diff --git a/giskard-ml-worker/ml_worker/utils/grpc_mapper.py b/giskard-ml-worker/ml_worker/utils/grpc_mapper.py index 23f697a942..a8512063db 100644 --- a/giskard-ml-worker/ml_worker/utils/grpc_mapper.py +++ b/giskard-ml-worker/ml_worker/utils/grpc_mapper.py @@ -7,7 +7,7 @@ from ml_worker.core.giskard_dataset import GiskardDataset from ml_worker.core.model import GiskardModel -from ml_worker_pb2 import SerializedGiskardModel, SerializedGiskardDataset +from generated.ml_worker_pb2 import SerializedGiskardModel, SerializedGiskardDataset def deserialize_model(serialized_model: SerializedGiskardModel) -> GiskardModel: diff --git a/giskard-ml-worker/poetry.lock b/giskard-ml-worker/poetry.lock index c4c4924b0d..dbc5cdc9df 100644 --- a/giskard-ml-worker/poetry.lock +++ b/giskard-ml-worker/poetry.lock @@ -25,11 +25,11 @@ transformers = ">=4.7.0,<5.0.0" typing-extensions = ">=3.7.4.3" [package.extras] -torch = ["torch (>=1.9.0,<2.0.0)"] -tensorflow = ["tensorflow (>=2.0.0,!=2.6.0,!=2.6.1,<2.10.0)"] -shap = ["numba (>=0.50.0,!=0.54.0,<0.56.0)", "shap (>=0.40.0,<0.41.0)"] +all = ["ray (>=0.8.7,<2.0.0)", "shap (>=0.40.0,<0.41.0)", "numba (>=0.50.0,!=0.54.0,<0.56.0)", "tensorflow (>=2.0.0,!=2.6.0,!=2.6.1,<2.10.0)", "torch (>=1.9.0,<2.0.0)"] ray = ["ray (>=0.8.7,<2.0.0)"] -all = ["torch (>=1.9.0,<2.0.0)", "tensorflow (>=2.0.0,!=2.6.0,!=2.6.1,<2.10.0)", "numba (>=0.50.0,!=0.54.0,<0.56.0)", "shap (>=0.40.0,<0.41.0)", "ray (>=0.8.7,<2.0.0)"] +shap = ["shap (>=0.40.0,<0.41.0)", "numba (>=0.50.0,!=0.54.0,<0.56.0)"] +tensorflow = ["tensorflow (>=2.0.0,!=2.6.0,!=2.6.1,<2.10.0)"] +torch = ["torch (>=1.9.0,<2.0.0)"] [[package]] name = "altair" @@ -397,6 +397,21 @@ ufo = ["fs (>=2.2.0,<3)"] unicode = ["unicodedata2 (>=14.0.0)"] woff = ["zopfli (>=0.1.4)", "brotlicffi (>=0.8.0)", "brotli (>=1.0.1)"] +[[package]] +name = "gdown" +version = "4.5.1" +description = "Google Drive direct download of big files." +category = "main" +optional = false +python-versions = "*" + +[package.dependencies] +beautifulsoup4 = "*" +filelock = "*" +requests = {version = "*", extras = ["socks"]} +six = "*" +tqdm = "*" + [[package]] name = "googleapis-common-protos" version = "1.56.2" @@ -542,13 +557,13 @@ tqdm = "*" typing-extensions = ">=3.7.4.3" [package.extras] +all = ["pytest", "datasets", "soundfile", "black (>=22.0,<23.0)", "isort (>=5.5.4)", "flake8 (>=3.8.3)"] +dev = ["pytest", "datasets", "soundfile", "black (>=22.0,<23.0)", "isort (>=5.5.4)", "flake8 (>=3.8.3)"] +fastai = ["toml", "fastai (>=2.4)", "fastcore (>=1.3.27)"] +quality = ["black (>=22.0,<23.0)", "isort (>=5.5.4)", "flake8 (>=3.8.3)"] +tensorflow = ["tensorflow", "pydot", "graphviz"] +testing = ["pytest", "datasets", "soundfile"] torch = ["torch"] -testing = ["soundfile", "datasets", "pytest"] -tensorflow = ["graphviz", "pydot", "tensorflow"] -quality = ["flake8 (>=3.8.3)", "isort (>=5.5.4)", "black (>=22.0,<23.0)"] -fastai = ["fastcore (>=1.3.27)", "fastai (>=2.4)", "toml"] -dev = ["flake8 (>=3.8.3)", "isort (>=5.5.4)", "black (>=22.0,<23.0)", "soundfile", "datasets", "pytest"] -all = ["flake8 (>=3.8.3)", "isort (>=5.5.4)", "black (>=22.0,<23.0)", "soundfile", "datasets", "pytest"] [[package]] name = "idna" @@ -981,6 +996,20 @@ doc = ["sphinx (>=4.0,<5.0)", "pydata-sphinx-theme (>=0.6,<1.0)", "sphinx-galler extra = ["lxml (>=4.5)", "pygraphviz (>=1.7)", "pydot (>=1.4.1)"] test = ["pytest (>=6.2)", "pytest-cov (>=2.12)", "codecov (>=2.1)"] +[[package]] +name = "nlpaug" +version = "1.1.11" +description = "Natural language processing augmentation library for deep neural networks" +category = "main" +optional = false +python-versions = ">=3.7" + +[package.dependencies] +gdown = ">=4.0.0" +numpy = ">=1.16.2" +pandas = ">=1.2.0" +requests = ">=2.22.0" + [[package]] name = "notebook" version = "6.4.12" @@ -1134,8 +1163,8 @@ python-versions = ">=3.6" importlib-metadata = {version = ">=0.12", markers = "python_version < \"3.8\""} [package.extras] -testing = ["pytest-benchmark", "pytest"] -dev = ["tox", "pre-commit"] +dev = ["pre-commit", "tox"] +testing = ["pytest", "pytest-benchmark"] [[package]] name = "preshed" @@ -1253,6 +1282,14 @@ category = "main" optional = false python-versions = ">=3.7" +[[package]] +name = "pysocks" +version = "1.7.1" +description = "A Python SOCKS client module. 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start + model_score = clf.score(X_test, Y_test) + logging.info(f"Trained model with score: {model_score} in {round(train_time * 1000)} ms") + + return GiskardModel( + prediction_function=clf.predict_proba, + model_type='classification', + feature_names=list(input_types), + classification_threshold=0.5, + classification_labels=clf.classes_ + ) diff --git a/giskard-ml-worker/test/test_data/enron_data.csv b/giskard-ml-worker/test/test_data/enron_data.csv new file mode 100644 index 0000000000..ae8a98fb9f --- /dev/null +++ b/giskard-ml-worker/test/test_data/enron_data.csv @@ -0,0 +1,13322 @@ +,Target,Subject,Content,Week_day,Year,Month,Hour,Nb_of_forwarded_msg +3,INTERNAL,draft organization announcement.,"Attached is the draft. It combines all three announcements into one, with a common format. It reflects a ""just the facts"" approach. Let me know if you have changes (or answers to the questions in the text). + + +",Tuesday,2001,June,15,0 +13,INTERNAL,FW: 1st Draft New Risk Management Policy," + + -----Original Message----- +From: Schultz, Cassandra +Sent: Monday, June 11, 2001 6:25 PM +To: Murphy, Ted; Port, David; Kaminski, Vince J; Andrews, Naveen; Zipter, Rudi; Nordstrom, Mary; Gorny, Vladimir; Hagelmann, Bjorn +Cc: 'vkaminski@aol.com' +Subject: 1st Draft New Risk Management Policy + +OK, here's the working draft ""masterpiece"" (haha). Please review and provide comments and feedback by the end of the week (note: Ted and David, we have a conference call scheduled Wednesday for the three of us to discuss). Also, I'm sending to Price Waterhouse Coopers for their input as well - I need to spend more time reviewing what they sent on Friday to see if I've missed any issues we want to address. + +I have not reviewed the details or the (one-RAC) structure with any of the other RAC or risk management functions - please do not distribute yourselves as I'd like to ""cushion"" the reception. + +Review meetings with these functions begins tomorrow (Tuesday), when I meet with: +? Dave Gorte, +? Bill Bradford and Molly Harris +? Sally Beck's group (Beth Apollo and James New) +? Treasury (Perkins and later, Despain) +? Internal Audit (Kilchrist) +? Legal (Sayre/Taylor) + +I'll wait to hear from David/Ted tomorrow morning as to whether I should provide a complete draft to any of these other functions or to Rick Buy at this point, or if I should wait until later in the week when we've all had the opportunity to review. + +As I turn around the next draft, I'll work on a power point presentation for use in the executive meetings beginning the last week of June (Business Unit Offices of the Chairman, Whalley, Causey, Fastow, Skilling). I made a quick summary of changes in the document attached below; going forward I will refine this and perhaps red-line the current policy to assist our detailed review. + + +Thanks for your help, + +Cassandra. + + + + + +",Thursday,2001,June,13,1 +19,INFLUENCE,Re: UC-CSU-Enron press release,"Is there an alternative quote we could use instead of the reference to +""stabilizing"" in the California market? I think I know what we mean but most +outside readers would see the situation as unstable. Perhaps we could +reference the continued availability of direct access or renewed interest in +Enron's offerings? + + +To: Marty Sunde/HOU/EES@EES, Janet R Dietrich/HOU/EES@EES, Elizabeth +Tilney/HOU/EES@EES, Peggy Mahoney/HOU/EES@EES, Vicki Sharp/HOU/EES@EES, +Robert C Williams/Enron@EnronXGate, Steven J Kean/NA/Enron@Enron, Karen +Denne/Corp/Enron@ENRON, Mark Palmer/Corp/Enron@ENRON, James D +Steffes/HOU/EES@EES, Evan Hughes/HOU/EES@EES +cc: + +Subject: UC-CSU-Enron press release + + +Attached is a draft of the UC-CSU-Enron press release concerning the +settlement agreement. Please review and let me know of any revisions or +suggestions. We would like for this to go out tomorrow if possible. We're +still waiting for a quote from CSU. I'll make sure you see that as well. +Thank you. Max + + + +",Friday,2001,July,0,0 +20,REGULATION,FW: Draft Revised Language On Market Based Rates From Our Counsel," +Attached below is Same Behrend's rough draft take on a revised section on market-based rates. Please let me have your comments on his ideas. Thanks. + +-----Original Message----- +From: Samuel Behrends [mailto:SBEHREND@LLGM.COM] +Sent: Thursday, September 13, 2001 6:51 PM +To: Shelk, John +Cc: SamBehrends@Gateway.net; Catherine McCarthy +Subject: Draft Language + + + + John - This still needs work, particularly the double negative in section (h) (2), but I wanted to get it to you in case you needed something bright and early. I'll noodle on it some more tonight. + + +============================================================================== +This e-mail, including attachments, contains information that is confidential and may be protected by the attorney/client or other privileges. This e-mail, including attachments, constitutes non-public information intended to be conveyed only to the designated recipient(s). If you are not an intended recipient, please delete this e-mail, including attachments, and notify me. The unauthorized use, dissemination, distribution or reproduction of this e-mail, including attachments, is prohibited and may be unlawful. + +==============================================================================",Friday,2001,September,6,1 +40,CALIFORNIA CRISIS,Re: NEW DRAFT OF ENRON STATEMENT,"As discussed. +---------------------- Forwarded by Steven J Kean/NA/Enron on 07/09/2001 06:27 PM --------------------------- + + +Steven J Kean +07/09/2001 03:54 PM +To: Linda Robertson/NA/Enron@ENRON +cc: James D Steffes/NA/Enron@Enron, Alan Comnes/Enron@EnronXGate, Carole Hodge/ETOL/EU/Enron@ETOL, dwatkiss@bracepatt.com, Jeff Dasovich/NA/Enron@ENRON, Richard B Sanders/Enron@EnronXGate, Richard Shapiro/NA/Enron@ENRON, Robert Frank/NA/Enron@ENRON, Sarah Novosel/Corp/Enron@ENRON, Susan J Mara/NA/Enron@ENRON + +Subject: Re: NEW DRAFT OF ENRON STATEMENT + +I know we are holding for a later filing, but I have attached further comments anyway. The document is still too rough to send out. We need to take the opportunity, as soon as possible, to get a hard hitting, thoroughly researched and carefully written document in front of the Commissioners. California's reaction to the Judge's recommendation is likely to give FERC (especially the new commissioners) a feel for how irrational the California politicians can be. We will have a limited opportunity to take advantage of that realization. We need to hit it hard in the pleading, our conversations at the Commission, the Hill and the media. + + + + + + +Linda Robertson +07/09/2001 09:58 AM +To: James D Steffes/NA/Enron@Enron +cc: Alan Comnes/Enron@EnronXGate, Carole Hodge/ETOL/EU/Enron@ETOL, dwatkiss@bracepatt.com, Jeff Dasovich/NA/Enron@ENRON, Richard B Sanders/Enron@EnronXGate, Richard Shapiro/NA/Enron@ENRON, Robert Frank/NA/Enron@ENRON, Sarah Novosel/Corp/Enron@ENRON, Steven J Kean/NA/Enron@ENRON, Susan J Mara/NA/Enron@ENRON + +Subject: Re: NEW DRAFT OF ENRON STATEMENT + +Let me emphasize that these comments are to be filed COB TODAY. + + + + + James D Steffes 07/09/2001 10:50 AM To: Robert Frank/NA/Enron@Enron, Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, Linda Robertson/NA/Enron@ENRON, Sarah Novosel/Corp/Enron@ENRON, Carole Hodge/ETOL/EU/Enron@ETOL, Richard B Sanders/Enron@EnronXGate, dwatkiss@bracepatt.com, Alan Comnes/Enron@EnronXGate, Susan J Mara/NA/Enron, Jeff Dasovich/NA/Enron@Enron cc: Subject: NEW DRAFT OF ENRON STATEMENT + + +HERE IS THE MOST RECENT STATEMENT WITH STEVE'S COMMENTS. + +Jim + + + + + + + + + + +",Monday,2001,July,21,1 +51,REGULATION,PRIVILEGED AND CONFIDENTIAL - Scott Jones Draft,"Attached is the draft testimony of Scott Jones. + +Comments should be received no later than 3:00 PM EST on Sunday, August 26. +All comments and suggestions need to be in writing and can be faxed (not +E-mailed) to Dan Watkiss at 202-857-2131. Also, if your suggestion is a +proposed addition, please write out the exact language you would propose we +incorporate into the testimony and where you would place the addition. + +Donald A. Kaplan, Esq. +Preston Gates Ellis & + Rouvelas Meeds LLP +Suite 500 +1735 New York Avenue, N.W. +Washington, D.C. 20006 +Ph: (202) 662-8466 +Fax: (202) 331-1024 +donk@prestongates.com + + +(See attached file: TFG SJones Draft 8-25-01.doc)(See attached file: +Exhibit STJ-6.xls)(See attached file: Exhibit STJ-3.xls)(See attached file: +Exhibit STJ-4.xls)(See attached file: Exhibit STJ-5.xls)(See attached file: +Exhibit STJ-2.doc) + +CONFIDENTIALITY NOTE: +This email message is intended solely for the individual or individuals +named above. It may contain confidential attorney-client privileged +information and/or attorney work product. If the reader of this message is +not the intended recipient, you are requested not to read, copy or +distribute it or any of the information it contains. Please delete it +immediately and notify the sender by return email or by telephone. Thank +you. + + + <> <> <> <> <> <> + + - TFG SJones Draft 8-25-01.doc + - Exhibit STJ-6.xls + - Exhibit STJ-3.xls + - Exhibit STJ-4.xls + - Exhibit STJ-5.xls + - Exhibit STJ-2.doc ",Saturday,2001,August,16,0 +63,INTERNAL,RE: ENE candlestick chart,"Greetings from London. +What do you think about P, TX, DVN? + + +Vince + + + + -----Original Message----- +From: ""sbigalow"" @ENRON [mailto:IMCEANOTES-+22sbigalow+22+20+3Csbigalow+40email+2Emsn+2Ecom+3E+40ENRON@ENRON.com] +Sent: Thursday, June 28, 2001 2:46 PM +To: Stuart III, William; Kaminski, Vince J; McFarland, Trena; James, Tracy; Branney, Theresa; Noble, Ted; Neville, Sue; Crenshaw, Shirley; Gonzalez, Selena; Davidson, Samantha T.; Lewis, William Patrick; Conner, Patrick; Mike Roberts; Fowler, Mike J; Cisneros, Michelle D.; Bradley, Michael W.; Slaughter, Mark; Bellard, Lyelle; Ferrell, Lee; Mccoy, Kelly; Weakly, John; Greene, John; Choi, John; Gualy, Jaime; Kendall, Heather; Hickerson, Gary; Lagrasta, Fred; Farhangnia, Farzad; Willis, Erin; Tipp, Eric; Scott, Eric; Boxall, Emily; Piekielniak, Elsa; Su, Ellen; Brown, Elaine; Maloney, Darren; Romain, Danielle; Breslau, Craig; Harper, Mike +Subject: ENE candlestick chart + + + + - RESEARCH ENHANCEMENT GROUP - ENE.doc << File: RESEARCH ENHANCEMENT GROUP - ENE.doc >> ",Friday,2001,June,2,1 +64,REGULATION,Bingaman Draft On Transparency -- Amendment Ideas," +Last night, Linda and I spent a fairly long time with Leon Lowery, Chairman Bingaman's chief electricity advisor, to discuss our concerns with the transparency and market-based rate language -- while at the same time commending the transmission access language in the draft and strategizing how to support the chairman in that regard. + +We made progress on transparency, less so on market-based rates. + +On transparency, Leon understands our concerns. In a nutshell, he seemed amenable to amending the langauge to avoid the result of having to divulge transaction-specific, trade-specific information. We persuaded Leon that was the impact of the initial language, although he initially said details would be left to FERC. We persuaded him that if any data is to be provided, it MUST be only in aggregate form. We also impressed on him that if, as he said, the intent is to leave details to FERC -- then more of the details should be left to FERC, not set by statute. + +Leon strongly advised that we seek to craft language consistent with the above exchange that makes as few changes to the draft as needed to make the necessary corrections. This will make it easier for Leon to navigate the internal waters of the staff. (Sam Fowler, th chief counsel, is a drafting stickler). + +Others should obviously weigh in and review this, but to facilitate internal comments (we need to get back to Leon today), here is my take on what he has in mind. Under new sec. 218(b) (to be added to the FPA by bill sec. 413) (pg. 13), under ""information required"" we would rewrite paragraph 2 as follows: + +(2) each broker, exchange, or other market-making entity that matches offers to sell and offers to buy wholesale electric energy in interstate commerce to provide aggregate statistical information about its sales of electric energy at wholesale in interstate commerce. + +The effect of the language change is drop the reference to sale prices of each sale of electric energy. By leaving it as aggregate statistical information, this should give FERC maximum flexibility to permit indexes, etc. + +As to the ""timely basis"" of information release (subsection (c)), the alternatives sent yesterday would require this to be done on the Internet after the end of the trading day. If we can restrict this to aggregate data, question arises whether we want to concede that this would be done daily. That suggests the data to be collected would be more than we would want, I think. Here is a take on how we might suggest a revision to that language to give FERC more leeway: + +""(c) TIMELY BASIS -- The Commission shall require the information required under subsection (b) to be posted on the Internet and updated as frequently as practicable and appropriate. + +The change is to add ""appropriate"" so that FERC can consider other than whether posting is practicable. The use of ""appropriate"" is what came to mind -- perhaps there is some other word or phrase like ""consistent with ..."" or ""promote competition"" or some way of saying there are policy considerations other than practicability. There should be some valid purpose established before data is released. I would argue that the (d) language on commercially sensitive information goes only to exempting from disclosure, not when disclosure is appropriate. + +Please let me have your thoughts, although the tragedy in NYC and DC now underway will probably make this not a day to transact such business on the Hill. + +Will provide a further report on market-based rates. In sum, Leon was not as sympathetic on this issue, but asked for our ideas and further arguments. We sense Leon personally feels strongly about moving the FPA to some linkage to competitive markets. His argument is that market participants can be doing everything by the book and the result can still be uncompetitive markets. We pushed that penalizing us is not the answer -- nor is increasing regulatory uncertainty about deals doing to help keep prices down. Leon clearly does not intend this language to punish Enron -- but others who we might all agree have done things that are not in keeping with competitive markets.",Tuesday,2001,September,6,0 +70,REGULATION,Next NERC Reliability Meeting on Legislation -- August 9th,"See NERC memo below that was just received. They have scheduled what they hope will be the final meeting to ""resolve"" the reliability legislation next week -- August 9th. Of course, this is awfully presumptuous in that it assumes that the model to be worked off of is the NERC model (even the shortened one), and not the PJM model that others prefer to use. We need to decide whether we suggest any changes to the shortened NERC version, even those we know they would not take just to show a willingness to offer specific comments as we promised at the last meeting, or simply ""agree to disagree."" + +---------------------- Forwarded by John Shelk/NA/Enron on 08/02/2001 05:09 PM --------------------------- + + +""David Cook"" @nerc.com on 08/02/2001 05:06:14 PM +Sent by: owner-rlc@nerc.com +To: +cc: + +Subject: revisions to reliability language + + +Reliability legislation coalition + +I have attached a memo outlining the edits that NERC would make in the +7/19 discussion draft. My memo does not take account of the suggestions +that have been circulated in the last day or so. I've also attached a +marked-up version of the 7/19 draft indicating our changes. + +I propose that we meet in Washington on Thursday, August 9, at 10:00 +a.m., with the goal of coming to closure on reliability legislation that +is shorter and less detailed than the language in the pending bills, but +that still preserves the essence of an industry self-regulatory +organization. I am working on a location and expect to provide that +information tomorrow. + +I know that scheduling this meeting may be difficult for some and that +schedules are already full, but schedules will become even more +difficult later in the month. I take as our deadline having new +language for the Hill during the August recess. + +Thank you in advance for your continuing efforts to bring this new model +for reliability into existence. + +David Cook +General Counsel +NERC +office: 609-452-8060 +cell: 609-915-3063 +david.cook@nerc.net + + <> <> + - Edits to 7-19 discussion draft.doc + - Discussion draft, 071901 (dnc comments).DOC ",Thursday,2001,August,15,1 +88,CALIFORNIA CRISIS,Re: Tokyo Presentation 15 May,"The presentation looks fine but consider adding this idea in a few slides: +the continuation of a regulated structure poses considerable risk for +utilities. California's utilities were pushed to the brink of, or into, +bankruptcy because of a regualtory regime which allocated price risk to +them. All parties are better off in a system where the regulated enterprise +is limited to natural monopoly functions and all other acitivities are +conducted in a marketplace. + +Also, did we cover the shortcomings of the Japanese market sufficiently?",Thursday,2001,May,2,0 +95,meeting minutes,Privileged and Confidential - Catalytica,"I've finished marking up the drafts, and thought perhaps a few thoughts would +give you some insight into the reasons for my revisions . Unfortunately, I +was engaged in discussions about the course to pursue in light of Arthur +Anderson's comments until almost 10pm, when I lost my typing help, so not +much headway was made in inputting the changes last night. My secretary is +supposed to be in early ( it is now nearly 8:00 and she still isn't in ! ), +and I will enlist whatever other help I can get to turn these documents +around. + +For those not involved in the discussions last night, Roger advised us that +Arthur Anderson had changes to the Xonon Technology Implementation Agreement +designed to make clear ENA had no primary or secondary obligations under the +XTIA. The principal change suggested by AA - the deletion of the last +sentence of the BOLD language in Section 2.2 - removed the obligation for ENA +to pick up any obligations under the agreement owed by West LB in excess of +the ""Cap"". Note that this same change applies in the Agreement in Principle +related to the purchase of turbines. + +XTIA Revision 4G. AA's change did not appear to address comprehensively the +principle AA espoused, ie, clarifying ENA had no primary or secondary +obligations under the agreements. After much discussion and some +consideration, I decided to prepare alternative markups of the XTIA - one +that attempts to meet the AA directive while preserving a level of comfort +for GE. I attempted this by increasing the limit on West LB's liability in +Article 10 to $20 million from $9.9 million so that GE's recourse against +West LB is the same as it had against West LB and ENA in the prior drafts, +and by obligating West LB, in the default provisions, to pony up for an ENA +default. I also extensively modified the Section 2.2 language ( taken +verbatim from the LM 6000 deal ) to eliminate the limited recourse provisions +favoring West LB, and in doing so made it easier to conclude that references +to ENA in the agreement are references to ENA acting in an agency, and not +its individual capacity. This notion is still pretty vague in the revision +because I did not want to create too much discomfort in GE, since ENA +explicitly acting in an agency capacity would mean there was no recourse +against it ( since ultimate recourse would lie with the principal, West LB). +Roger suggested I delete the limit on ENA's liability in Article 10 to remove +the implication it had any, which I did ( and which means we have no upside +protection if we are construed to have obligations under the XTIA. + +The upshot is that in my opinion the 4g revision goes as far as possible +toward placating AA while still retaining a possibility of selling it to GE. +The sheer number of changes required by the substance of AA's comment, +however, is bound to be disconcerting to GE at this stage of negotiations, +particularly when GE's expectation was for a markup incorporating the new +business terms agreed yesterday afternoon (calling for payment of the +Development Funds to be completed by September 30,2000, with the possibility +of a refund of a portion of the Development Fund Payment if the December 31 +Milestone is not timely completed) and some clean ups/clarifications. + +Note that in both revision 4g and 4ga, Section4.3 now provides that the Xonon +credit created is only exercisable by CCSI on and after December 31,2000, so +that the credit amount can reflect the deduction of any Milestone 4 refund +amount paid by GE if it does not complete that Milestone on time. I think the +dollar value of the credit should be adjusted downward if a portion of the +Development Funds paid on September 30 are in fact refunded in December. We +need to make sure to make provision in the Acquisition and Development +Agreement that any Milestone 4 refund received by West LB is paid over to +ENA, since West LB will have been repaid its advances on September 30,2000. + +XTIA Revision 4GA . This alternate revision to the XTIA takes a minimalist +approach, and incorporates only the new business terms, some minor clean +up/clarifications, and the AA change to Section 2.2 and the change to Article +10 ( to remove a cap for ENA's laibility) suggested by Roger. It seems to me +it does not address meaningfully the AA admonition that ENA may not have +primary or secondary liability under the XTIA if it wants to stay outside of +the rigors of FAS 97-10. However, it has the singular advantage of looking a +lot like what GE and West LB expect to see in the revision. + +Option Repurchase Agreement. This revision was complicated by the possible +refund of the a portion of the Development Funds by GE if it failed to +complete Milestone 4 by December 31,2000 ( an attempt to retain some +accountability for GE's performance given that it is being paid for that +Milestone on September 30 to satisfy CCSI ). Because the option repurchase +must occur on or before September 30, it isn't clear what will happen +December 31, so its hard to figure out what to pay if the contract is not +cancelled by September 30 or what the credits are worth on that date. + +Since CCSI is the direct recipient of the credits under the XTIA, I first +thought ENA could hang onto $2.1 million ( the amount formerly allocated to +Milestone 4 before its payment obligation was collapsed into Milestone 3) by +deducting the refund from the amount payable to CCSI on the option +repurchase date and leaving CCSI to bear the risk of GE's repayment of any +refund in order to make CCSI whole. If GE did meet the Milestone on time and +so did not pay the refund amount directly to CCSI, I thought ENA could always +make CCSI whole by paying the $2.1 million in December when the refund +matter was decided. That