Buffett's power market with California faces pricing anomalies

The regional power market that PacifiCorp, part of Warren Buffett's Berkshire Hathaway Inc., and California's grid operator created Nov. 1 is generating "pricing anomalies," a federal filing shows.

The market, which allows utilities to trade power across California and PacifiCorp's territories, is at times creating abnormally high prices in PacifiCorp's region because not enough supply is being bid into the system, California Independent System Operator Corp. said in a filing yesterday. It's seeking to waive tariff terms for 90 days to prevent the high prices while the resource pool expands.

Both PacifiCorp and the California ISO have hailed the market as the beginning of a regional system that will allow the integration of more renewable power by helping moderate sudden swings in power supply. NV Energy Inc., another one of Buffett's Berkshire utilities, is slated to join next year. The market started a month late after the operators decided they needed more time for testing and simulation.

Teams at PacifiCorp and California ISO ran market simulations and weren't able to detect all of the changes necessary to "sustain stable market operations," the ISO said in its petition to the Federal Energy Regulatory Commission. "It was not until actual operations that these circumstances were experienced and the resulting price excursions became apparent."

Limited Resources

Buffett has invested at least $26 billion on power plants, transmission lines and wind farms in the western U.S., data compiled by Bloomberg show. The system created with the grid operator can unite those holdings under a single market capable of automatically dispatching power every five minutes from plants with a combined capacity of 68,846 megawatts, enough to supply 51.6 million homes.

"We continue to be pleased at the overall functioning" of the market, Natalie Hocken, PacifiCorp's senior vice president for transmission and system operations, said in an e-mailed statement yesterday. "Effectively linking the two largest grids in the West is a big undertaking, and we will continue to fine tune and adjust to operating in a brand new market."

The resources PacifiCorp is able to supply to the market is "limited" by upgrades that have yet to be completed, the California ISO said in its filing. Other suppliers within PacifiCorp's region also haven't begun to participate and the shutdown of large resources within the area led to supply shortages in the market, it said.

"The CAISO understands that PacifiCorp intends to continue to work with potential third-party participating resources to facilitate their entry into the Energy Imbalance Market," the grid operator said in the filing.

California ISO asked the Federal Energy Regulatory Commission to decide on the waiver request by Nov. 26.

To contact the reporter on this story: Lynn Doan in San Francisco at ldoan6bloomberg.net To contact the editors responsible for this story: David Marino at dmarino4bloomberg.net Aaron Clark, Pratish Narayanan