he wind company at the centre of the California second-price auction bidding storm, SeaWest Energy Systems of San Diego, denies its bids were outrageous -- and indeed it says it played by the rules. Preliminary approval was granted for several hundred megawatts of wind capacity under California's Final Standard Offer No 4 solicitation, but Southern California Edison (SCE) abruptly suspended its auction over so-called "clever" and irregular pricing strategy (Windpower Monthly, January 1994).
SeaWest President and Chief Executive Officer Ron Fawcett says his company was merely being competitive. "It doesn't make a mockery of (the rules)," he says. "We're competitive. We competed to win. There's no basis for us being disqualified." Some members of the renewables community have described the strategy of SeaWest and others as disgraceful. Irregular pricing was primarily by SeaWest, but at least one other wind developer was also involved to a lesser degree, as well as some hydro companies, according to various reports.
Irregular bids in the Biennial Resource Plan Update (BRPU) included very high negative energy costs of minus $0.60-0.70/kWh, unrealistically high capacity factors of 90-100% and fixed capital costs of $5,000+/kW, according to SCE. Fawcett says he believes SeaWest used such figures. "I acknowledge that in some circumstances we could receive some relatively high payments," he says. "We recognise those cases could exist." As an example, he says storage technologies and commercial arrangements could allow a project to have that capacity factor. "This solicitation is wildly successful," he comments.
A complaint of SCE had been that in some cases it would have to pay so-called clever bidders more than the Identified Deferrable Resource (IDR) cost, the cost of the utility of building its own plant. SCE is asking the California Public Utilities Commission to require bidders to reflect reasonable operating and cost parameters. One option, it suggests, would be to disqualify "clever bidders" or do a re-bid. But SeaWest's Fawcett suggests instead that the utilities install a "payment cap" so that they do not pay more than the IDR.