approach- subtracting the refund amount from the +September 30 payment to CCSI- was decidedly unsatisfactory since the option +repurchase formula could result - depending on the Milestones paid on the +option repurchase date - in a negative payment to CCSI for the option. + +What I settled on in this draft was to go ahead and pay CCSI the amount of +the premiums it has paid to September 30 plus $200,000 if the turbine +contract has not been cancelled on September 30. This would include repayment +to CCSI on September 30 of premiums paid by CCSI under the spark spread on +September 30. Assuming CCSI made all its premium payments and West LB made +all of its Development Fund advances, ENA would have received $9.9 million +from CCSI by September 30, paid out $9.9 million plus interest to West LB by +September 30, and purchased the spark spread from CCSI for $10.1 million. If +the turbine contract is not cancelled but GE has to pay the refund, I think +the $2.1 million ought to go to West LB or its designee (ENA). + +If we cancel the turbine contract and do not go forward with Pastoria, the +dollar amount of the credits vested in CCSI and exercisable after December +31,2000, are equal to the Development Funds advanced less the refund amount. +Since the document now reads that the $2.1 refund amount goes back to West LB +or its designee, if GE pays the refund and CCSI is holding a Xonon credit of +only $7.8 million,it seems to me it will be necessary to pay the refund over +to CCSI instead of ENA in order to make up for the fact that it paid $9.9 in +premium and only received $7.8 in credit in September. This quick +""liquidation"" of $2.1 of the credit seems to be an ancillary benefit to CCSI +occasioned by GE's refund. We could provide in the agreements that GE makes +this payment directly to CCSI or we can continue to have the right to receive +the payment from GE under the XTIA and the obligation to pay it to CCSI under +the Repurchase Agreement.",Tuesday,1999,December,23,0 +106,talking points,DRAFT Comments on Barton RTO Draft," + +Attached for review and comment is a draft set of talking points on the Barton RTO discussion draft. I went through the testimony at the recent hearing and parsed the legislative language of the discussion draft. You will see that the talking points are designed to respond to two basic points being raised by our opponents: (1) that FERC is rushing and being heavy-handed and (2) that the only interests involved are those of the transmitting utilities (i.e., no mention of discrimination as being what RTOs will remedy). + +Please let me have your thoughts in the next few days. Once Capitol Hill is up and running again, we will distribute the final talking points to our consultants and to members/staff of the Barton Subcommittee as we continue our efforts against the discussion draft's treatment of RTOs. + + ",Tuesday,2001,October,11,0 +118,CALIFORNIA CRISIS,"Re: ATTORNEY CLIENT PRIVILEGDE - Draft FERC Brief on Settlement + Process","My suggestions are attached. +Take the gloves off. + + + + + + + +James D Steffes +07/06/2001 10:04 PM +To: Jeffrey T Hodge/Enron@EnronXGate, Robert C Williams/Enron@EnronXGate +cc: Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, Linda Robertson/NA/Enron@ENRON, Alan Comnes/Enron@EnronXGate, Jeff Dasovich/NA/Enron@Enron, Susan J Mara/NA/Enron, Robert Frank/NA/Enron@Enron, Ray Alvarez/NA/Enron@ENRON, Sarah Novosel/Corp/Enron@ENRON, dwatkiss@bracepatt.com + +Subject: ATTORNEY CLIENT PRIVILEGDE - Draft FERC Brief on Settlement Process + +The attached is a rough draft of a potential filing Enron would make in to Judge Wagner in the Settlement process (it is unclear if this would remain confidential per the gag order). + +Please provide Ray Alvarez your comments. This would be filed as early as Monday am. + +Jim + + + +",Sunday,2001,July,16,0 +122,INTERNAL,Confidential SNAP Special Report," +Confidential +Rika +I spoke to Kevin the other day and we discussed the attached special report. Please read over and call me to review. There was already a problem today a TMI +Fred + + - Update 011016.xls ",Thursday,2001,October,6,0 +124,INTERNAL,RE: Report for Prof. Duffie,"Amitava, + +Let's talk about it on Monday. + +Vince + + -----Original Message----- +From: Dhar, Amitava +Sent: Tuesday, June 26, 2001 9:49 PM +To: Kaminski, Vince J +Cc: Shanbhogue, Vasant +Subject: Report for Prof. Duffie + +Hi Vince, + +Please take a look and let me know how we need to modify the report. I am yet to put the page numbers in Table of Contents which I am thinking of putting once the organization of the report is final. + +Thanks, +-Amitava + + << File: Enron Credit Strategic Plan062501.doc >> ",Wednesday,2001,June,3,1 +126,CALIFORNIA CRISIS,Memo Re State Processes for Takeover of Transmission,"----- Forwarded by Steven J Kean/NA/Enron on 02/28/2001 02:52 PM ----- + + Susan J Mara + 02/21/2001 05:26 PM + + To: Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, Linda +Robertson/NA/Enron@ENRON, James D Steffes/NA/Enron@Enron, Susan J +Mara/NA/Enron@ENRON, Mary Hain/HOU/ECT@ECT, Jeff Dasovich/NA/Enron@Enron, +Mark Palmer/Corp/Enron@ENRON + cc: + Subject: Memo Re State Processes for Takeover of Transmission + +Here is an initial draft from our attorneys in California on the state +processes that could be required. In my experience, the single biggest issue +the utilities have is the transfer of the rights of way -- there are +thousands of these -- each like an individual contract. If the state tried +eminent domain, it seems like it could face a long-time in the courts to +finish that process. + + +Sue Mara +Enron Corp. +Tel: (415) 782-7802 +Fax:(415) 782-7854",Wednesday,2001,February,6,1 +154,CALIFORNIA CRISIS,California Power Crisis Update (No. 10),"We have been pulling together these weekly(sometimes more often) summaries +for internal purposes. Would you find it helpful to be on the distribution +list? Hope you are doing well. Look forward to touching base soon. +----- Forwarded by Suzanne Nimocks/HOU/NorthAmerica/MCKINSEY on 03/28/2001 +03:41 AM ----- + Memorandum + + TO: Pru Sheppard + BCC: Suzanne Nimocks + + + FROM: Pru Sheppard + B. Venki Venkateshwara + DATE: March 27, 2001 + + California Power Crisis Update (No. 10) + + DEVELOPMENTS THIS WEEK, 3/23/2001 + + The weeks highlights include: + + + ? Continued indications that the issue of market power and possible + remedies for it is likely to remain a high profile issue in + California and elsewhere (both retroactively and prospectively) + ? An ironical situation with respect to QFs in which QF power under + contract is effectively being released into the market at higher + prices + ? A court order requiring Reliant to continue to sell power to the + ISO even if it is not being paid in a full and timely manner + ? Another Stage 3 emergency and rolling blackouts + + Market power + + + There are continued indications that the issue of market power + will not be settled simply. This week there was a lengthy and + politically influential front page story in the New York Times about + FERCs passive approach to policing generators (Critics Say U.S. + Energy Agency Is Weak in Oversight of Utilities). The story was by + Jeff Gerth and Joseph Kahn. (Jeff Gerth's 1992 story on the + Whitewater deal is viewed by journalists to have been the origin of + what eventually became a multi-year investigation of Bill Clinton.) + + + The key issues are familiar: + + + ? Does market power exist to a degree that warrants remedies such + as price caps, refunds, and so on? + ? If so, what is the basis for asserting that market power exists + and what is the remedy? (See the discussion in the New York Times + article on the ""good hours"" vs. ""bad hours"" approach and the + associated political decision not to deal with ""good hours""). + ? Can market power be used as leverage to eventually settle + generator bills in California at something less than 100 cents on the + dollar. (The California ISO filed a complaint claiming $6 billion + in overcharges this week.) + + The QF irony + + + Through the 1990s, QF contracts were projected to be the source + of stranded costs because they were priced ""way above market."" In + recent months, in California, they look like a bargain (although some + are not such great bargains because a portion of their price is tied + to gas). You would think that the utilities would request QFs to + maximize their output. But credit problems have created an ironical + situation. The facts: + + + ? PG&E and Edison have not been paying the QFs fully and promptly + for some time. + ? The QFs form a creditors committee and threaten to push PG&E and + Edison into bankruptcy. (Some gas-fired QFs had to shut down because + they did not have money to pay for the gas.) + ? Last week's court decision allows MidAmerican/CalEnergy to + essentially sell its power to others even though the QF contract + ""dedicates"" the output to the purchasing utility. + ? CalEnergy does so immediately, selling to El Paso. + + The Reliant Order + + + A court ordered Reliant to continue to sell to the ISO, when + requested, regardless of whether Reliant had been paid fully and + promptly for past deliveries to the ISO. Reliant announced it will + appeal the order. + + + This is somewhat of a contrast to the QF situation except that + the circumstances governing the 2 situations are probably different. + The QF contracts pre-date the ISO and are with the utilities and most + likely make no reference to providing power during emergencies. In + fact, many QF contracts have the opposite provision: authority for + the utility to cut takes during so-called ""light load"" periods. + + + Stage 3 emergency and rolling blackouts--again + + + There was another Stage 3 emergency in California ? with rolling + blackouts this week. This prompted everyone to wonder why this was + happening in March. Among the factors: + + + ? Increased demand from summer-like temperatures + ? Cutbacks in imports + ? Loss of 1400 MW due to a transformer fire at an Edison plant + ? Loss of about 3100 MW from QF plants that were forced to shutdown + because they could not afford gas bills (VV) + + + MARKET COMMENTARY + + (For easier printing of all the articles in this section use the file + at the end of the section) + + + Critics Say U.S. Energy Agency Is Weak in Oversight of Utilities + By JEFF GERTH and JOSEPH KAHN + 03/23/2001 + The New York Times + Page 1, Column 1 + c. 2001 New York Times Company + + WASHINGTON, March 22 -- The pressure was intense when federal + regulators met + privately last month to debate remedies for soaring electricity + prices in + California. + Officials of the Federal Energy Regulatory Commission, the agency + whose mandate + is to ensure ''just and reasonable'' electricity rates nationwide, + had evidence + that a few companies had been selling electricity to California at + prices far + above the cost of generating it. The agency faced an imminent + deadline to + challenge those prices or let the companies possibly pocket hundreds + of millions + of dollars in unfair profits. + + An internal memorandum laid out two choices. The agency could audit + and punish + ''bad actors,'' the companies that were exploiting the market. Or it + could + identify ''bad hours,'' when electricity shortages were most acute + and spiking + prices were arguably nobody's fault, and order refunds for only the + most + exorbitant prices. + ''It may be easier to identify bad hours than bad actors,'' the + memorandum said. + + The commission took the easier way. It decided not to investigate + reports of + abuses by companies, but issued an order that could require them to + refund to + the state utilities up to $124 million collected during a relatively + few ''bad + hours'' in January and February. That is hundreds of millions of + dollars less + than California might have claimed, since the most potential + overcharging + occurred during ''good hours,'' when power was more plentiful but + prices were + often just as extreme. The order ignored those hours. + Today, in a criticism of the agency's lack of aggressiveness, + California + regulators estimated that generators had charged $6.2 billion above + competitive + levels over 10 months. They urged the agency to dig deeper, hoping it + would + demand more refunds or other stiff remedies. But the agency's track + record -- + one of complacency in the eyes of state officials -- leaves + California + regulators skeptical that Washington will confront the big power + producers. + The small, obscure agency, tucked behind the rail yard of Union + Station here, + has largely soft-pedaled its role as the electricity industry's top + cop, even + though it has wide authority to keep power companies in line. To keep + rates + reasonable, it can impose price caps, strip companies of the right to + charge + market rates, force them to return excessive profits and even suspend + deregulation altogether. + Instead, the agency has largely left it to private companies to pry + open the + $250 billion electricity industry, which has historically been + controlled by + monopoly utilities and state officials. The agency's defenders, + including its + chairman, Curt Hebert Jr., a fierce advocate of unfettered markets, + say that its + largely hands-off approach reflects the delicate balancing of + competing + interests -- a commitment to protect consumers while not stifling + market forces. + + But politicians, utility executives, energy economists and local + regulators say + California's rolling blackouts and skyrocketing electricity prices + are the signs + of a market running amok. They accuse the agency of standing aside as + companies + manipulate their way to windfall profits. The agency's critics, who + include one + of its own commissioners and numerous staff members, say that its + enforcement + mission has been blunted by free-market passions and the influence of + industry + insiders in its ranks. + When the agency began its first national investigation of high + electricity + prices last year, it named a newly recruited industry insider, Scott + Miller, to + lead the effort. Mr. Miller and his colleagues said in their report + that there + was ''insufficient data'' in California to prove any profiteering by + generating + companies. Yet his own former employer, PG&E Energy Trading, was at + the time a + subject of a civil antitrust investigation by the Justice Department + that + focused on electricity market abuses in New England. + The agency has given state regulators a lead role in monitoring local + power + markets. Yet even as these regulators have urged the agency to be + more + aggressive in investigating suspicions that companies have abused + their power in + California, New England, the Midwest and the mid-Atlantic, they have + frequently + been ignored or rebuffed. + Critics say that the agency began deregulation before it was ready or + willing to + make sure the markets worked effectively. They accuse it of showing + favoritism + to industry -- allowing companies, for example, to ignore + requirements to file + detailed reports of market transactions that are critical to proving + accusations + of market abuses. + ''We need to wake up to the fact that this is a dysfunctional market + that is + being gamed and manipulated by those who participate in it,'' said + William + Massey, a commissioner of the agency who has become one of its + leading critics. + The agency's inaction, the critics say, leads to ''gaming'' -- + jockeying for + profits that does not necessarily involve illegality -- and outright + market + manipulation. Consumers and utilities are the victims, paying + billions of + dollars more for electricity than if the markets were truly + competitive. + Agency officials acknowledge that enforcement of market rules to curb + gaming and + manipulation had not been a high priority in previous years. But they + defended + their recent California order as proof that they intend to keep + markets free of + abuse. They add that the agency is also pressuring two generators to + refund + almost $11 million for possibly manipulating the California market + last spring. + Agency officials and some outside analysts say that poorly conceived + deregulation plans by states, a shortage of power plants, rising + natural gas + prices, and even the weather have had more impact on electricity + prices than + abuses by companies or any failings by the agency. They say the + agency must + balance the competing interests of generators, local regulators and + utility + companies if it is to keep deregulation on track. + ''We're trying to craft a system that gives breathing room to develop + a market, + but not so much room that undue market power punishes consumers,'' + Mr. Hebert + said. + Fight Over Deregulation + Today's debate traces back to the 1930's, when President Franklin D. + Roosevelt + backed legislation to break up utility monopolies. The Federal Power + Act of 1935 + gave the Federal Power Commission a mandate to ensure ''just and + reasonable'' + electricity rates. The Federal Power Commission was abolished in 1977 + and + replaced by the Federal Energy Regulatory Commission, an independent + agency with + 1,200 employees that also oversees oil pipelines and the natural gas + market. The + president appoints the chairman and four commissioners -- two + Democrats and two + Republicans with staggered terms of five years. Two Republican seats + are + currently unfilled. + The deregulation of the electricity markets began in the late 1980's, + after the + agency had begun opening the gas markets. By 1996, the commissioners + issued a + landmark order that forced utility companies to open their + transmission lines to + other utilities and electricity wholesalers. The commission and many + private + economists expected that by prying open protected markets, + electricity prices + would immediately fall. + That possibility set off a deregulation frenzy, most prominently in + California, + New York, New England and the mid-Atlantic states. Generating + companies rushed + to expand in the new, borderless market. + But the agency's balancing act has grown more difficult as + electricity + deregulation has spread nationwide. Congress has forced it to trim + its staff in + recent years. Officials complain that investigating abuses in + electricity + markets strains their resources. + And as the California crisis has worsened, the commissioners have + begun sparring + publicly among themselves about what to do. This week, Mr. Massey, a + Democratic + commissioner, and Mr. Hebert (pronounced AY-bear), a Republican, sat + side by + side before a House panel and argued diametrically opposed positions. + Mr. Hebert + said high prices in California ''were sending the right signals to + get supply + there.'' Mr. Massey called the prices that generators were charging + ''unlawful'' + and said that his agency, by not reining them in, ''is simply not + doing its + job.'' + The agency's leadership has been in flux for months. Congressional + and industry + officials in Washington say President Bush is considering replacing + Mr. Hebert, + whom he named to the top post less than two months ago, with Pat + Wood, who runs + the Texas public utility commission. A White House spokeswoman had no + comment on + the reports. + Though Mr. Hebert's positions are not far from those of the Bush + administration, + his relations with California leaders may have made his position + tenuous. Mr. + Hebert, a Mississippian who is a close ally of the Senate majority + leader, Trent + Lott, has warred with California politicians who have proposed new + solutions to + the crisis there. + Mr. Hebert, who has served as a commissioner since 1997, has often + taken the + most ideologically free-market position of any commissioner. He + flatly rejects + the idea of price caps on electricity as hopelessly ineffective and + contrary to + market forces. When Gov. Gray Davis outlined a plan to have the state + buy + transmission lines to relieve utility companies' debt, Mr. Hebert's + response was + dismissive. ''It's not in the interest of the American public,'' he + pronounced. + Even as new electricity markets opened in the summer of 1999, they + started + producing nasty shocks. The mid-Atlantic region experienced some + early + volatility. + As the turmoil grew, economists began raising the alarm about a + phenomenon + called ''market power,'' the ability of energy traders in the new + national + market to sustain prices above the competitive level. Proving such + abuses is + difficult, because it requires comparing tens of thousands of + separate + electricity transactions with the costs of the generators that + initiated them. + Joseph Bowring, who heads the market monitoring unit of the nonprofit + entity + that operates the mid-Atlantic transmission system, said that power + companies + there had exercised some market power. But only the Federal Energy + Regulatory + Commission, not local regulators, had the authority to collect the + data to + determine how much market power had been exercised and whether it had + been + abusive or not, he said. + Mr. Bowring said he talked to agency officials about doing so. In the + end, Mr. + Bowring and several agency officials said, the agency chose not to + investigate. + The decision roiled some agency officials. + Ron Rattey, a veteran agency economist, wrote a memorandum last June + describing + the staff as ''impotent in our ability to monitor, foster, and ensure + competitive electric power markets.'' The staff, the memorandum said, + did not + even enforce a requirement that power companies file detailed + quarterly reports + listing essentially every sale they make. Such data would have been + useful to + Mr. Bowring. + Local-Federal Clash + Local regulators who want to ensure competitive prices often have to + act on + their own. Monitors in New England have intervened about 600 times + since 1999 to + correct prices they determined had been caused, at least in part, by + market + manipulation. + The federal agency has sometimes chastised them for interfering too + much. + The industry, not surprisingly, shares that view. One vocal critic + was Mr. + Miller. Before the agency recruited him last July to head its + division of energy + markets, he was director of policy coordination for the national + energy-trading + unit of PG&E Corporation, the California holding company whose assets + also + include Pacific Gas and Electric, the California utility. + Although the utility has lost billions of dollars during California's + crisis, + Mr. Miller's former unit has become one of the most profitable new + energy + traders nationwide. PG&E Energy Trading, by several estimates, is now + the + second-largest seller of electricity in New England. + The company has had a rocky relationship with regulators. They + intervened + several times in 1999 and 2000 to retroactively cancel auctions they + said + produced excessive profits for PG&E and other companies. Mr. Miller + denounced + the practice, though he acknowledged in public testimony that his + company + sometimes charged ''very high'' prices when it could. + ''One person's predatory pricing is another person's competitive + advantage,'' + Mr. Miller said at a public hearing on deregulation in Texas in 1999. + New + England regulators too often acted as ''judge, jury and executioner'' + when + overseeing the market, he said. + One year later, Mr. Miller and his new colleagues at the federal + agency got a + chance to examine New England's problems from the regulators' + perspective. Their + Nov. 1 report attributed New England's frequent price gyrations to + technical and + regulatory flaws. + As Mr. Miller's team was preparing its report, the Justice + Department, whose + threshold for stepping into possible industry wrongdoing is far + higher than the + agency's, began looking into whether price spikes in New England + pointed to + unlawful monopoly power or collusion, people contacted by the + department during + that inquiry said. + One subject of the civil inquiry is possible price manipulation in + one of New + England's ancillary services markets, people contacted by the + department said. + They said the department was examining whether PG&E and two other + companies + tried to corner that market for several months early last year. PG&E + confirmed + that the Justice Department had contacted it, but denies wrongdoing + and says it + has cooperated with the department's requests. + Mr. Miller has declined to comment on his role at PG&E or at the + agency. His + supervisors defended his work and said they had detected no conflict + of interest + between his work at PG&E and his duties at the agency. + Those duties brought Mr. Miller to California last August. With + electricity + prices there soaring, he and his colleagues sat down with several + utility + executives at the agency's San Francisco office. + One executive, Gary Stern, director of market monitoring for Southern + California + Edison, wanted the agency to stop what he suspected were market + abuses by power + generators. He provided a road map to help investigators figure out + how power + companies traded power contracts -- and whether they had manipulated + the + markets. + But when Mr. Miller and his team approached 11 generators and + marketers -- + including his old employer -- a few weeks later, they did it their + way. They + asked eight questions, many of them imprecise, like: ''Describe your + strategy + for bidding generation resources into market.'' + This question, Mr. Stern said in a recent interview, ''was equivalent + to asking + a suspected burglar how he spent his day.'' + Some agency officials also thought the team should probe deeper. Mr. + Rattey + recommended that Mr. Miller seek the quarterly pricing reports that + marketers + were supposed to file. But his suggestion was not adopted, agency + records show. + Daniel Larcamp, Mr. Miller's supervisor, said ''there might have been + more + information that could have been obtained'' in the California + inquiry. But he + said the commission gave the staff only three months to finish, + making it + impossible to collect and analyze the reams of data involved. + For Mr. Miller, agency documents show, the investigation was so + time-consuming + that he had no time to fill out the financial disclosure form + required of new + federal employees. Mr. Miller submitted his form in late January, + after a + reporter requested it. Agency lawyers approved the form, but only + after he + provided additional information about his job and compensation from + PG&E. The + lawyers said Mr. Miller's participation had been permissible because + PG&E was + not the subject of the investigation. + When the staff report was issued on Nov. 1, it found high prices and + problems in + the design of the California market. But while the companies ''had + the potential + to exercise market power,'' the commission said, there was + ''insufficient data'' + to prove that they did. + Some marketers saw the report as an exoneration. + ''This has been looked at several times, most notably by the FERC and + nobody has + found any evidence of market manipulation and profiteering,'' Rob + Doty, the + chief financial officer of Dynegy Inc., told a reporter earlier this + year. + California Inquiry + The agency has recently shown signs of wanting to