At 5 am on 31 March, the much discussed free market for electricity finally began to operate in California. The market, which took four years to put in place, handled over 1000 deals soon after its inauguration.

However controversy has surrounded one player in the market, Phoenix-based Salt River Project, because of its access to discounted power. Competitors are claiming this represents unfair competition.

The California market revolves around two key organizations. The Independent Sys-tem Operator (ISO), based in Folsom, moves power across the state transmission system. The Power Exchange, the second of the two lynchpins and based in Alhambra, takes bids for the buying and selling of power. Those bids are then submitted to ISO which schedules the movement of the power covered by each deal.

At its launch, the free market affected the 10 million customers of the state’s investor owned utilities, Southern California Edison, Pacific Gas and Electric and San Diego Gas and Electric. These companies represent over 70 per cent of the state’s power customers.

Launch of the market was delayed for three months after problems with the ISO and Power Exchange computer systems. But on the first day everything appeared to move smoothly, with an estimated 1100 power schedules being worked on the first morning, relating to around 29 000 MWh of power.

Trouble was brewing elsewhere, however, in relation to Salt River Project, which has won contracts in California, including one to supply Mobil Corp.’s California operations. Criticisms of the utility relate to its quasi-governmental status.

The utility was created by farmers with federal funding in 1903 and has traditionally sold power in the Phoenix region. It has built an installed generating base using tax-free bonds and also receives a portion of its power at discounted rates.

California competitors argue that they are at a disadvantage because they do not enjoy the same opportunities. One rival has requested that the US government prevent Salt River Project selling power beyond its own region.

The question raised by the Salt River Project will find echoes across the USA over how public power utilities should be treated in a competitive market.