FERC Refuses Palm Springs' Muni-Lite Wheeling Request

The Federal Energy Regulatory Commission (FERC) ruled that Palm Springs does not qualify as a municipal utility eligible to purchase power in the wholesale market and called its muni-lite proposal a "sham municipalization" in violation of section 212 (h) of the Energy Policy Act (EPAct) , denying its request for a wheeling order from its current utility, Southern California Edison.

Palm Springs hoped to qualify as a wholesaler entitled to transmission access under EPAct because the city already serves a small retail load at its airport. The city has already undergone a bidding process for new power suppliers and has selected two finalists, Portland General (backed by Enron) and Illinova, which need to use Edison's wires to offer competing retail electric service to residents and businesses with duplicate city-owned meters.

Palm Springs was hoping that FERC would find that it qualified as a wholesaler entitled to transmission a ccess because the city already serves a small retail load at its airport. FERC, hoewever, determined that simply installing meters does not constitute service to existing customers or the ownership or control of distribution facilities that is required under EPAct.

FERC also ruled that the city's attempt to bypass SoCal Edison would conflict with the California Public Utilities Commission's (CPUC) phase-in plan to deregulate the industry, and added that the city was trying to evade CPUC rules for for assessing a competition transistion charge (CTC) to allow utilities to recoup stranded investments. Commissioner James Hoecker dissented on the other four commissioners' decision that that the Palm Springs' application would not be in the public's interest because it conflicts with CPUC mandates, arguing that there was little basis upon which to make such a finding and that would be premature to endorse the CPUC's stranded cost recovery approach.

According to Art Lyons, ex-mayor of Palm Springs and lead consultant in the effort, the FERC's decision "will not put an end to the city's efforts." The city will request a rehearing on the public interest issue. With the financial backing it has established from Portland General and Illinova, Palm Springs could file another application based on ownership of distribution, or it could decide to completely bypass the utility. Lyons said that a statewide referendum on restructuring may be in the works.