apply pressure on + generators. + But its early efforts show how it is treading on new and uncertain + turf. + When the California crisis grew severe last December, the commission + issued a + refund order, a shot across the bow for generators charging high + prices. It + required them to submit detailed data any time they sold electricity + in + California for more than $150 per megawatt hour, considered at the + time a fair + estimate of the highest costs any of them faced. + It also told generators that for the next several months, they could + be forced + to give refunds if the agency found that they had charged excessive + prices. The + commission also said that it would examine bidding practices and + strategies for + withholding generating capacity to ferret out any efforts to + artificially raise + prices. + When the agency's own 60-day deadline for examining market data in + January + approached, however, it became clear that staff members had not made + any + detailed examination. Instead, staff members said, the agency + scrambled to forge + a last-minute compromise that would allow it to issue a statement + opposing high + prices in the state without a time-consuming investigation. + During this scramble, a senior staff member, Kevin Kelly, suggested + focusing on + bad hours instead of bad actors. + ''Our attempts to find illegal behavior or legal 'misbehavior' by + sellers ('bad + actors') always seems to fail,'' his memorandum said. It said that + the agency + could more easily blame high prices on acute shortages during the + most critical + hours. + The suggestion won the day. The commission decided to limit its order + to the + hours when California declared a Stage 3 emergency, when supplies are + critically + low. + Mr. Stern of Southern California Edison and several private-sector + economists + have attacked the economic logic of that order. They said that the + commission + has focused on times when prices might be legitimately high. The + bigger worry: + Generators can and often do sustain artificially high prices when + supplies are + not as tight, they say. + Mr. Massey, the Democratic commissioner, dissented from the decision + for those + reasons. Because most high-priced transactions in January and + February did not + occur during bad hours, he argued, the commission effectively chose + to bless as + ''just and reasonable'' the hefty profits generators are making from + the + California crisis. + ''The problem with my agency is that we're so carried away with the + rhetoric of + markets that we've gotten sloppy,'' Mr. Massey said. ''We're talking + about + electricity. It's the juice of the economy, so it's got to be + available and + reasonably priced.'' + + + Williams defends pricing of electricity + 03/23/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + TULSA, Okla. (AP) - Williams Cos. Inc. says it can justify the rates + it charged + for wholesale power, despite accusations from federal regulators that + it sold + over-priced electricity to California. + Federal regulators claim Williams Energy Marketing and Trading Co., a + unit of + Tulsa-based Williams, owes California more than $40 million in + refunds for power + it sold to the state's Independent System Operator. + + The Federal Energy Regulatory Commission says that Williams is one of + several + power providers responsible for $124 million in overcharges from + transactions in + January and February. + The Independent System Operator, which manages the state's power + grid, claims + the state was overcharged $6.2 billion by 21 wholesale power + providers, + including Williams, between May and February. + Williams says the rates it charged California were fair and were + based on + production costs and market conditions. + ""Williams is confident that it performed within the guidelines + established by + the ISO,"" said Williams spokeswoman Paula Hall Collins. ""We felt like + we had + worked within the regulations set up by ISO."" + According to the commission, power prices levied by Williams in + January and + February exceeded federal price ceilings based on the cost of natural + gas and + other market conditions. + However, the price ceilings were established after the ISO accepted + Williams' + power prices, Collins said. + The commission will review Williams' explanation and either accept + the + justification or order the company to pay refunds. + + + + Allegheny Energy makes big California connection + 03/23/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + HAGERSTOWN, Md. (AP) - Allegheny Energy Inc. said Thursday it has + agreed to sell + $4.5 billion worth of power to California's electricity-purchasing + agency over + the next 10 years. + The company said the contract call for Allegheny to provide up to + 1,000 + megawatts that the Hagerstown-based company has secured from western + generating + plants through its new energy trading division, Allegheny Energy + Global Markets + - formerly Merrill Lynch Global Energy Markets. + + ""This is a win-win for both the state of California and Allegheny + Energy. It + provides a long-term source of fixed-price energy and should help to + stabilize + prices in California,"" said Michael P. Morrell, president of the + Allegheny + Energy Supply division. + Allegheny Energy is the parent of Allegheny Power, which delivers + electric + energy and natural gas to parts of Maryland, Ohio, Pennsylvania, + Virginia and + West Virginia. + + + Williams plans expansion of pipeline to help power Calif. + 03/23/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + SALT LAKE CITY (AP) - The Williams Cos. plans to expands its Kern + River + pipeline, which runs through Utah, to provide more natural gas for + generating + plants in California. + Williams' gas pipeline unit in Salt Lake City said Thursday that it + plans to + construct nearly 700 miles of additional pipeline that will run + parallel to its + existing Kern River line. + + Construction on the $1 billion project is expected to begin next year + and is + scheduled for completion in May 2003, said Kirk Morgan, director of + business + development for Kern River pipeline. + ""Shippers are seeking more access to natural gas from the Rocky + Mountain basin, + where producers are aggressively stepping up production,"" Morgan + said. + The new pipeline is expected to deliver about 900 million cubic feet + of natural + gas per day to markets in Utah, Nevada and California. + Most of the gas will be used for generating plants planned in + California. If all + of the pipeline's capacity were used to generate electricity, it + could produce + about 5,400 megawatts. ""That is enough to light around 4.5 million + homes,"" + Morgan said. + The original Kern River line was completed in 1992. It enters Utah + from Wyoming + then crosses into the Salt Lake Valley near Bountiful. It turns south + near the + Salt Lake City International Airport then runs the length of the + state before + passing into southern Nevada and winding up near Bakersfield, Calif. + It currently transports 700 million cubic feet of natural gas per + day. Williams, + based in Tulsa, Okla., recently filed an emergency application with + federal + regulators to install additional pumping stations on the line to + increase its + capacity by 135 million cubic feet per day. That $81 million pumping + station + project should be completed by July 1. + During the 2002 construction period, the Kern River project will + employ between + 1,500 and 1,800 people. The company estimates annual property taxes + it pays to + Utah counties will increase from $3.5 million to about $7 million. + Questar will be one of the customers on the new pipeline, Morgan + said. + The utility wants to supply additional gas to southern Utah cities, + including + St. George and Cedar City. + ""Our own pipelines serving southern Utah are at full capacity so this + is an + opportunity to transport additional gas into those areas from + company-owned + supplies in Wyoming,"" said Questar Gas spokeswoman Audra Sorensen. + + + + Calif Energy Commission OKs 3 Pwr Plants Worth 2,076 MW + 03/23/2001 + Dow Jones Energy Service + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + (This article was originally published Thursday) + + LOS ANGELES -(Dow Jones)- The California Energy Commission Wednesday + approved + three power plants worth 2,076 megawatts, two of which are scheduled + to come on + line by the end of 2002, a CEC spokesman said Thursday. + + The plants approved include BP Amoco PLC (BP) unit ARCO Western + Energy's 500 + megawatt Western Midway Sunset Project, slated to come on line in + October 2002; + Caithness Energy's 520 MW Blythe Power Plant, to come on line by Dec. + 31, 2002; + and Thermo Ecotek's 1,056 MW Mountainview Power Plant, scheduled to + come on line + in April 2003. + All three of the new plants will be natural gas-fired combined-cycle + plants. + The $550 million Mountainview plant will be located in Southern + California, near + San Bernadino. The $300 million Western Midway-Sunset plant will be + located in + central Kern County, while the $250 million Blythe plant will be + located in the + city of Blythe in Riverside County. + The latest approvals bring to 13 the total number of plants approved + since April + 1999 by the CEC, a spokesman said. Those plants will supply 8,405 MW + to the + state, which has seen rolling blackouts and spiking wholesale power + prices in + the last six months, in part due to lack of supply. + -By Jessica Berthold, Dow Jones Newswires; 323-658-3872; + jessica.berthold@dowjones.com + + + Some CalEnergy Power Could Be Sold Outside Calif - CEO + 03/23/2001 + Dow Jones Energy Service + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + (This article was originally published Thursday) + + LOS ANGELES -(Dow Jones)- Some of CalEnergy Operating Corp's power + could end up + being sold outside of California, though that is not the company's + intent, + CalEnergy Chairman and CEO David Sokol said in a conference call + Thursday. + + CalEnergy, an affiliate of MidAmerican Energy Holdings Co, which is + majority + owned by Warren Buffett's Berkshire-Hathaway (BRKA), was given legal + authority + Thursday to suspend 270 megawatts of power delivery to Edison + International + (EIX) utility Southern California Edison and sell on the open market, + because + SoCal Edison has not paid its bills since November. + CalEnergy stopped supplying power to SoCal Ed immediately following + the court + ruling. + ""We stopped supplying power at 1 PM (PST) and have been selling to + parties that + will pay since then....We are selling it to marketers; our current + marketing + agent is El Paso Corp (EPG) and they will sell it for us,"" Sokol + said. + Sokol added that while it was his company's intention to have its + power sold to + California, that could not be guaranteed. + ""We leave the energy selling to El Paso....We've directed them that + we would + like the power to stay in California but we can't stop them,"" from + selling out + of state, Sokol said. + Wholesale prices on the open market are about $400-$500 a + megawatt-hour, three + times more than what the company had received under its contract with + SoCal Ed. + The court's ruling did not address the $45 million SoCal Ed still + owes CalEnergy + for November and December power, and Sokol said that his company's + separate + lawsuit on that matter sought to attach the utility's assets as + payment for that + debt. + Sokol said the court's ruling had ""significant implications"" for the + entire + community of small, independent generators, known as qualifying + facilities or + QFs, who have not received payment from SoCal Ed. + ""Edison's own lawyer said it best....that every QF in the state will + begin to + mitigate if the judge allowed us (to sell on the open market),"" Sokol + said. + Sokol said his company was prepared to push SoCal Ed into involuntary + bankruptcy + Friday if CalEnergy hadn't won the case, but said he couldn't + speculate whether + other QFs may be more or less inclined to do so as a result of the + court + outcome. + A group of renewable power suppliers, owed more than $100 million + from SoCal Ed, + said late Wednesday they want state lawmakers to release them for + their supply + contracts with PG&E Corp. (PCG) unit Pacific Gas & Electric and SoCal + Ed until + the utilities are restored to financial stability. + The utilities claim close to $13 billion in undercollections due to + an inability + to pass high wholesale power costs to customers under a rate freeze. + In a statement, SoCal Ed said it opposed CalEnergy's bid to suspend + its QF + contract because the utility believed Gov. Gray Davis and state + regulators are + close to resolving ""very legitimate financial concerns of CalEnergy + and other QF + suppliers."" + SoCal Ed said it was concerned that CalEnergy's request to sell to + third parties + would lead to a major supply shortage in California. + The utility said it has informed the QFs that it is working to + resolve the issue + without giving unfair advantage to one class of creditors. + While many of the state's large power suppliers have been paid by on + a forward + basis for the power they sell into California, the QFs, which make up + one-third + of the state's total power supply, haven't been paid by SoCal Ed + since November. + PG&E has made partial payments to its QFs. + -By Jessica Berthold, Dow Jones Newswires; 323-658-3872, + jessica.berthold@dowjones.com + (Jason Leopold contributed to this article.) + + + California and the West Judge Frees Small Firm From Edison Contract + KEN ELLINGWOOD; DAN MORAIN + TIMES STAFF WRITERS + 03/23/2001 + Los Angeles Times + Home Edition + A-3 + Copyright 2001 / The Times Mirror Company + + El CENTRO -- California's balance of electrical power shifted + slightly Thursday + when an Imperial County judge temporarily freed a small geothermal + energy + producer from its contract with Southern California Edison, allowing + it to sell + power on the open market. + The ruling by Superior Court Judge Donal B. Donnelly could lead to a + mass exodus + by hundreds of small energy producers that have been selling power to + the + state's financially troubled utilities for months without getting + paid. + + At the same time, it may have staved off plans by a group of the + small + generators to send Edison into involuntary bankruptcy as early as + today. + In Sacramento, energy legislation pushed by Gov. Gray Davis passed in + the state + Senate but foundered in the Assembly. The measure was intended to + ensure that + the state gets repaid for the electricity that it has been buying on + behalf of + Edison and Pacific Gas & Electric, which say they lack the cash and + credit to + purchase power. The bill also was supposed to guarantee that the + small, + alternative energy producers--which together provide nearly a third + of the + state's power--get paid. But Assembly Republicans opposed it, saying + it hadn't + been given sufficient scrutiny. + The impact of the small producers was made clear in Imperial County, + where + Edison's failure to pay CalEnergy, the county's biggest property + taxpayer, had + outsize implications. CalEnergy had put county officials on notice + that it was + about to miss a $3.8-million property tax payment. The uncertainty + had prompted + the tiny Calipatria Unified School District to postpone a bond issue + for badly + needed school repairs. + Among CalEnergy Chairman David Sokol's first acts after the judge's + ruling + Thursday was to promise Imperial County Supervisor Wally J. + Leimgruber that the + company would pay its property taxes on time. + ""That is great news,"" Leimgruber said. + Within hours of its court victory, CalEnergy had stopped transmitting + geothermal + power to Edison and begun selling it to El Paso Energy, a marketing + company that + purchased the energy at prevailing rates and resold it on the spot + market. + Some of the more than 700 other small energy producers in the state + said they + were considering similar action against Edison and Pacific Gas & + Electric. + ""We absolutely need the right to sell to third parties,"" said Dean + Vanech, + president of Delta Power, a New Jersey company that owns five small + gas-fired + plants in California and is owed tens of millions of dollars by + Edison. + Sokol praised the Imperial County judge and said his company simply + wanted the + authority to sell its power ""to a credit-worthy company that, in + fact, pays for + the power."" + An Edison spokesman said the company was disappointed with the + ruling, but + sympathized with CalEnergy and other small producers because + ""California's power + crisis has placed [them] in financial distress, just as it has placed + utilities + in financial distress."" + Edison expressed concern that the ruling would prompt CalEnergy and + other small + producers to sell their power out of state. Sokol said CalEnergy had + specifically told El Paso Energy that it hoped its power would remain + in + California, ""but if someone wants to pay a higher price out of state, + we can't + stop them."" + Sokol said that Edison still owes CalEnergy $140 million and that the + company--along with seven other small producers--had been prepared to + file a + petition in federal bankruptcy court in Los Angeles today forcing the + utility + into involuntary bankruptcy. He said his company no longer intends to + do so, and + he believed--but wasn't certain--that the other companies would + shelve their + plans. + Edison filed papers Thursday with the federal Securities and Exchange + Commission + showing that it owed $840 million to various small electricity + producers, many + of which rely on renewable energy sources such as geothermal steam, + solar energy + or wind. + The alternative energy producers--and utilities--strenuously objected + to the + legislation considered in Sacramento on Thursday. The bill, spelling + out how the + utilities are to pay the state and the small producers, passed the + Senate on a + 27-9 vote, the exact two-thirds margin required. But it stalled in + the Assembly + on a 46-23 party-line vote, well short of two-thirds. + ""When I was a citizen back in Lancaster, I heard these stories about + pieces of + legislation that were cooked up late at night, that . . . were cut + and pasted + together and were rammed through by the Legislature,"" Assemblyman + George Runner + (R-Lancaster) said. ""That's exactly what we have before us."" + The alternative electricity generators, including oil companies, + warned that + they would lose money under the Davis proposal, while representatives + of Edison + and PG&E, which have amassed billions in debt in the worsening energy + crisis, + said the legislation would push them deeper into the hole. + ""There isn't enough money,"" Edison attorney Ann Cohn testified at a + Senate + hearing on the bill Thursday. ""It is a very simple question: Dollars + going out + cannot be greater than dollars coming in."" + The bill, AB 8X, combined several proposals. First, it sought to + clarify earlier + legislation by spelling out that Edison and PG&E must pay the state + all money + collected from consumers for electricity that the state has been + buying. + Additionally, the bill would turn over to the California Public + Utilities + Commission the thorny issue of how much to pay alternative energy + producers for + their electricity. + Wind, solar and geothermal producers might agree to the prices + offered by the + administration. But most of the alternative energy producers, + including Chevron + and British Petroleum, use natural gas to generate electricity + through + ""cogeneration,"" a process of creating steam for both electric + generation and + heat. With natural gas prices high, they contend, they would lose + money at the + prices Davis is offering. + * + Ellingwood reported from El Centro, Morain from Sacramento. Times + staff writers + Mitchell Landsberg in Los Angeles and Jenifer Warren, Nancy Vogel and + Carl + Ingram in Sacramento contributed to this story. + (BEGIN TEXT OF INFOBOX / INFOGRAPHIC) + Power Points + Background + The state Legislature approved electricity deregulation with a + unanimous vote in + 1996. The move was expected to lower power bills in California by + opening up the + energy market to competition. Relatively few companies, however, + entered that + market to sell electricity, giving each that did considerable + influence over the + price. Meanwhile, demand has increased in recent years while no major + power + plants have been built. These factors combined last year to push up + the + wholesale cost of electricity. But the state's biggest + utilities--Pacific Gas & + Electric and Southern California Edison--are barred from increasing + consumer + rates. So the utilities have accumulated billions of dollars in debt + and, + despite help from the state, have struggled to buy enough + electricity. + * + Daily Developments + * Overcharges by major electricity suppliers were estimated at $6.3 + billion, up + from the $5.5 billion first thought, California's power grid operator + said. + * Electricity producers denied that they have profiteered and argued + that + Cal-ISO's figures don't take into account all their costs. + * A Superior Court judge's ruling Thursday freeing a small producer + from its + contract with Edison could lead to a mass exodus by small energy + producers that + have been selling to the utilities without getting paid. + * + Verbatim + ""If these guys have such high costs ... how come they're making so + much money?"" + --Gary Stern, Edison's director of market monitoring and analysis, + referring to + power producers + Complete package and updates at www.latimes.com/power + + + Grid Operator Says California Paid Too Much for Power + By Rebecca Smith and John R. Emshwiller + Staff Reporters of The Wall Street Journal + 03/23/2001 + The Wall Street Journal + A2 + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + California's electric-grid operator said power suppliers may have + overcharged + the state and its utilities by $6.2 billion, or a total of 30%, in a + 10-month + period, and has asked federal regulators to step up their policing of + electricity markets. + Meanwhile, a California state judge handed down a decision involving + small power + producers that could result in more electricity being made available + in the + energy-starved state, but likely at greater cost to the state + government. + + The $6.2 billion figure was contained in a market analysis by the + California + Independent System Operator filed yesterday with the Federal Energy + Regulatory + Commission. The ISO says it isn't seeking a refund -- for the May + through + February period -- because its analysis lacked important market data. + For example, it estimated costs for 21 suppliers based on published + prices for + natural gas, not on specific data showing what each generator + actually paid for + the fuel. ""We don't know how much gas actually was purchased at + spot-market + prices,"" said Anjali Sheffrin, the ISO's head of market analysis. + Charles Robinson, general counsel for the ISO, said FERC needs to + become ""more + aggressive about market-power mitigation."" The ISO's filing, he said, + was + intended to push the agency in that direction, since FERC is + responsible for + policing deregulated electricity and natural-gas markets. + He said that if the FERC doesn't act, the state of California may + find ways to + discipline the market, such as through the state attorney general's + office. The + attorney general has been investigating the state's electricity + market for many + months but hasn't brought any court action. + Dynegy Inc., a big owner of power plants in California, said it will + provide + additional information to FERC supporting its position that the + prices it has + charged for power have been ""just and reasonable."" The Houston + company was one + of 13 energy suppliers that the FERC this month ordered to pay + refunds totaling + $124 million or ""show cause"" why it should be excused. Dynegy said + the FERC + analysis was flawed, because it used ""inaccurate"" prices for natural + gas and + pollution credits. + While big power producers such as Dynegy came under attack, small + power + producers won a potentially significant victory in a state court in + Southern + California's Imperial County. A judge granted 10 geothermal plants + operated by + the CalEnergy Co. unit of MidAmerican Energy Holdings Co., a unit of + Berkshire + Hathaway Inc., of Omaha, Neb., permission to suspend deliveries of + electricity + to Southern California Edison Co. and instead seek other buyers. + These plants, known as ""qualifying facilities,"" are under long-term + contract to + Edison and other utilities but haven't been paid for months. Edison, + a unit of + Edison International, of Rosemead, Calif., says it has been unable to + pay + hundreds of millions of dollars in power bills to CalEnergy and + others because + it has been driven to the brink of insolvency by the state's failed + utility-deregulation plan. + While the CalEnergy case involves only about 320 megawatts of power, + the + repercussions could be far greater. Collectively, hundreds of + qualifying + facilities, or QFs, produce as much as 30% of California's + electricity needs. + QFs totaling 3,000 megawatts cut their production in recent weeks for + lack of + payment. This loss of output was a significant cause of the blackouts + that hit + California this week. + Observers believe the CalEnergy court decision could give other QFs + an + opportunity to sell power in the open market, presumably to the state + government + that now is California's biggest energy buyer. An hour after the + court decision + yesterday, some 400 megawatts of power came back into the market, the + ISO said. + However, additional QF power sales on the open market could + substantially + increase the state's tab. Already, the state has allocated more than + $4 billion + for electricity purchases. + Separately, Edison said in a Securities and Exchange Commission + filing that its + unpaid power bills could contribute to a write-off of as much as $2.7 + billion + for 2000. Because of uncertainty caused by the energy crisis, the + company hasn't + yet reported year-end earnings. + + + + Power regulators debate who should be exempted from blackouts + By KAREN GAUDETTE + Associated Press Writer + 03/22/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + SAN FRANCISCO (AP) - State power regulators said Thursday they are + working to + exempt all California hospitals, regardless of size, from rolling + blackouts. + The Public Utilities Commission met with representatives from + hospitals and + investor-owned utilities after Los Angeles lawyer David Huard filed + an emergency + motion with the PUC on behalf of more than 500 hospitals throughout + the state. + + Under PUC rules, hospitals with more than 100 beds are exempt from + losing + electricity during power emergencies. But during rolling blackouts + Monday, at + least a dozen hospitals from Long Beach to Clearlake were forced to + use their + backup generators. + Pacific Gas and Electric Co. and Southern California Edison Co. say + they blacked + out those hospitals specifically because they have backup generators. + Both + utilities said the temporary blackouts were part