, it found that the situation was the result of a rare confluence of events. Those conditions are "unlikely to recur," the report said.
Much of the problem was weather-related. Power lines suffered storm damage at the same time that an unexpected heat wave covering a broad region of the country was unusually severe and lengthy. Temperatures in Chicago, Detroit and Milwaukee, for instance, were between 12 and 16 degrees hotter than normal on June 25.
Several power generators also were out of service, and many wholesale marketers defaulted on contracts to sell electricity.
As a result, one Midwest utility, which FERC did not name, paid $7,500 for one hour of electricity. Many others paid between $3,000 and $6,000 a megawatt hour for wholesale electricity usually selling for about $30 an hour.
Most states bar companies from passing those high prices on to consumers.
But the crisis threatened service across Illinois and other parts of the Midwest. Chicago-based Commonwealth Edison and Decatur-based Illinois Power asked residential customers to turn off air conditioners for short times.
During the crunch, utilities with extra power that also controlled key transmission lines were in a prime position.
Transmission systems are supposed to allow open access to other utilities trying to move electricity through the area. Some utilities refused such access but then made deals themselves to provide the electricity at high prices, the report found.
The FERC recommended no new regulations such as setting price caps or standards for firms that trade electricity, known as "power marketers." It did say increased monitoring is needed, along with more regional cooperation and faster communication of prices.