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FOLSOM — California grid officials approved a blueprint for a new wholesale electricity market Thursday, one they hope will withstand the price spikes that sent the state spiraling into rolling blackouts and billions in debt. 

The state is facing a deadline to rebuild the market by September, when federal price caps expire. 

The Independent System Operator also approved a price cap for the California market that mimics the Federal Energy Regulatory Commission order. 

Last summer, FERC set the caps after more than a year of exorbitant wholesale energy prices crippled three utilities and led to rolling blackouts on six days in 2001. The state eventually stepped in to buy billions of dollars worth of power when wholesalers refused to sell energy to the near-bankrupt utilities. 

The ISO, manager of the state’s power grid, will submit the plan for the revised market to FERC by May 1. If approved, part of the plan will take effect Oct. 1. 

If FERC doesn’t extend the price caps, the ISO’s short-term plan includes a damage-control cap. 

The FERC price caps and its “must offer” obligation are for the Western region, while similar rules the ISO is considering would require generators to offer any electricity they have available only in California. 

“We are still insisting that priority No. 1 is that FERC extend the market mitigation they put in place last year,” said ISO spokeswoman Stephanie McCorkle. “If FERC doesn’t extend it, if it truly expires Sept. 30, then the must-offer requirement and the damage control bid cap will go into effect.” 

State lawmakers have also asked FERC to extend the price caps. In a letter to FERC commissioners, 43 Assembly Democrats said California was working to build more power plants and stabilize its market, but it “is still not healthy.” 

The ISO board approved a recommendation by a task force of six state agencies that capped prices at $108 per megawatt hour, the same amount as the current FERC cap. Spot market prices are now averaging $30 per megawatt hour. 

This restructuring of the electricity market differs from the state’s 1996 deregulation market because that first attempt “resulted from a political process,” said ISO Vice President Elena Schmid. 

The new plan was based on “reality, economy and hard experience we all earned in the last four years,” she said. 

ISO Board of Governors Chairman Michael Kahn said its goal is to narrow the market it controls, then scrutinize those transactions to make sure no one is manipulating the market. 

But the California market is still too unstable and undefined to craft a complete restructuring plan, Kahn said. 

Kahn insisted the board’s resolution for the long-term proposal reflected the market as a “hypothetical” design, since the state’s energy market is still evolving. 

The more comprehensive changes to the wholesale market will begin to be implemented in April 2003 and will take about six months to complete, McCorkle said. 

One of those long-term changes would be to require utilities to arrange sufficient power for their customers, plus a reserve. 

Previously, no entity had explicit responsibility to ensure there was adequate power to meet demand, and during the energy crisis in 2000 and 2001 “that responsibility inappropriately defaulted to the ISO,” grid managers said in a memo outlining the plan. 

Kahn said that provision, which wouldn’t take effect until 2004, should be reviewed again before being implemented. 

At the end of this year, the state’s authority to buy power expires, and the utilities will be expected to re-enter the market. 

The state’s two largest utilities are trying to regain financial health by the end of the year, but Pacific Gas and Electric Co. is still in bankruptcy and Southern California Edison is trying to work out details of a settlement with the state. 

With so many changes at the end of this year, Kahn said there is a question about to whom the proposed requirement would apply.