of their overall + efforts to + spread the burden of blackouts over more of their customers. + Linda Ziegler, director of business and regulatory planning for SoCal + Edison, + said the utility is following state law and will implement new + guidelines if the + PUC changes them. + But hospitals say there is a 10-second lapse before emergency + generators kick + in, which could harm patients in the midst of delicate surgical + procedures such + as organ transplants or brain surgery. + ""You wouldn't fly a plane with only your emergency backup systems in + place,"" + said Ann Mosher, a spokeswoman for California Pacific Medical Center + in San + Francisco. ""Backup generators are just that, they're not designed to + keep the + hospital up and running at full capacity."" + Ziegler said that power still goes out for reasons beyond the energy + crisis, + from incidents like lightning or a knocked-down power pole. + ""If it's a serious problem for the hospital it's certainly something + they should + be address just from an ongoing basis,"" she said. + The exemption would cover all hospitals within the territory of the + state's + investor owned utilities PG&E, Southern California Edison and San + Diego Gas and + Electric. + Hospitals within the range of municipally owned utilities, such as + the Los + Angeles Department of Water and Power, are separately regulated. + For more than two decades, prisons, hospitals with more than 100 beds + and + emergency services such as fire and police departments have been + classified as + ""essential"" services, and are exempted from blackouts by order of + state power + regulators. + After rolling blackouts began darkening the state in January, many + other public + service groups began seeking relief from power interruptions, + including transit + systems, schools and water districts. + --- + On the Net: + http://www.cpuc.ca.gov + + + + Federal Judge Orders Reliant To Keep Selling Pwr To Calif + 03/22/2001 + Dow Jones Energy Service + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + SACRAMENTO, Calif. (AP)--A federal judge issued a preliminary + injunction + Wednesday ordering a major electricity wholesaler to continue selling + to + California despite its fear that it will not get paid. + U.S. District Judge Frank C. Damrell Jr. said Californians were at + risk of + irreparable harm if Reliant Energy (REI) stopped selling power to the + Independent System Operator, which oversees the state's power grid. + The ISO buys + last-minute power on behalf of utilities to fill gaps in supply. + + Damrell dismissed Reliant's attempt to force the state Department of + Water + Resources to back the ISO's purchases for the state's two biggest + utilities. The + state has been spending about $50 million a day on power for Pacific + Gas and + Electric Co. and Southern California Edison, both denied credit by + suppliers + after amassing billions of dollars in debts. + The judge said he had no authority to force the DWR to pay for that + power. + Gov. Gray Davis has said the state isn't responsible for purchasing + the costly + last-minute power ISO buys for Edison and PG&E, despite a law + authorizing state + power purchases on the utilities' behalf. + ISO attorney Charles Robinson said the ruling gives ISO operators ""a + tool to + assist them in keeping the lights on in California."" + ""Had the decision gone the other way, one could expect other + generators to + simply ignore emergency orders,"" Robinson said. + Damrell's preliminary injunction will remain in effect until the + Federal Energy + Regulatory Commission rules on the matter. + Damrell denied the ISO's request for preliminary injunctions against + three other + wholesalers - Dynegy Inc. (DYN), AES Corp. (AES) and Williams Cos. + (WMB) - which + agreed to continue selling to the ISO pending the FERC ruling. + Spokesmen for Reliant, Dynegy, AES and Williams were out of the + office Wednesday + night and didn't immediately return calls from The Associated Press + seeking + comment on the ruling. + The ISO went to court in February after a federal emergency order + requiring the + power sales expired. The judge then issued a temporary restraining + order, + requiring the sales, but dropped it after the suppliers agreed to + continue sales + to California pending his Wednesday ruling. + The ISO said it would lose about 3,600 megawatts if the suppliers + pulled out, + enough power for about 2.7 million households. One megawatt is enough + for + roughly 750 homes. + Grid officials said Reliant's share alone is about 3,000 megawatts. + Reliant said + the amount at issue actually is less than a fourth of that, because + most of its + output is already committed under long-term contracts. + Reliant, which currently provides about 9% of the state's power, + worries it + won't get paid due to the financial troubles of PG&E and Edison. PG&E + and Edison + say that together they have lost about $13 billion since June due to + soaring + wholesale electricity costs that California's 1996 deregulation law + bars them + from passing onto customers. + + + Calif Small Pwr Producers To Shut Plants If Rates Capped + By Jason Leopold + Of DOW JONES NEWSWIRES + 03/22/2001 + Dow Jones Energy Service + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + LOS ANGELES -(Dow Jones)- Many of California's independent power + producers late + Wednesday threatened to take their small power plants offline this + week if state + lawmakers pass legislation that would cap the rates the generators + charge for + electricity they sell directly to the state's three investor-owned + utilities. + At issue is a bill that would repeal a section of the state's Public + Utilities + Code, which links the 688 so-called qualifying facilities' + electricity rates to + the monthly border price of natural gas. + + Lawmakers, however, are poised to pass the legislation. + State regulators are then expected to approve a measure that would + restructure + the fluctuating rates the QFs charge PG&E Corp. (PCG) unit Pacific + Gas & + Electric, Edison International (EIX) unit Southern California Edison, + and Sempra + Energy (SRE) unit San Diego Gas & Electric from $170 a megawatt-hour + to + $69-$79/MWh, regardless of the price of natural gas. + Whereas each of the 688 QF contracts differed, largely because + natural gas + prices are higher in Southern California than Northern California, + the state + wants the QFs to sign a general contract with the utilities. + The cogeneration facilities, which produce about 5,400 megawatts of + electricity + in the state, said the rates are too low and they won't sign new + supply + contracts with the utilities. + ""For $79/MWh, natural gas would have to be $6 per million British + thermal unit + at + the Southern California border,"" said Tom Lu, executive director + of + Carson-based Watson Cogeneration Company, the state's largest QF, + generating 340 + MW. ""Our current gas price at the border is $12.50."" + Other gas-fired QFs said the state could face another round of + rolling blackouts + if lawmakers and state regulators pass the legislation, which is + expected to be + heard on the Senate floor Thursday, and allow it to be implemented by + Public + Utilities Commission next week. + Lu, whose company is half-owned by BP Amoco PLC (BP) and is owed $100 + million by + SoCal Ed, said the proposals by the PUC and the Legislature ""will + only make + things worse."" + David Fogarty, spokesman for Western States Petroleum Association, + whose members + supply California with more than 2,000 MW, said the utilities need to + pay the + QFs more than $1 billion for electricity that was already produced. + State Loses 3,000 MW QF Output Due Of Financial Reasons + + + The QFs represent about one-third, or 9,700 MW, of the state's total + power + supply. Roughly 5,400 MW are produced by natural gas-fired + facilities. The rest + is generated by wind, solar power and biomass. + About 3,000 MW of gas-fired and renewable QF generation is offline in + California + because the power plant owners haven't been paid hundreds of millions + of dollars + from cash-strapped utilities SoCal Ed and PG&E for nearly four + months. + Several small power plant owners owed money by SoCal Ed have + threatened to drag + the utility into involuntary bankruptcy if the utility continues to + default on + payments and fails to agree to supply contracts at higher rates. + The defaults have left many of the renewable and gas-fired QFs unable + to operate + their power plants because they can't afford to pay for the natural + gas to run + their units. Others continue to produce electricity under their + contracts with + the state's utilities but aren't being paid even on a forward basis. + The California Independent System Operator, keeper of the state's + electricity + grid, said the loss of the QF generation was the primary reason + rolling + blackouts swept through the state Monday and Tuesday. + Gov. Gray Davis, recognizing the potential disaster if additional QFs + took their + units offline, held marathon meetings with key lawmakers Monday and + Tuesday to + try and hammer out an agreement that would get the QFs paid on a + forward basis + and set rates of $79/MWh and $69/MWh for five and 10 year contracts. + He also + said he would direct the PUC to order the utilities to pay the QFs + for power + they sell going forward. + ""After next week the QF problem will be behind us,"" Davis said + Tuesday. ""We want + to get the QFs paid...the QFs are dropping like flies...and when that + happens + the lights go out."" + But this just makes the problem worse, said Assemblyman Dean Florez, + D-Shafter, + a member of the Assembly energy committee. + ""I don't know how we are going to keep the lights on,"" Florez said in + an + interview. ""Many of these congenerators are in my district. They said + if the + legislation doesn't change they are going offline. This compounds the + issue of + rolling blackouts, especially now when we need every megawatt."" + Davis, who didn't meet with people representing the QFs, said he was + handing the + QF issue to the PUC because lawmakers failed to pass legislation that + would have + set a five-year price for natural gas and allow the QFs to sign + individual + contracts with the utilities. In addition, SOCal Ed opposed the + legislation, + saying the rates should be below $50/MWh. + Some renewable power producers said they aren't vehemently opposed to + the new + rate structure because it guarantees them a higher rate than what was + originally + proposed. + QFs Want Third Party Supply Contracts + + + John Wood, who represents the SoCal Ed Gas Fired Creditors Committee, + one of a + handful of groups that have formed since January to explore options + on getting + paid by the utilities, said his group of gas-fired QF creditors want + to be + released from their supply contracts and sell to third parties. + ""Under our plan, we would be permitted to sell electricity to third + parties + (including the state Department of Water Resources) until a + resolution to the + crisis can be accomplished,"" wood said. + Hal Dittmer, president of Sacramento-based Wellhead Electric in + Sacramento, + which is owed $8 million by PG&E, has 85 MW of gas-fired generation + units + offline. + Under the state's plan, Dittmer said he risks going out of business. + ""I can't buy natural gas for what I would be paid under this + decision,"" he said. + ""The state needs to quit kidding themselves that they don't need to + raise + electricity rates. All of this is being driven by an artificial + construct that + California can avoid raising rates."" + + -By Jason Leopold, Dow Jones Newswires; 323-658-3874; + jason.leopold@dowjones.com + + + Power Strain Eases but Concerns Mount Energy: Officials say summer + prices will be high, and a state report shows that contracts with + generators are far short of goals. + DAN MORAIN; JENIFER WARREN + TIMES STAFF WRITERS + 03/22/2001 + Los Angeles Times + Home Edition + A-3 + Copyright 2001 / The Times Mirror Company + + SACRAMENTO -- California's fragile electricity system stabilized + Wednesday, but + a Davis administration report suggested troubles ahead because the + state could + be forced to buy most of its power for the coming summer on the + costly and + volatile spot market. + After two days of statewide blackouts, power plants that had been + shut down were + cranked up. Unseasonable heat tapered off. The operators of the + statewide power + grid relaxed their state of emergency. + + But plenty of ominous signs remained. Many small producers remained + shut down, + skeptical about Gov. Gray Davis' plan for utilities to pay them. + State Controller Kathleen Connell issued a sharp warning about the + high cost of + the state's foray into the power business and announced that she will + block an + administration request that she transfer $5.6 billion into an account + that could + be tapped to pay for state purchases of electricity. + And a report from the administration summarizing contracts between + Davis and + independent power generators showed that the state has signed + contracts for only + 2,247 megawatts of electricity, significantly less than the 6,000 to + 7,000 + megawatts previously claimed. + While there are agreements in principle for the full amount, the + report notes + that generators can back out of the contracts for a variety of + reasons, + including the state's failure to sell bonds to finance power + purchased by July + 1. The Legislature has approved plans to sell $10 billion in bonds, + but none + have yet been issued. + ""We are exposed enormously this summer,"" Senate Energy Committee + chairwoman + Debra Bowen (D-Marina del Rey) said after looking at the report. ""We + owe the + people the truth about how difficult this summer is going to be. We + don't have a + power fairy."" + Perhaps most significant, the report suggests that the contracts fall + significantly short of Davis' stated goal of buying no more than 5% + of the + state's summer needs on the spot electricity market, where prices can + be many + times those of long-term contracts. + After reading the report, Frank Wolak, a Stanford University + economist who + studies the California electricity market, said the numbers suggested + that the + state's long-term contracts will cover less than half of what the + state will + need this summer. + ""We're definitely short this summer, next summer and the summer of + 2003,"" he + said. + California was forced to start buying electricity in December--at a + cost of $50 + million a day--because producers refused to sell to Southern + California Edison + and Pacific Gas & Electric. The two utilities amassed billions of + dollars in + debt when prices for wholesale power soared on the spot market. + Vikram Budhraja, a consultant retained by Davis to negotiate deals + with + generators, said the report represents a ""work in progress."" He said + the state + may yet sign new contracts. + However, Wolak said the contract figures confirm what he and others + have been + dreading: that summer is going to be rife with rolling blackouts + unless serious + steps to cut demand are taken immediately. + Wolak and other experts say large industrial customers must be + switched to + real-time meters and pricing to persuade them to use the bulk of + their energy at + times of low demand. + The head of the Energy Foundation, a San Francisco-based nonprofit + that promotes + sustainable sources of power, made the same proposal to Davis on + Wednesday. + ""The government need not ask customers to swelter in the dark this + summer,"" + foundation President Hal Harvey argued in a letter. + He also proposed a crash campaign to boost sales of efficient + appliances and + lightbulbs. He said the state needs to take over the utilities' + contracts with + alternative energy providers to ensure they stay in business, and + sign new + contracts for 1,500 megawatts of new wind power--the cheapest, + fastest and + cleanest source of new supply. + Davis had proposed a formula Tuesday to force private utilities to + pay the + alternative producers, some of which have not been paid since + November. But some + of them warned Wednesday that Davis' plan offers them little + incentive to turn + on their generators. + Alternative energy producers supply more than a quarter of the + electricity + consumed in California. + Many producers generate electricity from wind, sun and geothermal + sources. But + most of them generate power using natural gas--and the cost of + natural gas has + been soaring. Several natural gas users said Davis' plan, which caps + rates, + won't cover their fuel costs. + Davis assumes that the price of natural gas will fall. But small + generators say + they don't have sufficient purchasing power or sophistication to + gamble on + future prices. + The Public Utilities Commission is expected to approve Davis' + proposal next + week. It offers producers two choices: 7.9 cents a kilowatt-hour if + they agree + to supply power for five years, or 6.9 cents a kilowatt-hour over 10 + years. + ""The price of natural gas is higher than that,"" said Marty Quinn, + executive vice + president and chief operating officer of Ridgewood Power LLC, which + owns three + natural gas-fired co-generation plants. ""If we operate, we'll lose + money."" + Ridgewood is not operating, having been cut off by gas suppliers. The + company + sued PG&E last month seeking overdue payments and release from its + contracts + with the utility. + A hearing is scheduled in El Centro today in another lawsuit filed by + a small + energy producer, an Imperial Valley geothermal producer that sued + Edison for + refusing to let it break its contract and sell on the open market. + CalEnergy + says Edison owes it about $140 million for energy sold since + November. + A company spokesman, Jay Lawrence, said CalEnergy was going ahead + with its suit + despite Davis' proposal. ""We've had promises before,"" he said. + In other developments: + * A federal judge in Sacramento on Wednesday ordered Reliant Energy + of Houston, + a major producer, to continue selling power to California during + emergencies, + despite the company's argument that it may not be fully reimbursed. + The order + will remain in effect for 60 days or until the U.S. Federal Energy + Regulatory + Commission decides a related case. + * Connell said the state budget surplus has shrunk to $3.2 billion + because the + state has spent roughly $2.8 billion on electricity. She criticized + the + administration for withholding basic information about state + finances, and said + she will begin an audit on Monday of the Department of Water + Resources, which is + responsible for purchasing power. + Davis' aides said Connell took her action because the Democratic + governor + endorsed one of Connell's foes this week in the race for Los Angeles + mayor, + former Assembly Speaker Antonio Villaraigosa. A Connell aide scoffed + at the + notion. + * Sen. Dianne Feinstein (D-Calif.) said she ""never has had a + response"" from + President Bush after writing him last month for an appointment to + discuss the + California energy crisis. + In a wide-ranging lunch talk with reporters in Washington, she + deplored the fact + that ""huge, huge profits are being made"" in the California crisis, + and said ""an + appropriate federal role"" would be to guarantee a reliable source of + power until + the state can get nine new generators online. + * + Times staff writers Mitchell Landsberg in Los Angeles and Robert L. + Jackson in + Washington contributed to this report. + (BEGIN TEXT OF INFOBOX / INFOGRAPHIC) + Power Points + Daily Developments + * Wholesale electricity suppliers overcharged by about $5.5 billion + between May + and last month, and that money should be refunded to taxpayers and + utilities, + according to a Cal-ISO report. + * The state may have to buy most of its power for summer on the + costly spot + market, which could drive consumers' bills up, a Davis administration + report + concludes. + * State Controller Kathleen Connell said she will block a request by + the Davis + administration for $5.6 billion for state purchases of electricity. + Verbatim + ""We owe the people the truth about how difficult this summer is going + to be. We + don't have a power fairy."" + Debra Bowen (D-Marina del Rey), Senate Energy Committee chairwoman + + + CPUC Must Address Rates In QF Repayment Order - SoCal Ed + 03/21/2001 + Dow Jones Energy Service + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + LOS ANGELES -(Dow Jones)- Any order from the California Public + Utilities + Commission requiring utilities to pay small, independent generators + going + forward must determine how that could be done within the existing + rate + structure, a spokesman for Edison International (EIX) utility + Southern + California Edison said Wednesday. + The utility was responding to a PUC proposed decision that would + require + utilities to pay small generators, called qualifying facilities, $79 + a megawatt + hour within 15 days of electricity delivery. The decision will be + voted March 27 + by the CPUC. + + ""We're still reviewing (the decision) and should have more to say in + a day or + two. To the extent that the commission orders us to pay going forward + of course + we will. But it needs to address how we will pay the QFs,"" a SoCal + Edison + spokesman said. + SoCal Edison and PG&E Corp. (PCG) unit Pacific Gas & Electric Co. are + struggling + under nearly $13 billion in uncollected power costs due to an + inability to pass + high wholesale power costs to customers under a rate freeze. + Gov. Gray Davis Tuesday blasted the utilities for not having paid + their QF bills + in full since December. Pacific Gas & Electric Co. has made some + partial + payments to QFs, but SoCal Edison has paid nothing. Together, they + owe the QFs + about $1 billion, but the order doesn't address that debt. + An Edison executive said, in reaction to the governor's sharp + comments, that the + company simply doesn't have the money to pay creditors. + ""The root problem here is there just isn't enough money in the + current rate base + to pay our bills,"" said Edison Senior Vice President of Public + Affairs Bob + Foster. ""We understand the financial distress (the QFs) face; we are + facing + financial distress ourselves."" + The proposed PUC order would also require the state's investor-owned + utilities + to offer the small generators five- and 10-year contracts for power + for $79/MWh + and $69/MWh, respectively. + The QFs ""may be able to live with"" the PUC proposal, but the five- + and 10-year + contract prices may be inadequate if natural gas prices at one of the + California + borders are high, said Jan Smutny-Jones, president of the Independent + Energy + Producers Association. Natural gas prices into California are + currently higher + than anywhere in the country. + But some say the proposed decision may not be enough to prevent the + QFs from + filing involuntary bankruptcy proceedings against the utilities for + the money + they are still owed. + ""There's still a lot of skepticism. To say our position has changed + based on the + CPUC decision or the governor's announcement is not accurate. A lot + still has to + happen,"" said Jay Lawrence, a spokesman for a renewable creditors + committee. + -By Jessica Berthold, Dow Jones Newswires; 323-658-3872; + jessica.berthold@dowjones.com -0- 22/03/01 01-27G + + + + State Says It's Accelerating Plan to Buy Power Utilities' Grid + Government: Talks with Edison are reported near completion, but + agreement with heavily indebted PG&E has a way to go. + RONE TEMPEST; DAN MORAIN + TIMES STAFF WRITERS + 03/21/2001 + Los Angeles Times + Home Edition + A-22 + Copyright 2001 / The Times Mirror Company + + SACRAMENTO -- As blackouts hit California for a second day Tuesday, a + key + consultant to Gov. Gray Davis said negotiations to buy the power grid + owned by + the state's largest utilities ""are proceeding at an accelerated + pace."" + Wall Street consultant Joseph Fichera said talks with Southern + California Edison + could be wrapped up within days, although those with PG&E are much + less + advanced. + + The administration and PG&E have not reached even an agreement in + principle, he + said. PG&E, which has more debt than Edison, says its transmission + lines are + more extensive than those of its Southern California counterpart. + The state wants to buy the utilities' transmission lines and other + assets for + about $7 billion to provide cash to the utilities, help stabilize the + electricity supply and ease the power crunch that has plagued + California for + months. To research the grid purchase, Fichera said, the state has + had to pore + over 80,000 documents just to assess the utilities' liabilities. + ""We are working at a good pace,"" said Fichera, chief executive of the + New York + firm Saber Partners. "" . . . If we get to a deal-breaker, it might be + longer."" + By making Fichera, who is also a consultant to the Texas Public + Utilities + Commission, available to reporters Tuesday, the Davis administration + was clearly + trying to reassure the public that progress is being made on the + governor's plan + to pull the state out of the crisis. + Since mid-January, when the big utilities' credit failed and + suppliers stopped + selling to them, the state has spent nearly $3 billion buying + electricity from a + handful of large suppliers in Texas, Oklahoma, Georgia and North + Carolina. Not a + cent has gone to the hundreds of alternative energy suppliers in + California who + provide about a quarter of the state's electricity. + The Monday and Tuesday blackouts occurred partly because many of the + cash-strapped alternative suppliers, including solar, biomass and + wind power + units, cut their normal supply to the system in half. They say Edison + and PG&E + have not paid them since November; the utilities say they are out of + cash. + Assemblyman Fred Keeley (D-Boulder Creek) said the plight of the + alternative + suppliers has dragged on because of the complexity of dealing with + ""almost 700 + individual contractors."" + Another delaying factor, said Keeley, who with state Sen. Jim Battin + (R-La + Quinta) worked for almost three months to come up with a legislative + plan to + lower the small producers' prices, was ""the huge enmity . . . + manifested between + the utilities and the qualifying facilities. These people just don't + like each + other."" + This week's blackouts provided two painful lessons for the Davis + administration: + + * When it comes to electricity, size doesn't matter--every kilowatt + counts. + During peak use, a small wind power facility in Riverside County can + make the + difference between full power and blackouts. + * There is no such thing as a partial solution. Unless the whole + energy equation + is balanced, the parts don't work. + For the Davis plan to work, several key elements need to come + together or + utility customers will almost certainly face rate increases above the + 19% + already set in motion * The cost of power purchased by the state must + be reduced + through long-term contracts with the big out-of-state producers. + These contracts, the details of which the Davis administration has + kept + confidential, are still being negotiated by Davis consultant Vikram + Budhraja of + the Pasadena firm Electric Power Group. The administration says it + has concluded + 40 contracts with generators, about half of which have been signed. + According to the most recent statistics released by the Department of + Water + Resources, which buys power for the state, current prices are still + well above + the rate state Treasurer Phil Angelides says is necessary for a + planned + $10-billion bond offering to succeed. + The bonds, set for sale in May, will be used to reimburse the state + for the + money it will have spent by that time to buy electricity. The state + is currently + spending at a rate of $58 million a day to buy power. If prices stay + high, the + $10 billion in bonds will not cover the state's power purchases by + the end of + the summer. + Angelides says he cannot proceed with bridge financing for the bonds + until the + Public Utilities Commission devises a formula to guarantee that a + portion of + utility bills will be dedicated to bond repayment. Angelides has + estimated that, + under the January law that put the state in the power buying + business, the state + must be reimbursed $2.5 billion annually, and that $1.3 billion is + needed to + service the debt. + PUC Administrative Law Judge Joseph R. DeUlloa is expected to + announce his + ruling on the reimbursement rate later this week, leading to a PUC + vote on the + matter as early as next week. + * The rates charged for electricity by the alternative producers, + known as + qualifying facilities, must be cut at least in half, down from an + average of + more than 17 cents per kilowatt-hour. In his news conference Tuesday, + Davis said + he will ask the PUC to set QF rates at 6.9 cents for 10-year + contracts and 7.5 + cents for five-year contracts. + Meanwhile, PUC Chairman Loretta Lynch, a Davis appointee, said + Tuesday that the + commission will vote next week on a proposed order requiring Southern + California + Edison and Pacific Gas & Electric to pay the QFs for electricity in + the future. + Lynch said a recent PUC assessment showed that the utilities have + enough cash on + hand for that. + ""We are trying to make sure the folks providing the power get paid,"" + Lynch said. + ""The qualified facilities have demonstrated that they haven't been + paid and that + it is impairing their ability to provide power."" + The utilities contend that if they pay the small providers what they + owe them, + there will not be enough money left to pay other creditors. + ""There is not enough money in the current rate structure to pay the + [alternative + producers], pay the [Department of Water Resources] and pay the + utilities for + their generation,"" said John Nelson, a spokesman for PG&E. + * The utilities must sell to the state the power they produce + themselves, mainly + from hydro and nuclear sources, at a rate only slightly above the + cost of + producing it. This is tied to the ongoing negotiations between the + Davis + administration and the utilities to restore the near-bankrupt + utilities to + solvency. + * + Times staff writers Julie Tamaki, Miguel Bustillo and Tim Reiterman + contributed + to this report. + + + Davis OKs Subsidy of Pollution Fees Smog: As part of secret deal to + get long-term energy contracts, state would pay for some of the + credits that allow excess power plant emissions. Critics renew call + for full disclosure. + DAN MORAIN + TIMES STAFF WRITER + 03/21/2001 + Los Angeles Times + Home Edition + A-23 + Copyright 2001 / The Times Mirror Company + + SACRAMENTO -- As part of his closed-door negotiations to buy + electricity, Gov. + Gray Davis has agreed to relieve some generators from having to pay + potentially + millions of dollars in fees for emitting pollutants into the air, + Davis said + Tuesday. + Davis announced two weeks ago that his negotiators had reached deals + with 20 + generators to supply $43 billion worth of power during the next 10 + years. + + However, the Democratic governor has refused to release any of the + contracts or + detail various terms, contending that release of such information + would hamper + the state's ability to negotiate deals with other generators and + therefore + ultimately would raise prices Californians pay for electricity. + Sources familiar with the negotiations, speaking on condition of + anonymity, said + the agreement reached with Dynegy Inc., a power company based in + Houston, is one + that includes language requiring that the state pay the cost of + credits that + allow emissions. Dynegy spokesman Steve Stengel declined to discuss + the + company's deal with the state. + ""We couldn't get them to sign contracts; it was a sticking point,"" + Davis said of + the decision to pay the fees of some generators. ""We had to lock down + some power + so we were not totally dependent on the spot market."" + The fees in question are part of an emission trading system known as + RECLAIM. + Under the system, companies are allotted a certain amount of + allowable + pollution. If their operations pollute more, companies are required + to purchase + credits on an open market. Currently the credits cost about $45 per + pound of + pollution--an amount that can lead to a bill of well over $10 million + a year for + a power plant. + The South Coast Air Quality Management District, which regulates + pollution in + the Los Angeles Basin, is considering steps to significantly lower + the cost of + the system--a step that could considerably cut the state's potential + cost, Davis + said. + Senate Energy Committee Chairwoman Debra Bowen (D-Marina del Rey) + defended the + decision to cover the power company's costs. + ""It is a question of whether it brings down the price of power,"" she + said. ""If + it brings down the price of power, I don't have a problem with it."" + Nevertheless, word that the contracts could bind the state to pay + pollution fees + caused some critics of Davis' policy to renew calls for Davis to + reconsider the + secrecy surrounding the power negotiations. The payment provision + underscores + the fact that the contracts involve more than merely the prices the + state will + pay for its megawatts, the critics note. + ""The Legislature should have known about it,"" said Senate President + Pro Tem John + Burton (D-San Francisco). ""It is going to cost taxpayers money. It + makes you + wonder. . . . This was a policy issue that was never discussed with + the + Legislature."" + V. John White, a lobbyist for the Sierra Club, who also represents + alternative + energy producers, called the contract proposal ""a horrible + precedent."" + ""Until we know exactly what the state has agreed to and how much of a + subsidy + this represents, we can't determine how serious the breach of + principle this + is,"" White said. + Another critic of the secrecy of the negotiations, Terry Francke, + general + counsel for the California First Amendment Coalition, said the + provision in + question ""raises the possibility that there are other [concessions]"" + that have + not yet come to light. + In the summer, when demand for power is highest, some generators + probably will + exceed pollution limits set by regional air quality management + districts. + To avert blackouts, state officials might ask the companies to keep + plants + running. In such cases, some sources familiar with aspects of the + contracts + said, the contract language could be interpreted to suggest that the + state would + cover any fines--although Davis said Tuesday the state will not cover + the cost + of fines. + A recent Dynegy filing with the Securities and Exchange Commission + underscores + the rising cost of pollution-related measures. The company, which is + partners + with NRG Energy in three California plants in El Segundo, Long Beach + and + Carlsbad in San Diego County, said its ""aggregate expenditures for + compliance + with laws related to the regulation of discharge of materials into + the + environment"" rose to $14.3 million in 2000, from $3.6 million in + 1999. + A South Coast Air Quality Management spokesman said Dynegy's + facilities appear + to be fairly clean--although Sierra Club lobbyist White said Dynegy + has been + seeking a permit at one of its plants to burn fuel oil, which is + dirtier than + natural gas. + Davis said he intends to ""make this information public,"" but he added + that ""we + do not want to put the public's interest in jeopardy by asking them + to pay + higher prices."" + ""Nobody likes the notion that [the administration is] not being fully + forthcoming,"" Davis said. ""But I also have a corollary responsibility + that I + don't stick these generators with a higher rate."" + + + FERC ORDERS WILLIAMS ENERGY AND AES TO EXPLAIN THEIR REFUSAL TO MAKE + CERTAIN RMR UNITS AVAILABLE TO CALIFORNIA ISO LAST YEAR + 03/21/2001 + Foster Electric Report + 5 + (c) Copyright 2001, Foster Associates, Inc. + + Following a preliminary, non-public investigation, FERC directed AES + Southland + Inc. and Williams Energy Marketing & Trading Co. (IN01-3) on March 14 + to show + cause why they did not violate section 205 of the Federal Power Act + (FPA) by + failing to provide power to the California ISO from two reliability + must-run + (RMR) generator units during a period in April and May 2000. The + investigation + responded to a matter referred by the Cal-ISO. If a violation is + found, Williams + Energy and AES could be required to refund excess profits of $10.9 + million (as + calculated by FERC) and face restrictions on their market-based rate + authority + for a year. + The show cause order involves two generation units (Alamitos 4 and + Huntington + Beach 2), owned and operated by AES. Williams Energy markets all + output from the + Alamitos and Huntington Beach plants, including the two units at + issue here, + pursuant to a tolling agreement filed with the Commission. The + Cal-ISO + designated the two units as RMR units that it could call on when + necessary to + provide energy and ancillary service essential to the reliability of + the + California transmission network. The Cal-ISO makes both a fixed + payment to the + RMR owner or operator to compensate for the RMR unit's availability + and a + variable payment for the RMR unit's output (if the unit is not + otherwise + participating in the market). Williams Energy and the Cal-ISO + executed RMR + agreements, filed as rate schedules with the Commission, allowing the + Cal-ISO to + dispatch units ""solely for purposes of meeting local reliability + needs or + managing intra-zonal congestion."" The ISO may dispatch a non-RMR unit + if the + designated RMR unit is not available. Under its RMR agreement with + the ISO, + Williams is paid the greater of its contract price or marginal cost + for + operating RMR units. However, if a non-RMR unit has to be dispatched + because a + designated RMR unit is unavailable, Williams will be paid its bid + price, not the + RMR contract price. + + During the April to May 2000 period, the Cal-ISO sought to dispatch + both + Alamitos 4 and Huntington Beach 2 as RMR units to provide voltage + support. + However, according to the FERC order, Williams Energy refused to make + Alamitos 4 + available from April 25 through May 5, and to make Huntington Beach 2 + available + from May 6 through May 11, ""for reasons not directly related to the + necessary + and timely maintenance of the units."" Consequently, the Cal-ISO was + forced to + dispatch non-RMR units at a higher cost, namely, Williams Energy's + bid price for + service provided by the replacement units. + By contrast, if the RMR units had not experienced outages and been + available + from April 25 through May 11, Williams Energy would have received + either (1) the + market revenues only from the respective units, which would have + resulted in no + payments for RMR output from the ISO to Williams Energy, or (2) + Williams + Energy's variable cost for operating the RMR units less the market + revenues from + the respective units' output. Accordingly, FERC observed, Williams + Energy had ""a + financial incentive to prolong any outages of Alamitos 4 and + Huntington Beach 2 + in April and May 2000."" + The bid price for the non-RMR units was at or near the Cal-ISO's + then-effective + bid cap of $750/MWh, FERC continued. Therefore, Williams Energy + received + payments from the Cal-ISO of more than $11.3 million, or about $10.3 + million + greater than the estimated average variable operating cost of the + non-RMR units + (approximately $63/MWh) during the period in question. This indicates + a refund + amount, including interest, of nearly $10.9 million. + The information in this order and a non-public appendix, the + Commission + declared, suggests that AES declared outages at the two RMR units and + maintained + Huntington Beach 2 in a manner inconsistent with good utility + practice, and that + Williams Energy took action to extend the outage at Alamitos 4 and to + make + Huntington Beach 2 unavailable for ""pretextual reasons."" + Based on this information coupled with Williams Energy's financial + incentive not + to make the Alamitos 4 and Huntington Beach 2 units available, FERC + found + serious questions about whether (1) AES and Williams Energy violated + applicable + RMR contracts and tariffs on file with the Commission pursuant to FPA + section + 205 when they refused to make Alamitos 4 and Huntington Beach 2 + available for + dispatch by the Cal-ISO; (2) whether Williams acted inconsistently + with its + market-based rate authority and the market monitoring information + protocols of + the Cal-ISO's tariff regarding the unavailability of the RMR units + during the + period at issue; and (3) whether AES violated a tolling agreement on + file with + the Commission pursuant to section 205. + The Commission identified two remedies for these potential + violations: a refund + by Williams Energy and/or AES of revenues received greater than the + amount that + would have collected from the ISO if the RMR units had been + available, and a + condition on Williams Energy's market-based rate authority. + Specifically, for a + one-year period, if an RMR unit were not available when dispatched by + the + Cal-ISO, a non-RMR unit dispatched in its place would only receive + payment + according to the terms of the applicable RMR contract. In other + words, Williams + Energy would not receive the bid price for operation of the + substitute, non- RMR + unit. + The Commission directed Williams Energy and AES to show cause, within + 20 days, + why they should not be found to have committed the above-described + violations + and why the specified remedies should not be imposed. + Further, to ensure procurement of all relevant information, the + Commission + instituted a formal, non-public investigation into the operation, + maintenance + and sales of power from the Alamitos and Huntington Beach plants in + 2000 and + 2001. + + + Calif Consumers Failing To Conserve Pwr Despite Blackouts + 03/20/2001 + Dow Jones Energy Service + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + LOS ANGELES -(Dow Jones)- California consumers haven't been + conserving enough + electricity to relieve strain on the power grid and reduce demand in + the state, + a spokesman with the Independent System Operator said Tuesday. + The ISO said that despite two straight days of statewide rolling + blackouts, + consumers aren't using less electricity, which means additional + megawatts will + be taken off the grid. As a result, blackouts could last longer and + impact + additional communities, the ISO said. + + ISO spokesman Pat Dorinson said Monday ""conservation in California is + no longer + an option,"" but consumers in the state aren't heeding the call to + reduce + consumption. + Conservation efforts during rolling blackouts Monday and Tuesday were + far less + than Jan. 17 and Jan. 18, when blackouts swept through Northern + California due + to transmission constraints. Jim Detmers, the ISO's vice president of + operation, + said consumers saved the state about 1,000 megawatts of electricity, + enough + power for 1 million houses. + The ISO said conservation efforts Monday were about 500 MW or less. + ""We would be very happy if we saw the same amount this time,"" Detmers + said. + The state's Energy Commission said consumers think it's no longer + important to + save electricity until blackouts are imposed. + ""People have been saving generally, but it isn't a big bump from hour + to hour,"" + a spokesman for the Energy Commission said. + Gov. Gray Davis launched a massive conservation campaign this month, + promising + consumers a rebate on their summer electricity bill if they save at + least 20% of + electricity, compared with last summer. + The governor said he believes conservation this summer will amount to + possibly + saving 5,000 MW and averting the chance of rolling blackouts. + -By Jason Leopold; Dow Jones Newswires; 323-658-3874; + jason.leopold@dowjones.com + + + Gas Co.'s Success Opens Debate Southern California energy supplier + has reaped + millions of dollars in state incentives for keeping down its costs. + Though + consumers get a share of the windfall, regulators are asking whether + they should + get more of the bonus, which is expected to be huge this year, as a + form of + price relief. The natural gas provider says it deserves to keep its + reward. + TIM REITERMAN + TIMES STAFF WRITER + 03/18/2001 + Los Angeles Times + Home Edition + C-1 + Copyright 2001 / The Times Mirror Company + + SAN FRANCISCO -- While consumers suffer soaring energy bills and the + big + electric utilities lurch toward insolvency, the news is not all dire + at Southern + California Gas Co. + Through vigorous deal making, the Sempra Energy subsidiary has + consistently + beaten the volatile natural gas market during the last year, and the + company + stands to reap millions of dollars in savings through a state + incentive program + that rewards utilities for keeping costs down. + + For several years, the utility has been splitting the savings 50-50 + with + ratepayers whenever the company's gas costs fall slightly below + market levels. + Those savings, Gas Co. executives acknowledged, have shot to + unprecedented + heights during the state's power crisis. + Now, in this climate of high consumer gas bills and runaway market + prices, + regulators are taking another look at the program. The question + before the + Public Utilities Commission: Should Gas Co. ratepayers, who endured + huge bill + increases this winter, get a bigger share of the savings? + The total windfall under the incentive program has in some years + exceeded $20 + million. But the amount for the last 12 months is expected to + multiply many + times over, company executives said, partly because the Gas Co. has + done so well + in the wild market by selling, lending and trading gas as well as + buying it. + ""The recent market conditions . . . could possibly result in some + unintended + consequences that result in shared savings of benefits that may be + more + appropriately allocated entirely to ratepayers,"" the PUC's consumer + protection + arm, the Office of Ratepayer Advocates, reported Oct. 30, even before + the latest + upward market spirals. + Gas Co. representatives express frustration, saying they have done + what the + state has requested under its gas-cost incentive program: Buy + smarter, and pass + the savings along to its 5 million residential and small-business + customers. The + company contends it has worked hard to keep bills down and should be + rewarded + for taking risks to obtain gas at the lowest possible cost. + ""The PUC, every time we do well, raises the bar on us,"" said Jim + Harrigan, + director of gas acquisition. ""I don't necessarily agree with it."" + By virtue of its purchasing power and storage and pipeline capacity, + the Gas Co. + has become a big player in the regional natural gas market. In the + company's + bustling trading room at its Los Angeles headquarters, 15 employees + track price + movements, pipeline supplies and even the weather via computer, while + cutting + deals and arranging gas shipments. + Although the Gas Co. buys the commodity for its customers, the + company also + sells to marketers, other utilities and producers. State officials + say the + number of transactions by the company has risen steeply to 10,000 to + 20,000 a + year, including gas sales along California's border, where prices + have rocketed. + + The PUC created the cost incentive program for the state's three + major gas + utilities--San Diego Gas & Electric Co. in 1993, Southern California + Gas the + next year and PG&E Corp.'s Pacific Gas & Electric Co. in 1997. Like + Southern + California Gas, SDG&E is a subsidiary of Sempra Energy. + The program was designed to give utilities added motivation for + obtaining gas at + the best price for customers. It replaced lengthy and contentious + reviews by the + PUC, which assessed whether utilities had purchased gas at reasonable + prices and + sometimes ordered them to return millions of dollars to customers. + An annual audit of the Gas Co. program and a staff evaluation + requested by the + PUC recently concluded that the program has achieved many of its + goals, but it + also proposed adjustments that would give customers a greater share + of the + rewards. + ""These incentives were designed in less volatile times,"" said program + supervisor + Mark Pocta of the Office of Ratepayer Advocates, which conducted the + audit. + ""There is a question of how much should go to ratepayers and + shareholders."" His + office also plans to assess whether the Gas Co.'s trading had any + negative + effects on the gas market, resulting in diminished supplies or higher + prices for + other utilities and their customers. + Under the program, the Gas Co. shares risks and rewards with its + ratepayers, but + since the program was launched, it has consistently produced awards. + If the cost + of gas is 0.5% or more below a benchmark based on monthly gas market + indexes, + the company and its customers split the savings 50-50. + California's gas utilities are not allowed to profit on their raw + commodity + costs; they merely pass along those costs to ratepayers with no + markup. The + savings under the incentive program are automatically reflected in + consumers' + monthly gas bills but are not itemized. + At the end of the year, the utilities request their share of the + savings, and + the PUC has routinely granted approval. Then the companies, and thus + their + shareholders, are paid through customer utility bills. + The resulting bill increases typically have been modest, less than + 1%. But as + the awards increase, regulators say, the effect on customers will + become more + significant unless the present structure is changed. + ""There's no question, when you start to talk about $100 million [or + more in + savings], and add [the company's award] into rates in a year, it will + make a + noticeable difference,"" said Los Angeles economist Jeff Leitzinger, + president of + Econ One, who has done consulting for the Gas Co. + Still, he said, ratepayers should bear in mind that they already + benefit from + below-market gas and transportation costs. + In the early years of the program, records show, the Gas Co.'s awards + went from + zero to $3.2 million, $10.6 million, $2 million and $7.7 million. + Last year's + award of $9.8 million is awaiting PUC approval. + This year's proposed award, covering the period through the end of + this month, + has not yet been submitted by the Gas Co. But the utility has + provided monthly + figures and oral updates on a confidential basis to PUC officials, + who declined + to provide figures. + Harrigan of the Gas Co. said the savings are expected to multiply + ""many times + over,"" largely because the company was well-equipped for the market + fluctuations + and tried to insulate its customers from high gas prices. + ""Any trading company, especially one with assets like we have, has + benefited + from volatility in the market,"" he said. + Harrigan said, however, that he does not believe the company's level + of activity + has adversely affected the market and that its trading pales in + volume to that + of unregulated energy companies. + Anne Smith, the Gas Co.'s vice president of customer service and + marketing, said + the utility will not release figures for this year's incentive + program until + they are filed with the PUC in June. + ""I don't want to interrupt that process,"" Smith said, noting that the + PUC + ultimately will determine the company's award. ""I think they need to + focus on + what [the Gas Co.] has done for the ratepayers. It has been immense."" + Although the typical monthly gas bill has risen to $80 from $50 a + year ago, Gas + Co. customers tend to have lower rates than those of other California + utilities. + + The company's gas procurement cost in February was 66 cents per + therm, or 100 + cubic feet. That's more than twice last year's cost but only about + half what + sister company SDG&E paid for its 740,000 customers in February. It's + also much + lower than the $1.09 per therm PG&E pays. + ""We were as upset about the overall [gas price] increase as anyone + else,"" + Harrigan said. ""I would rather see the prices of a year ago, even + though we + managed to do a little better in the [recent] environment."" + When it comes to keeping down costs, regulators say, the Gas Co. has + advantages + over other utilities in the marketplace. For one, the company has so + much + pipeline capacity at major gas basins that it purchases a relatively + small + portion of its needs--about 10% to 15%--at the California border, + where prices + in December briefly rose to the equivalent of $6 per therm, or 20 + times those a + year earlier. + This presents opportunities. + ""At the beginning of the month, they forecast a certain amount of gas + they have + to buy,"" said Pocta of the Office of Ratepayer Advocates. ""If they go + out and + buy and do not need to use as much because the weather is more + moderate than + expected, they can either inject the gas into storage or they can + make sales at + the border."" + With gas price run-ups like those seen in the last year, Pocta said, + ""there is a + question: Should that benefit be shared, or flow entirely to + ratepayers?"" + Customers, he pointed out, may be entitled to additional benefits + because they + pay for the interstate and intrastate pipeline capacity and the gas + storage that + give the company the flexibility to make advantageous deals. + ""By the same token, we want [the Gas Co.] . . . to go into the market + and + generate cost savings that can be passed on to the customers,"" he + added. ""We + want them to have incentives. The question is how to balance them."" + Under deregulation, the Gas Co. adopted the nontraditional role of + marketer, + according to a PUC Energy Division report in January. The company + makes gas + sales at various locations. It engages in exchanges. It makes futures + transactions to help stabilize costs. + ""They look for ways to lower the gas cost,"" said Richard Myers, + program + supervisor at the Energy Division. ""Before they were lots more + risk-averse. Now + they feel they can take risks and make money for shareholders, and it + is a + benefit for ratepayers at the same time."" + The incentive programs are tailored to individual utilities, so it is + difficult + to compare them. Records show that the shared savings at SDG&E, a + much smaller + utility, declined steadily from $9.2 million in the 1996-97 cycle to + $560,000 in + 1999-2000. + Spokesman Ed Van Herik said the falloff largely represents a drop in + gas + purchases, especially as the company sold off its own gas-fired + electricity-generating plants. He said the company does not yet know + how much + savings have accrued in the last year. + In an annual report to the PUC in February, PG&E said it had no + savings under + the incentive program and thus it is not entitled to any award for + the 1999-2000 + cycle. + The Utility Reform Network, a San Francisco-based consumer advocacy + group, said + it will closely watch the PUC's evaluation of the incentive program + at the Gas + Co. + ""We want to make sure, given the dramatic changes in the gas market + and prices, + ratepayers are not left out of the [additional] benefits,"" TURN + attorney Marcel + Hawiger said. ""We'll look to see whether the mechanism should be + changed."" + Severin Borenstein, director of the Energy Institute at UC Berkeley, + said the + program should be changed to provide more incentive for utilities to + enter + long-term contracts that would smooth out volatility in the market. + ""Unfortunately, under the system,"" he said, ""the only incentive is to + beat the + [spot] market."" + + + Use this file to download and print all the articles in this section + (See attached file: Dow Jones + Interactive-california-03233001-selected.doc) + + + + IMPLICATIONS FOR OTHER MARKETS + + (For easier printing of all the articles in this section use the file + at the end of the section) + + + + New York: New York at the crossroads + Wednesday, March 21, 2001 + + + Energy Insight + + + + (Embedded image moved to file: pic24389.pcx) + + + + By Dave Todd + + + + dtodd@ftenergy.com + + + + U.S. Energy Secretary Spencer Abraham declared this week that the Big + Apple is on the verge of being bitten hard by power cuts and rising + energy prices. + + + Delivering the keynote address at the U.S. Chamber of Commerce's + national energy summit in Washington Monday, Abraham said, + ""California is not the only state facing a mismatch between supply + and demand,"" what with ""electricity shortages predicted for New York + City and Long Island this summer"" and low capacity margins + threatening electricity reliability elsewhere across the country. But + how likely is it that New Yorkers will face blackouts of the sort + confronting Californians? + + + Not very, says energy trade specialist Edward Krapels, managing + director of Boston-based METIS Trading Advisors. Krapels, a + consultant helping major Northeastern utilities, such as Consolidated + Edison, design market-hedging programs, adamantly decried what he + said are facile comparisons between conditions in New York and + California, there being ""more differences than there are + similarities"" between those two industrial cornerstones of the + country's economy in respect to energy security management. + + + ""First of all, New York has a more varied portfolio of energy + generation sources than California,"" he said. California has hydro, + nuclear and gas, but when it lost a lot of hydro, the state needed + gas to pick up the slack, and the ""capacity just wasn't there."" In + New York's case, the state has oil and coal still in the mix and its + overall dependence on gas is much lower than California's, Krapels + added. + + + New York avoids making same mistakes + + + Portfolio diversity is one pillar of any effective plan to help New + York avoid the same errors made in redesigning California's + marketplace. New York's Independent System Operator (ISO), in a new + report warning that the state is at an ""energy crossroads"" in terms + of its capacity adequacy in the immediate future, argues that a + concerted effort is required to arrest declining in-state generation + capacity reserve margins, and a strategy must be put in place, + whether or not new generation comes on-line, in accordance with + current anticipated scenarios. + + + A measure of New York's essential difficulty is that, between 1995 + and 2000, statewide demand for electricity grew 2,700 MW, while + generating capacity expanded by only 1,060 MW. With no major new + generating plants in downstate New York fully approved, the gap is + expected to continue to widen. To avoid ""a replication of + California's market meltdown"" the New York ISO calculates the state's + daily generating capacity needs to grow by 8,600 MW by 2005, with + more than half of that located in New York City and on Long Island. + Expressing concern this may be too big a burden for the current + bureaucratic process to bear, the ISO wants to see a state-appointed + ombudsman named to help would-be merchant power plant investors plow + through red tape. + + + ""Increasing New York's generating capacity will also lessen the + state's escalating and risky reliance on out-of-state sources of + electricity,"" the ISO added. ""Since 1999, New York State has been + unable to cover its reserve requirements from in-state sources."" + + + Not everyone agrees with that analysis, insofar as it argues for + circling the wagons inward. Some analysts believe the ultimate + solution lies not in tying in more inwardly dedicated power, but in + expanding the marketplace by breaking down inter-jurisdictional + barriers. In any case, New York energy regulatory authorities and + those responsible elsewhere in the U.S. Northeast, such as PJM + (Pennsylvania-New Jersey-Maryland) Interconnection and the New + England Power Pool, are in vastly better shape in terms of + ""cross-border"" cooperation than California and its neighbors in that + efforts are being made among various authorities toward developing an + integrated regional electricity market. In California, by contrast, + the state's focus?for example, in the case of new gas-fired power + plant development?has been to ensure dedicated supply to the + California market alone, rather than on a regional marketplace. + + + + + (Embedded image moved to file: pic05075.pcx) + + The New York ISO's new broad-based analysis of market-restructuring + needs argues that the relatively stronger health of its reformed + environment is ""due in large part to the ability of New York's + utilities to enter into long-term power contracts."" + + + What needs to be done most, it says, is to move aggressively to build + some of the more than 29,000 MW of ""proposed new generation in the + siting pipeline."" + + + In the meantime, the 30,200 MW of electricity New Yorkers used on a + peak day last summer shouldn't be eclipsed on too many days this + coming summer (given early long-range weather forecasts). Demand, + however, is expected to increase at an annual average rate of up to + 1.4%. + + + So while New York City, the rest of the state and adjacent parts + might breathe easy this year, it could be a brief rest from the fray. + Meanwhile, a 4% shortfall is still being planned for this summer that + is not yet provided for, as authorities hurriedly seek to arrange new + generation plants around Manhattan, on Long Island and even on barges + offshore. + + + One way or another, whether it is the weather or the politics of + siting new energy facilities, it's going to be a hot time in the + city. + + + Long-term solutions hit brick wall + + + Meanwhile, attempts at longer-term solutions continue to run into + trouble. Last week, Connecticut state regulators came out against a + proposal to run a new underwater cable under Long Island Sound that + Hydro-Quebec subsidiary TransEnergie U.S. Ltd. wants to build to pump + more juice into Long Island Power Authority's load pocket. Despite + strong promises from TransEnergie to be diligent in avoiding damage + to oyster beds in Long Island Sound, the proposal failed to convince + authorities, who were persuaded the pipeline project could lead to + diversion of electricity from Connecticut. + + + In similar fashion, private companies wanting to build 10 small + independent power plants and temporary generators offshore New York + City are running into intense opposition from environmental groups + and citizen orga +nizations?some of whom have taken their cases to the + state assembly in Albany. + + + The David vs. Goliath nature of such controversies has further + alerted energy companies to the difficulties of addressing complex + energy supply issues that may ultimately devolve to people not + wanting things in their backyard, regardless of what the alternative + might mean to their fellow citizens or the greater public good. + + + But suddenly, in New York, California's troubles?while still distant + in their intensity? may not be so far away. By some estimates, this + summer's bills for Consolidated Edison customers could be up as much + as one third or more over last year's charges. + + + Letting the time slip when it comes to building new infrastructure + isn't going to make the pain go away. + + + + NEW YORK: NY-ISO REPORT SAYS STATE NEEDS 4,000 - 5,000 MW OF NEW + GENERATION SOON TO AVOID SEVERE SHORTAGES; NY-ISO ALSO ASKS FERC TO + EXTEND BID CAP AND TEMPORARY EMERGENCY PROCEDURES + 03/21/2001 + Foster Electric Report + 2 + (c) Copyright 2001, Foster Associates, Inc. + + Raising the specter of an East Coast version of the California + crisis, the New + York Independent System Operator, Inc. (NY-ISO) is warning of serious + electricity shortages, air quality deterioration and stunted economic + growth + without immediate approval of between 4,000-5,000 MW of new + generating capacity + in the state. Of this amount, 2,000-3,000 MW is needed to serve New + York City. + Another 8,600 MW of new capacity will have to be built by 2005, the + NY-ISO said + in a recent report, Power Alert: New York's Energy Crossroads. + ""New York is heading towards a very serious situation unless it acts + immediately + to get new supply sited within its borders,"" said NY-ISO president + William + Museler in a statement accompanying the report. ""This report is + essentially a + caution light at New York's energy crossroads."" + + Sources in the New York Public Service Commission have downplayed the + NY-ISO's + warning, asserting that a process for bringing on new generation is + well + underway, with more than 85 projects in the approval pipeline. + In a related development, the NY-ISO asked FERC to approve a proposed + tariff + amendment (ER01-1517) extending existing bids caps in some of its + markets until + 10/31/02, and a separate and related amendment (ER01-1489) extending + the + NY-ISO's so-called temporary extraordinary procedures (TEP) that + allow the ISO + to make price adjustments and take other corrective actions if it + finds evidence + of market power abuse. + The NY-ISO Report --The NY-ISO likened the situation in New York to + that faced + by California, where a relentless increase in demand has not been met + with an + equal increase in supply. The NY-ISO said that between 1995 and 2000, + statewide + demand for electricity rose by 2,700 MW, while generating capacity + increased by + only 1,060 MW. With no major new generating plants in downstate New + York fully + approved for construction at this time and generation demand in the + state + expected to grow around 1.3 percent annually for the next several + years, the + NY-ISO said this gap will continue to widen. + The inevitable result of this trend is large rate increases for New + York's power + consumers. The NY-ISO's modeling suggests that ""by 2005, statewide + prices are + likely to be more than 20-25 percent lower in the case in which new + plants are + built than in the case where they are not."" In New York City, ""the + price to + consumers of electric power could be reduced by as much as 28 percent + when + compared to the case of no new supply or load management programs."" + Besides large rate increases, the NY-ISO asserted that a failure to + site and + build new plants in New York will threaten power reliability in the + state and + lead to increasing reliance on out-of-state resources. The report + said that if + no new in-state generation comes on line in the next five years, the + state's + generation reserve margins will shrink from the current 14.9 percent + above peak + demand ""to a dangerously low 8.4 percent by 2005."" Pointing to + California's + situation, the report added that increased reliance on power imports + ""can + subject electrical suppliers and customers in New York to + transmission + restrictions and political and economic considerations beyond the + control or + influence of responsible New York State entities."" + To avoid these harsh consequences, the NY-ISO said New York's new + siting law, + known as the Article X process, needs to be modified. Since the law + was passed + 18 months ago, the report noted that only two plants have been + approved (both + upstate) and neither has yet been built. The problem, according to + the NY-ISO, + is that the siting process ""requires the cooperation of multiple + state + agencies."" To expedite the process, the report suggested the ""clear + designation + of a lead agency and the adoption of an `ombudsman program' to + expedite and + coordinate the work of the agencies responsible for the Article X + process must + be made."" The NY-ISO added that an expedited approval process would + improve the + environment because older, more polluting power plants would be + replaced by + cleaner gas-fired units. + On a more positive note, the NY-ISO reported that New York's + restructured power + market ""is far healthier than that in California, due in large part + to the + ability of New York `s utilities to enter long-term power contracts. + The basic + structure of the New York market will also reduce unwarranted price + spikes and + other market disruptions through mitigation programs which + automatically correct + price spikes due to market power abuses."" + ""Nevertheless, California `s experience raises a caution flag for all + New + Yorkers,"" the report continued. ""The deregulated market in New York + cannot + achieve lower costs through competition without an increase in + generating + capacity similar in magnitude to the recommendations of this report, + along with + simultaneous efforts to institute greater conservation, better load + management + and alternative energy supply initiatives. Additionally, closer + integration with + regional suppliers of power is both inevitable and beneficial."" + The report also recommended (1) accelerating conservation, real-time + metering + and price-sensitive load programs; and (2) upgrading the state's and + the + Northeast's transmission infrastructure. + The Proposed Tariff Amendments -- New York's Article X siting process + and + continuing tight supplies were also cited in the NY-ISO's request to + extend from + 4/30/01 until 10/31/02 its $1,000/MWh bid caps. FERC first approved + the + 1,000/MWh bid caps in July 2000 (see REPORT No.197, pg.6), and + subsequently + extended them. + The NY-ISO's board ""is sensitive to the Commission's concerns about + undue + intervention in energy markets,"" the filing related. ""Nevertheless, + the NY-ISO + is submitting this request because it believes that delays in New + York state's + `Article X' process for licensing and siting new generating capacity + is + inhibiting supply from increasing to match continued demand growth. . + . . + Moreover, although the NY-ISO proposes to implement several + demand-side measures + this summer, it is not yet clear whether they will make demand + sufficiently + price-responsive to avoid periods of high prices that would not occur + if there + were an efficient demand-side response."" + Thus, the NY-ISO insisted that the requested extension is needed to + provide more + time for the development of additional generation and to gauge the + effectiveness + of the NY-ISO's proposed demand-side response mechanisms ""in order to + avoid + exposing consumers to price spikes that are not a product of the + interplay of + competitive market forces."" + Other problems cited in the NY-ISO's filing which keep New York's + power market + from being fully competitive include continuing capacity and + operating + constraints at the state's Central-East interface, and questions over + adequate + gas supply. + ""The NY-ISO remains acutely aware that taking steps to deal with + price + abnormalities can have undesirable consequences,"" the filing + continued. + ""Nevertheless, the NY-ISO believes that the $1,000/MWh cap that has + been used in + the PJM's markets since inception does not appear to have had an + adverse impact + there. . . . The permanent bid caps in PJM, and the interim bid caps + in ISO New + England (proposed for extension through the end of 2001) also make + continuation + of the NY-ISO's bid caps more important in order to maintain + uniformity across + the Northeastern markets. The NY-ISO also continues to believe that + suppliers + will not be materially harmed by the continuation of bid caps, which + are likely + to come into effect very rarely and are set at levels that prevent + only + artificially high run-ups in prices."" + The NY-ISO's request to extend its TEP procedures (which also were + previously + extended) through 10/31/02 cited similar problems with New York's + power markets, + but claimed that the NY-ISO ""has made great strides"" toward + eliminating market + design and software flaws. ""The TEPs were, and remain, an + indispensable tool for + responding to and correcting market flaws and other instances where + the markets + are not operating as the NY-ISO and the Commission intended,"" the + filing + insisted. + + + MASSACHUSETTS: Attorney general says summer poses electricity + concerns + By JOHN McELHENNY + Associated Press Writer + 03/19/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + BOSTON (AP) - The state's top consumer advocate warned that + Massachusetts may + see ""California-type"" electricity blackouts this summer when + temperatures rise + and residents turn on air conditioners and fans. + ""It would be a mistake to feel this is a cold weather problem,"" said + Attorney + General Thomas Reilly in an interview with The Associated Press. ""Our + major + problem will come this summer."" + + State deregulation of the electric industry has been among the + factors blamed + for local power outages in California, and on Monday, California for + the first + time suffered rolling blackouts across the entire state. + Massachusetts relaxed regulations on its own electric industry in + 1998 to + attract more companies to stir competition. But that hasn't happened + yet, + largely because the current high cost of oil and gas make it + expensive to + produce electricity. + ""The promise of deregulation was that there was going to be + competition,"" said + Reilly, a Democrat. ""That competition in the wholesale market is not + happening."" + + Hot summer weather drives up electricity use as residents turn on air + conditioners and fans, and Reilly said a few particularly hot days + could strain + the grid that provides the region's power. + A spokeswoman for the region's power grid said electricity use is + expected to + rise 1.5 to 2 percent this year, but the region should have enough + power because + of six new power plants that have begun generating electricity in the + past 18 + months. + ""The situation is unlike California because we have new generation + coming on + line that is outpacing demand,"" said Ellen Foley, spokeswoman for ISO + New + England Inc., which manages the grid of 330 generators connected by + 8,000 miles + of high voltage transmission lines. + Still, a particularly hot day and an unforeseen power generation + breakdown could + prompt ISO to ask residents to conserve electricity, a situation that + arose once + last summer, Foley said. + In order to avoid any power outages and protect consumers, Reilly + repeated calls + for electric companies to build more power lines and to offer more + options for + new customers who have signed up since deregulation. Those customers + typically + pay more than long-term customers. + Electric transmission companies should also be allowed to enter into + two-year + contracts with suppliers, instead of the six-month contracts many + have now, to + avoid short-term price spikes for consumers, Reilly said. + The Attorney General's Office acts as an advocate for consumers. + Michael Monahan, a spokesman for NSTAR, which provides electricity to + more than + 1 million customers, is upgrading some of its power lines and last + year built a + new line to Cape Cod, but currently has no lines under construction. + ""I wholeheartedly concur with the attorney general that it's + something we have + to focus on,"" Monahan said, but he added, ""The indications I see are + that we + have an ample supply of electricity."" + California's statewide outages were ordered on Monday after a + transformer fire, + high demand and a lack of electricity imports pushed power reserves + to near + zero. + California partially deregulated its electric industry in 1996, two + years before + Massachusetts. + --- + On the Net: + Attorney General's Office: http://www.ago.state.ma.us + NSTAR: http://www.nstaronline.com + ISO New England Inc.: http://www.iso-ne.com + + + NEVADA: Discussion of bill stopping power plant sales to continue + Wednesday + By JOHN WILKERSON + Associated Press Writer + 03/19/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + CARSON CITY, Nev. (AP) - Lawmakers hit more delays Monday in trying + to pass a + measure that pulls the plug on the sale of Nevada power plants to + avoid + California-style energy problems. + ""The goal of this bill is only stopping the divestiture of power + plants and + making sure it's constitutional,"" said Senate Commerce and Labor + Chairman + Randolph Townsend, R-Reno. ""And that's not as easy as it sounds."" + + Townsend's comment just before his committee began working on SB253 + was + prophetic - witnesses kept bringing up the need for more flexibility + in the + measure. + Translation: Don't kill all deals by stopping Reno-based Sierra + Pacific Power + and Las Vegas-based Nevada Power from selling their Nevada power + plants until + June 2003 - and possibly until 2006. + Pete Ernaut, a lobbyist for Reliant Energy which has been trying to + buy a power + plant, said unforeseen market changes could make a plant sale before + 2003 a deal + that would be in the public's interest. + ""If you put a two-year moratorium on these plants, all these deals + are going to + go away,"" he said. ""When the cow leaves the barn, it's difficult to + catch."" + Townsend had hoped to wrap up committee work on SB253 on Monday. Now + it's up for + review again Wednesday in the Commerce and Labor Committee. + Reliant isn't the only company trying to keep power plant purchases + alive. + Earlier this month, executives of Pinnacle West Energy told the + committee that + it's in the public's interest to allow Sierra Pacific Resources to + sell its + Harry Allen power plant. + The Harry Allen plant produces about 72 megawatts out of the 2,900 + megawatts of + energy that Nevada utilities generate. Pinnacle has plans to expand + that to 700 + megawatts by 2004. + Other provisions not strictly related to the plant divestitures, such + as ways in + which Sierra Pacific and Nevada Power can recover the cost of undoing + the sales + contracts, don't have to be included in SB253, Townsend said. + Townsend said the other concerns dealing with the energy crisis and + utility + deregulation can be handled in later bills - but the power plant sale + issue must + be handled now. + Nevada's PUC and the Federal Energy Regulatory Commission had + directed Sierra + Pacific and Nevada Power to sell the plants as a condition of the + companies' + merger in 1999 under the parent company Sierra Pacific Resources. + Critics of the plant sales say the plants generate about half the +state's + electricity - and if they're sold, the unregulated new owners could + sell the + power to other states and put Nevada into the energy dilemma + California faces of + shrinking supply and rising prices. + The Southern Nevada Water Authority has presented an analysis stating + that rate + payers will save from $1.7 billion to $3.5 billion by July 2001 if + the power + plant sales are stopped. + Nevada's Consumer Advocate's Office previously had projected a + conservative + estimate of $915 million in savings. + + + MAINE: Panel of experts would review impact of energy deregulation + By GLENN ADAMS + Associated Press Writer + 03/19/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + AUGUSTA, Maine (AP) - In the wake of rolling blackouts in California + and rate + spikes in their home state, Maine's top legislators proposed a study + Monday into + the effects of deregulation of the energy industry. + ""Deregulation of electricity is a new idea and we still have a lot to + learn,"" + Senate President Michael Michaud said as he called for the analysis. + + A panel of industry insiders, elected officials and consumers would + study issues + such as what standard rate consumers can expect and the likelihood of + energy + shortfalls over the next three years, and whether Maine consumers are + vulnerable + to anti-competitive activities. + In addition, the Blue Ribbon Commission would look into whether + changes in + Maine's deregulation law are needed to encourage more generating + capacity, + improve conservation and spur competition. + The study is being proposed as consumers remain mindful of a power + crisis in + California that resulted from high wholesale energy costs, a consumer + rate cap + and too few power plants in that deregulated state. + Maine's deregulation law is designed to avoid such pitfalls, said + Rep. William + Savage, D-Buxton, House chairman of the Legislature's Utilities + Committee. + Maine's law does not cap consumer prices, as California's does, and + the state + has more than enough generating facilities to meet the state's energy + needs, + Savage said. + Since Maine's deregulation law took effect in March 2000, Bangor + Hydro-Electric + Co. rates have increased 19 percent. The Public Utilities Commission + approved a + residential standard rate increase as recently as last month. + Federal energy regulators are reviewing their decision to allow steep + fee + increases for utilities and power wholesalers that fail to arrange + enough + capacity to meet customers' peak load. Gov. Angus King and all four + members of + Maine's congressional delegation oppose the hike. + The PUC has approved standard rate increases for energy delivered by + Central + Maine Power Co. to medium-sized and large industrial users. + On the other hand, some towns and school districts are saving money + on energy + through deals they can get in the deregulated market. + In the meantime, legislation has been introduced in response to some + of the + changes that have occurred in Maine's deregulated energy industry. + One would use some of the money from the sale of power-generating + assets to + offset an increase in rates paid by large industrial users, said Sen. + Norman + Ferguson, R-Hanover, Senate chairman of the Utilities Committee. + Supporters of the utility study that was proposed Monday said they + are not + looking to make changes in Maine's deregulation law, but if it needs + fixing it + could be done during next year's session. + The lawmakers' primary interest is to find out how trends in a new + environment + designed to encourage competition will affect consumers, and to try + to identify + what consumers can expect in the few years ahead. + House Speaker Michael Saxl, D-Portland, said the Legislature ""has a + fundamental + public policy interest in making sure rate-payers and businesses are + protected + against exorbitant rate hikes."" + Michaud, D-East Millinocket, said he's interested in finding out how + future + changes in electric prices and availability might affect businesses + and + consumers in northern Maine. + ""The economy in my part of the state is the most vulnerable, and I + want to make + certain we are leaving no stone unturned in our effort to prevent any + shocks to + the economy in northern, western and eastern Maine,"" Michaud added. + The commission would include House and Senate members from each + party, a utility + executive, and representatives of energy producers, providers, a + large + commercial consumer and individual consumers. + + + OREGON: State Senate moves to combat energy crisis + 03/16/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + SALEM, Ore. (AP) - In an attempt to avoid a California-like energy + crisis, the + Oregon Senate approved a bill Friday that would quicken the process + of siting + power plants that use gas and renewable resources. + ""It's important for Oregon. It makes sure that energy will be + available to + everyone,"" said Sen. Lee Beyer, D-Springfield. + + The measure, SB843, would shorten the siting process for power plants + that use + gas and renewable resources, like wind, from a year and a half to a + matter of + months. + The speeded-up process would be in effect for two years. + ""If we can act now, we can actually start to solve power supply + problems by this + summer,"" said Sen. Jason Atkinson, R-Jacksonville + California's strict regulations on the construction of new power + plants has + contributed to its current shortage and legislators took note. Beyer + said though + California was definitely a wake-up call, the measure is a reaction + to the + larger power picture in the Northwest. + With low rainfall, hydroelectric generators will have trouble meeting + demand, + Beyer said. Gas-fired and wind plants could come online as soon as + this fall and + would provide relief. + ""We are not in a position to sit back and do nothing about the energy + crisis the + Northwest and the country are experiencing,"" said Senate Minority + Leader Kate + Brown, D-Portland. + Conservationists, however, caution that lawmakers should be careful + not to rush + to provide power at the expense of environmental standards. + + + + WISCONSIN: Two utilities to add 975 megawatts in plan to avoid + energy crisis + By The Associated Press + 03/22/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + Plans of two state utilities to add 975 megawatts to Wisconsin's + electric power + grid as a way of avoiding an energy crisis similar to California's + were + questioned Thursday by a consumer advocate who said too many power + plants may be + in the works. + ""Certainly nobody wants to see blackouts like you have in California + but there + is the danger Wisconsin could be overbuilding,"" said Steve Hiniker, + executive + director of the Citizens' Utility Board, which represents consumer + interests in + utility rate cases. He noted that plant construction costs ultimately + are born + by the utility customers. + + Alliant Energy Corp. announced its proposal Wednesday - in a filing + with the + state Public Service Commission - to spend $1 billion to build one + coal and two + gas-fired power plants. + Alliant has proposed building a 500 megawatt coal-fired plant and a + 100 megawatt + natural-gas fired plant by 2006. It also wants to build a 200 + megawatt natural + gas-fired facility in 2011. Wisconsin has not built a coal-fired + plant in more + than two decades. + Alliant has not determined the plants' locations. + Also, Madison Gas & Electric, the state's smallest investor-owned + utility, said + Wednesday that it had signed deals to buy 175 megawatts of power from + three + generating plants in Wisconsin and Illinois. + ""Three out of the four past summers, we've had public appeals for + conservation + due to shortages somewhere in the state. We need to take steps to + avoid that, + and the California situation makes that even more clear,"" said + Alliant spokesman + Chris Schoenherr. ""Getting more iron in the ground will give us more + flexibility + in the state to be able to react."" + Alliant acknowledged the new plants will probably mean rate + increases, but it + was too early to say how much rates would go up. + California's problems, which this week resulted in the first + deliberate + blackouts since World War II, stemmed from underestimating the + state's power + needs, forcing utilities to sell their power plants but not allowing + them to + secure long-term supply contracts, and freezing rates, among other + things. + But Wisconsin's situation is far different. + The state has moved slower than California toward deregulation, and + there has + been no desire here to speed up the process in recent years as power + reliability + became a problem. + The PSC estimates that Wisconsin will need an additional 3,000 + megawatts of + power over the next decade. + Hiniker said Wisconsin needs to coordinate its planning to avoid + overbuilding. + The costs of new power plants are passed on to ratepayers, meaning + electric + bills will increase as new generation is added. In addition, + coal-generated + power plants are a major source of air pollution in the state. + ""We don't have the advance planning that has kept Wisconsin from + overbuilding in + the past,"" said Hiniker. ""This is something the PSC should be doing."" + MG&E's deals are: + -A 10-year contract to buy 75 megawatts from Calpine Energy Services + starting in + May 2004. The power will come from the natural gas-fired plant Rock + River Energy + Center, near Beloit. + Calpine Energy Services is a unit of San Jose, Calif.-based Calpine + Energy Corp. + The plant is being built by Northbrook, Ill.-based SkyGen Energy LLC, + which + Calpine bought last year from SkyGen President Michael Polsky and + Wisvest Corp., + a unit of Wisconsin Energy Corp. + -A 10-year contract to buy 50 megawatts of power from the Rainy River + Energy + Corp. starting in May 2002. The power is coming from a natural + gas-fired plant + near Joliet, Ill. owned by LS Power Co. Rainy River is a unit of + Duluth-based + Minnesota Power Inc. + -A five-year contract to buy 50 megawatts from an El Paso Merchant + Energy plant + near Cordova, Ill., in western Illinois. + The owner of the natural gas facility is the Cordova Energy Center + Co., which is + a unit of Iowa-based MidAmerican Energy Holdings. + Alliant also offered support in the Wednesday filing for a $7 billion + plan of + Milwaukee-based Wisconsin Energy, which includes five new power + plants in Oak + Creek and Pleasant Prairie. + -- + On the Net: + CUB: http://www.wiscub.org/ + Alliant Energy: http://www.alliant-energy.com + Wisconsin Public Service Commission: http://www.psc.state.wi.us + Wisconsin Energy: http://www.wisenergy.com/ + Madison Gas & Electric: http://www.mge.com + + + + Use this file to download and print all the articles in this section + (See attached file: Dow Jones + Interactive-california-03233001-implications.doc) + + + + If you wish to be removed from the distribution list for this update + please contact Pru Sheppard - DC. + + + + + All recipients of this message have been Bcc'd as part of industry + best practice for broadcast emails. + + + + + + + ++-------------------------------------------------------------+ +| This message may contain confidential and/or privileged | +| information. If you are not the addressee or authorized to | +| receive this for the addressee, you must not use, copy, | +| disclose or take any action based on this message or any | +| information herein. If you have received this message in | +| error, please advise the sender immediately by reply e-mail | +| and delete this message. Thank you for your cooperation. | ++-------------------------------------------------------------+ + - Dow Jones Interactive-california-03233001-selected.doc + - pic24389.pcx + - pic05075.pcx + - Dow Jones Interactive-california-03233001-implications.doc",Tuesday,2001,March,19,1 +159,INFLUENCE,Tom DeLay CA Aug Dinner & Golf event,"Jeff, +I spoke to Joannie this afternoon and asked for your e-mail to send this +invitation. +Here is the initial information on the event. We are expecting additional +members of Congress to attend both events. If you have any questions or +comment, please let me know. +I have attached a word doc. as well: + +Tom DeLay / ARMPAC +Guest Speaker - David Horowitz +Four Seasons Aviara - Dinner & Golf Tournament + +The event will take place: +Wednesday, August 15 +Four Seasons Aviara (Northern San Diego, CA) +Golf +Lunch will start at 11am +Tee times at 12:15pm +An informal reception afterwards +Limited to 40 people +Cost is $5k per person +Dinner +Reception 6 to 6:45pm +Dinner 7 to 8:30pm +Speakers Tom DeLay and David Horowitz +$1,500 per person, $2,500 per couple +There are four levels of sponsorship: $100K, $50k, $25k and $15k. +Contribution levels will also transfer from the dinner and/or Golf Tournament +to the ARMPAC ""contributor sponsorship program."" +Bill Gowan +Election Day Consulting, LLC +1947 Camino Vida Roble, suite 104 +Carlsbad, CA 92009 +760 929.1203 +electiondayconsulting.com + + - Aug 15 Golf dinner.doc ",Tuesday,2001,July,16,0 +164,CALIFORNIA CRISIS,California Power Crisis Update (No. 10),"We have been pulling together these weekly(sometimes more often) summaries +for internal purposes. Would you find it helpful to be on the distribution +list? Hope you are doing well. Look forward to touching base soon. +----- Forwarded by Suzanne Nimocks/HOU/NorthAmerica/MCKINSEY on 03/28/2001 +03:41 AM ----- + Memorandum + + TO: Pru Sheppard + BCC: Suzanne Nimocks + + + FROM: Pru Sheppard + B. Venki Venkateshwara + DATE: March 27, 2001 + + California Power Crisis Update (No. 10) + + DEVELOPMENTS THIS WEEK, 3/23/2001 + + The weeks highlights include: + + + ? Continued indications that the issue of market power and possible + remedies for it is likely to remain a high profile issue in + California and elsewhere (both retroactively and prospectively) + ? An ironical situation with respect to QFs in which QF power under + contract is effectively being released into the market at higher + prices + ? A court order requiring Reliant to continue to sell power to the + ISO even if it is not being paid in a full and timely manner + ? Another Stage 3 emergency and rolling blackouts + + Market power + + + There are continued indications that the issue of market power + will not be settled simply. This week there was a lengthy and + politically influential front page story in the New York Times about + FERCs passive approach to policing generators (Critics Say U.S. + Energy Agency Is Weak in Oversight of Utilities). The story was by + Jeff Gerth and Joseph Kahn. (Jeff Gerth's 1992 story on the + Whitewater deal is viewed by journalists to have been the origin of + what eventually became a multi-year investigation of Bill Clinton.) + + + The key issues are familiar: + + + ? Does market power exist to a degree that warrants remedies such + as price caps, refunds, and so on? + ? If so, what is the basis for asserting that market power exists + and what is the remedy? (See the discussion in the New York Times + article on the ""good hours"" vs. ""bad hours"" approach and the + associated political decision not to deal with ""good hours""). + ? Can market power be used as leverage to eventually settle + generator bills in California at something less than 100 cents on the + dollar. (The California ISO filed a complaint claiming $6 billion + in overcharges this week.) + + The QF irony + + + Through the 1990s, QF contracts were projected to be the source + of stranded costs because they were priced ""way above market."" In + recent months, in California, they look like a bargain (although some + are not such great bargains because a portion of their price is tied + to gas). You would think that the utilities would request QFs to + maximize their output. But credit problems have created an ironical + situation. The facts: + + + ? PG&E and Edison have not been paying the QFs fully and promptly + for some time. + ? The QFs form a creditors committee and threaten to push PG&E and + Edison into bankruptcy. (Some gas-fired QFs had to shut down because + they did not have money to pay for the gas.) + ? Last week's court decision allows MidAmerican/CalEnergy to + essentially sell its power to others even though the QF contract + ""dedicates"" the output to the purchasing utility. + ? CalEnergy does so immediately, selling to El Paso. + + The Reliant Order + + + A court ordered Reliant to continue to sell to the ISO, when + requested, regardless of whether Reliant had been paid fully and + promptly for past deliveries to the ISO. Reliant announced it will + appeal the order. + + + This is somewhat of a contrast to the QF situation except that + the circumstances governing the 2 situations are probably different. + The QF contracts pre-date the ISO and are with the utilities and most + likely make no reference to providing power during emergencies. In + fact, many QF contracts have the opposite provision: authority for + the utility to cut takes during so-called ""light load"" periods. + + + Stage 3 emergency and rolling blackouts--again + + + There was another Stage 3 emergency in California ? with rolling + blackouts this week. This prompted everyone to wonder why this was + happening in March. Among the factors: + + + ? Increased demand from summer-like temperatures + ? Cutbacks in imports + ? Loss of 1400 MW due to a transformer fire at an Edison plant + ? Loss of about 3100 MW from QF plants that were forced to shutdown + because they could not afford gas bills (VV) + + + MARKET COMMENTARY + + (For easier printing of all the articles in this section use the file + at the end of the section) + + + Critics Say U.S. Energy Agency Is Weak in Oversight of Utilities + By JEFF GERTH and JOSEPH KAHN + 03/23/2001 + The New York Times + Page 1, Column 1 + c. 2001 New York Times Company + + WASHINGTON, March 22 -- The pressure was intense when federal + regulators met + privately last month to debate remedies for soaring electricity + prices in + California. + Officials of the Federal Energy Regulatory Commission, the agency + whose mandate + is to ensure ''just and reasonable'' electricity rates nationwide, + had evidence + that a few companies had been selling electricity to California at + prices far + above the cost of generating it. The agency faced an imminent + deadline to + challenge those prices or let the companies possibly pocket hundreds + of millions + of dollars in unfair profits. + + An internal memorandum laid out two choices. The agency could audit + and punish + ''bad actors,'' the companies that were exploiting the market. Or it + could + identify ''bad hours,'' when electricity shortages were most acute + and spiking + prices were arguably nobody's fault, and order refunds for only the + most + exorbitant prices. + ''It may be easier to identify bad hours than bad actors,'' the + memorandum said. + + The commission took the easier way. It decided not to investigate + reports of + abuses by companies, but issued an order that could require them to + refund to + the state utilities up to $124 million collected during a relatively + few ''bad + hours'' in January and February. That is hundreds of millions of + dollars less + than California might have claimed, since the most potential + overcharging + occurred during ''good hours,'' when power was more plentiful but + prices were + often just as extreme. The order ignored those hours. + Today, in a criticism of the agency's lack of aggressiveness, + California + regulators estimated that generators had charged $6.2 billion above + competitive + levels over 10 months. They urged the agency to dig deeper, hoping it + would + demand more refunds or other stiff remedies. But the agency's track + record -- + one of complacency in the eyes of state officials -- leaves + California + regulators skeptical that Washington will confront the big power + producers. + The small, obscure agency, tucked behind the rail yard of Union + Station here, + has largely soft-pedaled its role as the electricity industry's top + cop, even + though it has wide authority to keep power companies in line. To keep + rates + reasonable, it can impose price caps, strip companies of the right to + charge + market rates, force them to return excessive profits and even suspend + deregulation altogether. + Instead, the agency has largely left it to private companies to pry + open the + $250 billion electricity industry, which has historically been + controlled by + monopoly utilities and state officials. The agency's defenders, + including its + chairman, Curt Hebert Jr., a fierce advocate of unfettered markets, + say that its + largely hands-off approach reflects the delicate balancing of + competing + interests -- a commitment to protect consumers while not stifling + market forces. + + But politicians, utility executives, energy economists and local + regulators say + California's rolling blackouts and skyrocketing electricity prices + are the signs + of a market running amok. They accuse the agency of standing aside as + companies + manipulate their way to windfall profits. The agency's critics, who + include one + of its own commissioners and numerous staff members, say that its + enforcement + mission has been blunted by free-market passions and the influence of + industry + insiders in its ranks. + When the agency began its first national investigation of high + electricity + prices last year, it named a newly recruited industry insider, Scott + Miller, to + lead the effort. Mr. Miller and his colleagues said in their report + that there + was ''insufficient data'' in California to prove any profiteering by + generating + companies. Yet his own former employer, PG&E Energy Trading, was at + the time a + subject of a civil antitrust investigation by the Justice Department + that + focused on electricity market abuses in New England. + The agency has given state regulators a lead role in monitoring local + power + markets. Yet even as these regulators have urged the agency to be + more + aggressive in investigating suspicions that companies have abused + their power in + California, New England, the Midwest and the mid-Atlantic, they have + frequently + been ignored or rebuffed. + Critics say that the agency began deregulation before it was ready or + willing to + make sure the markets worked effectively. They accuse it of showing + favoritism + to industry -- allowing companies, for example, to ignore + requirements to file + detailed reports of market transactions that are critical to proving + accusations + of market abuses. + ''We need to wake up to the fact that this is a dysfunctional market + that is + being gamed and manipulated by those who participate in it,'' said + William + Massey, a commissioner of the agency who has become one of its + leading critics. + The agency's inaction, the critics say, leads to ''gaming'' -- + jockeying for + profits that does not necessarily involve illegality -- and outright + market + manipulation. Consumers and utilities are the victims, paying + billions of + dollars more for electricity than if the markets were truly + competitive. + Agency officials acknowledge that enforcement of market rules to curb + gaming and + manipulation had not been a high priority in previous years. But they + defended + their recent California order as proof that they intend to keep + markets free of + abuse. They add that the agency is also pressuring two generators to + refund + almost $11 million for possibly manipulating the California market + last spring. + Agency officials and some outside analysts say that poorly conceived + deregulation plans by states, a shortage of power plants, rising + natural gas + prices, and even the weather have had more impact on electricity + prices than + abuses by companies or any failings by the agency. They say the + agency must + balance the competing interests of generators, local regulators and + utility + companies if it is to keep deregulation on track. + ''We're trying to craft a system that gives breathing room to develop + a market, + but not so much room that undue market power punishes consumers,'' + Mr. Hebert + said. + Fight Over Deregulation + Today's debate traces back to the 1930's, when President Franklin D. + Roosevelt + backed legislation to break up utility monopolies. The Federal Power + Act of 1935 + gave the Federal Power Commission a mandate to ensure ''just and + reasonable'' + electricity rates. The Federal Power Commission was abolished in 1977 + and + replaced by the Federal Energy Regulatory Commission, an independent + agency with + 1,200 employees that also oversees oil pipelines and the natural gas + market. The + president appoints the chairman and four commissioners -- two + Democrats and two + Republicans with staggered terms of five years. Two Republican seats + are + currently unfilled. + The deregulation of the electricity markets began in the late 1980's, + after the + agency had begun opening the gas markets. By 1996, the commissioners + issued a + landmark order that forced utility companies to open their + transmission lines to + other utilities and electricity wholesalers. The commission and many + private + economists expected that by prying open protected markets, + electricity prices + would immediately fall. + That possibility set off a deregulation frenzy, most prominently in + California, + New York, New England and the mid-Atlantic states. Generating + companies rushed + to expand in the new, borderless market. + But the agency's balancing act has grown more difficult as + electricity + deregulation has spread nationwide. Congress has forced it to trim + its staff in + recent years. Officials complain that investigating abuses in + electricity + markets strains their resources. + And as the California crisis has worsened, the commissioners have + begun sparring + publicly among themselves about what to do. This week, Mr. Massey, a + Democratic + commissioner, and Mr. Hebert (pronounced AY-bear), a Republican, sat + side by + side before a House panel and argued diametrically opposed positions. + Mr. Hebert + said high prices in California ''were sending the right signals to + get supply + there.'' Mr. Massey called the prices that generators were charging + ''unlawful'' + and said that his agency, by not reining them in, ''is simply not + doing its + job.'' + The agency's leadership has been in flux for months. Congressional + and industry + officials in Washington say President Bush is considering replacing + Mr. Hebert, + whom he named to the top post less than two months ago, with Pat + Wood, who runs + the Texas public utility commission. A White House spokeswoman had no + comment on + the reports. + Though Mr. Hebert's positions are not far from those of the Bush + administration, + his relations with California leaders may have made his position + tenuous. Mr. + Hebert, a Mississippian who is a close ally of the Senate majority + leader, Trent + Lott, has warred with California politicians who have proposed new + solutions to + the crisis there. + Mr. Hebert, who has served as a commissioner since 1997, has often + taken the + most ideologically free-market position of any commissioner. He + flatly rejects + the idea of price caps on electricity as hopelessly ineffective and + contrary to + market forces. When Gov. Gray Davis outlined a plan to have the state + buy + transmission lines to relieve utility companies' debt, Mr. Hebert's + response was + dismissive. ''It's not in the interest of the American public,'' he + pronounced. + Even as new electricity markets opened in the summer of 1999, they + started + producing nasty shocks. The mid-Atlantic region experienced some + early + volatility. + As the turmoil grew, economists began raising the alarm about a + phenomenon + called ''market power,'' the ability of energy traders in the new + national + market to sustain prices above the competitive level. Proving such + abuses is + difficult, because it requires comparing tens of thousands of + separate + electricity transactions with the costs of the generators that + initiated them. + Joseph Bowring, who heads the market monitoring unit of the nonprofit + entity + that operates the mid-Atlantic transmission system, said that power + companies + there had exercised some market power. But only the Federal Energy + Regulatory + Commission, not local regulators, had the authority to collect the + data to + determine how much market power had been exercised and whether it had + been + abusive or not, he said. + Mr. Bowring said he talked to agency officials about doing so. In the + end, Mr. + Bowring and several agency officials said, the agency chose not to + investigate. + The decision roiled some agency officials. + Ron Rattey, a veteran agency economist, wrote a memorandum last June + describing + the staff as ''impotent in our ability to monitor, foster, and ensure + competitive electric power markets.'' The staff, the memorandum said, + did not + even enforce a requirement that power companies file detailed + quarterly reports + listing essentially every sale they make. Such data would have been + useful to + Mr. Bowring. + Local-Federal Clash + Local regulators who want to ensure competitive prices often have to + act on + their own. Monitors in New England have intervened about 600 times + since 1999 to + correct prices they determined had been caused, at least in part, by + market + manipulation. + The federal agency has sometimes chastised them for interfering too + much. + The industry, not surprisingly, shares that view. One vocal critic + was Mr. + Miller. Before the agency recruited him last July to head its + division of energy + markets, he was director of policy coordination for the national + energy-trading + unit of PG&E Corporation, the California holding company whose assets + also + include Pacific Gas and Electric, the California utility. + Although the utility has lost billions of dollars during California's + crisis, + Mr. Miller's former unit has become one of the most profitable new + energy + traders nationwide. PG&E Energy Trading, by several estimates, is now + the + second-largest seller of electricity in New England. + The company has had a rocky relationship with regulators. They + intervened + several times in 1999 and 2000 to retroactively cancel auctions they + said + produced excessive profits for PG&E and other companies. Mr. Miller + denounced + the practice, though he acknowledged in public testimony that his + company + sometimes charged ''very high'' prices when it could. + ''One person's predatory pricing is another person's competitive + advantage,'' + Mr. Miller said at a public hearing on deregulation in Texas in 1999. + New + England regulators too often acted as ''judge, jury and executioner'' + when + overseeing the market, he said. + One year later, Mr. Miller and his new colleagues at the federal + agency got a + chance to examine New England's problems from the regulators' + perspective. Their + Nov. 1 report attributed New England's frequent price gyrations to + technical and + regulatory flaws. + As Mr. Miller's team was preparing its report, the Justice + Department, whose + threshold for stepping into possible industry wrongdoing is far + higher than the + agency's, began looking into whether price spikes in New England + pointed to + unlawful monopoly power or collusion, people contacted by the + department during + that inquiry said. + One subject of the civil inquiry is possible price manipulation in + one of New + England's ancillary services markets, people contacted by the + department said. + They said the department was examining whether PG&E and two other + companies + tried to corner that market for several months early last year. PG&E + confirmed + that the Justice Department had contacted it, but denies wrongdoing + and says it + has cooperated with the department's requests. + Mr. Miller has declined to comment on his role at PG&E or at the + agency. His + supervisors defended his work and said they had detected no conflict + of interest + between his work at PG&E and his duties at the agency. + Those duties brought Mr. Miller to California last August. With + electricity + prices there soaring, he and his colleagues sat down with several + utility + executives at the agency's San Francisco office. + One executive, Gary Stern, director of market monitoring for Southern + California + Edison, wanted the agency to stop what he suspected were market + abuses by power + generators. He provided a road map to help investigators figure out + how power + companies traded power contracts -- and whether they had manipulated + the + markets. + But when Mr. Miller and his team approached 11 generators and + marketers -- + including his old employer -- a few weeks later, they did it their + way. They + asked eight questions, many of them imprecise, like: ''Describe your + strategy + for bidding generation resources into market.'' + This question, Mr. Stern said in a recent interview, ''was equivalent + to asking + a suspected burglar how he spent his day.'' + Some agency officials also thought the team should probe deeper. Mr. + Rattey + recommended that Mr. Miller seek the quarterly pricing reports that + marketers + were supposed to file. But his suggestion was not adopted, agency + records show. + Daniel Larcamp, Mr. Miller's supervisor, said ''there might have been + more + information that could have been obtained'' in the California + inquiry. But he + said the commission gave the staff only three months to finish, + making it + impossible to collect and analyze the reams of data involved. + For Mr. Miller, agency documents show, the investigation was so + time-consuming + that he had no time to fill out the financial disclosure form + required of new + federal employees. Mr. Miller submitted his form in late January, + after a + reporter requested it. Agency lawyers approved the form, but only + after he + provided additional information about his job and compensation from + PG&E. The + lawyers said Mr. Miller's participation had been permissible because + PG&E was + not the subject of the investigation. + When the staff report was issued on Nov. 1, it found high prices and + problems in + the design of the California market. But while the companies ''had + the potential + to exercise market power,'' the commission said, there was + ''insufficient data'' + to prove that they did. + Some marketers saw the report as an exoneration. + ''This has been looked at several times, most notably by the FERC and + nobody has + found any evidence of market manipulation and profiteering,'' Rob + Doty, the + chief financial officer of Dynegy Inc., told a reporter earlier this + year. + California Inquiry + The agency has recently shown signs of wanting to apply pressure on + generators. + But its early efforts show how it is treading on new and uncertain + turf. + When the California crisis grew severe last December, the commission + issued a + refund order, a shot across the bow for generators charging high + prices. It + required them to submit detailed data any time they sold electricity + in + California for more than $150 per megawatt hour, considered at the + time a fair + estimate of the highest costs any of them faced. + It also told generators that for the next several months, they could + be forced + to give refunds if the agency found that they had charged excessive + prices. The + commission also said that it would examine bidding practices and + strategies for + withholding generating capacity to ferret out any efforts to + artificially raise + prices. + When the agency's own 60-day deadline for examining market data in + January + approached, however, it became clear that staff members had not made + any + detailed examination. Instead, staff members said, the agency + scrambled to forge + a last-minute compromise that would allow it to issue a statement + opposing high + prices in the state without a time-consuming investigation. + During this scramble, a senior staff member, Kevin Kelly, suggested + focusing on + bad hours instead of bad actors. + ''Our attempts to find illegal behavior or legal 'misbehavior' by + sellers ('bad + actors') always seems to fail,'' his memorandum said. It said that + the agency + could more easily blame high prices on acute shortages during the + most critical + hours. + The suggestion won the day. The commission decided to limit its order + to the + hours when California declared a Stage 3 emergency, when supplies are + critically + low. + Mr. Stern of Southern California Edison and several private-sector + economists + have attacked the economic logic of that order. They said that the + commission + has focused on times when prices might be legitimately high. The + bigger worry: + Generators can and often do sustain artificially high prices when + supplies are + not as tight, they say. + Mr. Massey, the Democratic commissioner, dissented from the decision + for those + reasons. Because most high-priced transactions in January and + February did not + occur during bad hours, he argued, the commission effectively chose + to bless as + ''just and reasonable'' the hefty profits generators are making from + the + California crisis. + ''The problem with my agency is that we're so carried away with the + rhetoric of + markets that we've gotten sloppy,'' Mr. Massey said. ''We're talking + about + electricity. It's the juice of the economy, so it's got to be + available and + reasonably priced.'' + + + Williams defends pricing of electricity + 03/23/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + TULSA, Okla. (AP) - Williams Cos. Inc. says it can justify the rates + it charged + for wholesale power, despite accusations from federal regulators that + it sold + over-priced electricity to California. + Federal regulators claim Williams Energy Marketing and Trading Co., a + unit of + Tulsa-based Williams, owes California more than $40 million in + refunds for power + it sold to the state's Independent System Operator. + + The Federal Energy Regulatory Commission says that Williams is one of + several + power providers responsible for $124 million in overcharges from + transactions in + January and February. + The Independent System Operator, which manages the state's power + grid, claims + the state was overcharged $6.2 billion by 21 wholesale power + providers, + including Williams, between May and February. + Williams says the rates it charged California were fair and were + based on + production costs and market conditions. + ""Williams is confident that it performed within the guidelines + established by + the ISO,"" said Williams spokeswoman Paula Hall Collins. ""We felt like + we had + worked within the regulations set up by ISO."" + According to the commission, power prices levied by Williams in + January and + February exceeded federal price ceilings based on the cost of natural + gas and + other market conditions. + However, the price ceilings were established after the ISO accepted + Williams' + power prices, Collins said. + The commission will review Williams' explanation and either accept + the + justification or order the company to pay refunds. + + + + Allegheny Energy makes big California connection + 03/23/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + HAGERSTOWN, Md. (AP) - Allegheny Energy Inc. said Thursday it has + agreed to sell + $4.5 billion worth of power to California's electricity-purchasing + agency over + the next 10 years. + The company said the contract call for Allegheny to provide up to + 1,000 + megawatts that the Hagerstown-based company has secured from western + generating + plants through its new energy trading division, Allegheny Energy + Global Markets + - formerly Merrill Lynch Global Energy Markets. + + ""This is a win-win for both the state of California and Allegheny + Energy. It + provides a long-term source of fixed-price energy and should help to + stabilize + prices in California,"" said Michael P. Morrell, president of the + Allegheny + Energy Supply division. + Allegheny Energy is the parent of Allegheny Power, which delivers + electric + energy and natural gas to parts of Maryland, Ohio, Pennsylvania, + Virginia and + West Virginia. + + + Williams plans expansion of pipeline to help power Calif. + 03/23/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + SALT LAKE CITY (AP) - The Williams Cos. plans to expands its Kern + River + pipeline, which runs through Utah, to provide more natural gas for + generating + plants in California. + Williams' gas pipeline unit in Salt Lake City said Thursday that it + plans to + construct nearly 700 miles of additional pipeline that will run + parallel to its + existing Kern River line. + + Construction on the $1 billion project is expected to begin next year + and is + scheduled for completion in May 2003, said Kirk Morgan, director of + business + development for Kern River pipeline. + ""Shippers are seeking more access to natural gas from the Rocky + Mountain basin, + where producers are aggressively stepping up production,"" Morgan + said. + The new pipeline is expected to deliver about 900 million cubic feet + of natural + gas per day to markets in Utah, Nevada and California. + Most of the gas will be used for generating plants planned in + California. If all + of the pipeline's capacity were used to generate electricity, it + could produce + about 5,400 megawatts. ""That is enough to light around 4.5 million + homes,"" + Morgan said. + The original Kern River line was completed in 1992. It enters Utah + from Wyoming + then crosses into the Salt Lake Valley near Bountiful. It turns south + near the + Salt Lake City International Airport then runs the length of the + state before + passing into southern Nevada and winding up near Bakersfield, Calif. + It currently transports 700 million cubic feet of natural gas per + day. Williams, + based in Tulsa, Okla., recently filed an emergency application with + federal + regulators to install additional pumping stations on the line to + increase its + capacity by 135 million cubic feet per day. That $81 million pumping + station + project should be completed by July 1. + During the 2002 construction period, the Kern River project will + employ between + 1,500 and 1,800 people. The company estimates annual property taxes + it pays to + Utah counties will increase from $3.5 million to about $7 million. + Questar will be one of the customers on the new pipeline, Morgan + said. + The utility wants to supply additional gas to southern Utah cities, + including + St. George and Cedar City. + ""Our own pipelines serving southern Utah are at full capacity so this + is an + opportunity to transport additional gas into those areas from + company-owned + supplies in Wyoming,"" said Questar Gas spokeswoman Audra Sorensen. + + + + Calif Energy Commission OKs 3 Pwr Plants Worth 2,076 MW + 03/23/2001 + Dow Jones Energy Service + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + (This article was originally published Thursday) + + LOS ANGELES -(Dow Jones)- The California Energy Commission Wednesday + approved + three power plants worth 2,076 megawatts, two of which are scheduled + to come on + line by the end of 2002, a CEC spokesman said Thursday. + + The plants approved include BP Amoco PLC (BP) unit ARCO Western + Energy's 500 + megawatt Western Midway Sunset Project, slated to come on line in + October 2002; + Caithness Energy's 520 MW Blythe Power Plant, to come on line by Dec. + 31, 2002; + and Thermo Ecotek's 1,056 MW Mountainview Power Plant, scheduled to + come on line + in April 2003. + All three of the new plants will be natural gas-fired combined-cycle + plants. + The $550 million Mountainview plant will be located in Southern + California, near + San Bernadino. The $300 million Western Midway-Sunset plant will be + located in + central Kern County, while the $250 million Blythe plant will be + located in the + city of Blythe in Riverside County. + The latest approvals bring to 13 the total number of plants approved + since April + 1999 by the CEC, a spokesman said. Those plants will supply 8,405 MW + to the + state, which has seen rolling blackouts and spiking wholesale power + prices in + the last six months, in part due to lack of supply. + -By Jessica Berthold, Dow Jones Newswires; 323-658-3872; + jessica.berthold@dowjones.com + + + Some CalEnergy Power Could Be Sold Outside Calif - CEO + 03/23/2001 + Dow Jones Energy Service + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + (This article was originally published Thursday) + + LOS ANGELES -(Dow Jones)- Some of CalEnergy Operating Corp's power + could end up + being sold outside of California, though that is not the company's + intent, + CalEnergy Chairman and CEO David Sokol said in a conference call + Thursday. + + CalEnergy, an affiliate of MidAmerican Energy Holdings Co, which is + majority + owned by Warren Buffett's Berkshire-Hathaway (BRKA), was given legal + authority + Thursday to suspend 270 megawatts of power delivery to Edison + International + (EIX) utility Southern California Edison and sell on the open market, + because + SoCal Edison has not paid its bills since November. + CalEnergy stopped supplying power to SoCal Ed immediately following + the court + ruling. + ""We stopped supplying power at 1 PM (PST) and have been selling to + parties that + will pay since then....We are selling it to marketers; our current + marketing + agent is El Paso Corp (EPG) and they will sell it for us,"" Sokol + said. + Sokol added that while it was his company's intention to have its + power sold to + California, that could not be guaranteed. + ""We leave the energy selling to El Paso....We've directed them that + we would + like the power to stay in California but we can't stop them,"" from + selling out + of state, Sokol said. + Wholesale prices on the open market are about $400-$500 a + megawatt-hour, three + times more than what the company had received under its contract with + SoCal Ed. + The court's ruling did not address the $45 million SoCal Ed still + owes CalEnergy + for November and December power, and Sokol said that his company's + separate + lawsuit on that matter sought to attach the utility's assets as + payment for that + debt. + Sokol said the court's ruling had ""significant implications"" for the + entire + community of small, independent generators, known as qualifying + facilities or + QFs, who have not received payment from SoCal Ed. + ""Edison's own lawyer said it best....that every QF in the state will + begin to + mitigate if the judge allowed us (to sell on the open market),"" Sokol + said. + Sokol said his company was prepared to push SoCal Ed into involuntary + bankruptcy + Friday if CalEnergy hadn't won the case, but said he couldn't + speculate whether + other QFs may be more or less inclined to do so as a result of the + court + outcome. + A group of renewable power suppliers, owed more than $100 million + from SoCal Ed, + said late Wednesday they want state lawmakers to release them for + their supply + contracts with PG&E Corp. (PCG) unit Pacific Gas & Electric and SoCal + Ed until + the utilities are restored to financial stability. + The utilities claim close to $13 billion in undercollections due to + an inability + to pass high wholesale power costs to customers under a rate freeze. + In a statement, SoCal Ed said it opposed CalEnergy's bid to suspend + its QF + contract because the utility believed Gov. Gray Davis and state + regulators are + close to resolving ""very legitimate financial concerns of CalEnergy + and other QF + suppliers."" + SoCal Ed said it was concerned that CalEnergy's request to sell to + third parties + would lead to a major supply shortage in California. + The utility said it has informed the QFs that it is working to + resolve the issue + without giving unfair advantage to one class of creditors. + While many of the state's large power suppliers have been paid by on + a forward + basis for the power they sell into California, the QFs, which make up + one-third + of the state's total power supply, haven't been paid by SoCal Ed + since November. + PG&E has made partial payments to its QFs. + -By Jessica Berthold, Dow Jones Newswires; 323-658-3872, + jessica.berthold@dowjones.com + (Jason Leopold contributed to this article.) + + + California and the West Judge Frees Small Firm From Edison Contract + KEN ELLINGWOOD; DAN MORAIN + TIMES STAFF WRITERS + 03/23/2001 + Los Angeles Times + Home Edition + A-3 + Copyright 2001 / The Times Mirror Company + + El CENTRO -- California's balance of electrical power shifted + slightly Thursday + when an Imperial County judge temporarily freed a small geothermal + energy + producer from its contract with Southern California Edison, allowing + it to sell + power on the open market. + The ruling by Superior Court Judge Donal B. Donnelly could lead to a + mass exodus + by hundreds of small energy producers that have been selling power to + the + state's financially troubled utilities for months without getting + paid. + + At the same time, it may have staved off plans by a group of the + small + generators to send Edison into involuntary bankruptcy as early as + today. + In Sacramento, energy legislation pushed by Gov. Gray Davis passed in + the state + Senate but foundered in the Assembly. The measure was intended to + ensure that + the state gets repaid for the electricity that it has been buying on + behalf of + Edison and Pacific Gas & Electric, which say they lack the cash and + credit to + purchase power. The bill also was supposed to guarantee that the + small, + alternative energy producers--which together provide nearly a third + of the + state's power--get paid. But Assembly Republicans opposed it, saying + it hadn't + been given sufficient scrutiny. + The impact of the small producers was made clear in Imperial County, + where + Edison's failure to pay CalEnergy, the county's biggest property + taxpayer, had + outsize implications. CalEnergy had put county officials on notice + that it was + about to miss a $3.8-million property tax payment. The uncertainty + had prompted + the tiny Calipatria Unified School District to postpone a bond issue + for badly + needed school repairs. + Among CalEnergy Chairman David Sokol's first acts after the judge's + ruling + Thursday was to promise Imperial County Supervisor Wally J. + Leimgruber that the + company would pay its property taxes on time. + ""That is great news,"" Leimgruber said. + Within hours of its court victory, CalEnergy had stopped transmitting + geothermal + power to Edison and begun selling it to El Paso Energy, a marketing + company that + purchased the energy at prevailing rates and resold it on the spot + market. + Some of the more than 700 other small energy producers in the state + said they + were considering similar action against Edison and Pacific Gas & + Electric. + ""We absolutely need the right to sell to third parties,"" said Dean + Vanech, + president of Delta Power, a New Jersey company that owns five small + gas-fired + plants in California and is owed tens of millions of dollars by + Edison. + Sokol praised the Imperial County judge and said his company simply + wanted the + authority to sell its power ""to a credit-worthy company that, in + fact, pays for + the power."" + An Edison spokesman said the company was disappointed with the + ruling, but + sympathized with CalEnergy and other small producers because + ""California's power + crisis has placed [them] in financial distress, just as it has placed + utilities + in financial distress."" + Edison expressed concern that the ruling would prompt CalEnergy and + other small + producers to sell their power out of state. Sokol said CalEnergy had + specifically told El Paso Energy that it hoped its power would remain + in + California, ""but if someone wants to pay a higher price out of state, + we can't + stop them."" + Sokol said that Edison still owes CalEnergy $140 million and that the + company--along with seven other small producers--had been prepared to + file a + petition in federal bankruptcy court in Los Angeles today forcing the + utility + into involuntary bankruptcy. He said his company no longer intends to + do so, and + he believed--but wasn't certain--that the other companies would + shelve their + plans. + Edison filed papers Thursday with the federal Securities and Exchange + Commission + showing that it owed $840 million to various small electricity + producers, many + of which rely on renewable energy sources such as geothermal steam, + solar energy + or wind. + The alternative energy producers--and utilities--strenuously objected + to the + legislation considered in Sacramento on Thursday. The bill, spelling + out how the + utilities are to pay the state and the small producers, passed the + Senate on a + 27-9 vote, the exact two-thirds margin required. But it stalled in + the Assembly + on a 46-23 party-line vote, well short of two-thirds. + ""When I was a citizen back in Lancaster, I heard these stories about + pieces of + legislation that were cooked up late at night, that . . . were cut + and pasted + together and were rammed through by the Legislature,"" Assemblyman + George Runner + (R-Lancaster) said. ""That's exactly what we have before us."" + The alternative electricity generators, including oil companies, + warned that + they would lose money under the Davis proposal, while representatives + of Edison + and PG&E, which have amassed billions in debt in the worsening energy + crisis, + said the legislation would push them deeper into the hole. + ""There isn't enough money,"" Edison attorney Ann Cohn testified at a + Senate + hearing on the bill Thursday. ""It is a very simple question: Dollars + going out + cannot be greater than dollars coming in."" + The bill, AB 8X, combined several proposals. First, it sought to + clarify earlier + legislation by spelling out that Edison and PG&E must pay the state + all money + collected from consumers for electricity that the state has been + buying. + Additionally, the bill would turn over to the California Public + Utilities + Commission the thorny issue of how much to pay alternative energy + producers for + their electricity. + Wind, solar and geothermal producers might agree to the prices + offered by the + administration. But most of the alternative energy producers, + including Chevron + and British Petroleum, use natural gas to generate electricity + through + ""cogeneration,"" a process of creating steam for both electric + generation and + heat. With natural gas prices high, they contend, they would lose + money at the + prices Davis is offering. + * + Ellingwood reported from El Centro, Morain from Sacramento. Times + staff writers + Mitchell Landsberg in Los Angeles and Jenifer Warren, Nancy Vogel and + Carl + Ingram in Sacramento contributed to this story. + (BEGIN TEXT OF INFOBOX / INFOGRAPHIC) + Power Points + Background + The state Legislature approved electricity deregulation with a + unanimous vote in + 1996. The move was expected to lower power bills in California by + opening up the + energy market to competition. Relatively few companies, however, + entered that + market to sell electricity, giving each that did considerable + influence over the + price. Meanwhile, demand has increased in recent years while no major + power + plants have been built. These factors combined last year to push up + the + wholesale cost of electricity. But the state's biggest + utilities--Pacific Gas & + Electric and Southern California Edison--are barred from increasing + consumer + rates. So the utilities have accumulated billions of dollars in debt + and, + despite help from the state, have struggled to buy enough + electricity. + * + Daily Developments + * Overcharges by major electricity suppliers were estimated at $6.3 + billion, up + from the $5.5 billion first thought, California's power grid operator + said. + * Electricity producers denied that they have profiteered and argued + that + Cal-ISO's figures don't take into account all their costs. + * A Superior Court judge's ruling Thursday freeing a small producer + from its + contract with Edison could lead to a mass exodus by small energy + producers that + have been selling to the utilities without getting paid. + * + Verbatim + ""If these guys have such high costs ... how come they're making so + much money?"" + --Gary Stern, Edison's director of market monitoring and analysis, + referring to + power producers + Complete package and updates at www.latimes.com/power + + + Grid Operator Says California Paid Too Much for Power + By Rebecca Smith and John R. Emshwiller + Staff Reporters of The Wall Street Journal + 03/23/2001 + The Wall Street Journal + A2 + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + California's electric-grid operator said power suppliers may have + overcharged + the state and its utilities by $6.2 billion, or a total of 30%, in a + 10-month + period, and has asked federal regulators to step up their policing of + electricity markets. + Meanwhile, a California state judge handed down a decision involving + small power + producers that could result in more electricity being made available + in the + energy-starved state, but likely at greater cost to the state + government. + + The $6.2 billion figure was contained in a market analysis by the + California + Independent System Operator filed yesterday with the Federal Energy + Regulatory + Commission. The ISO says it isn't seeking a refund -- for the May + through + February period -- because its analysis lacked important market data. + For example, it estimated costs for 21 suppliers based on published + prices for + natural gas, not on specific data showing what each generator + actually paid for + the fuel. ""We don't know how much gas actually was purchased at + spot-market + prices,"" said Anjali Sheffrin, the ISO's head of market analysis. + Charles Robinson, general counsel for the ISO, said FERC needs to + become ""more + aggressive about market-power mitigation."" The ISO's filing, he said, + was + intended to push the agency in that direction, since FERC is + responsible for + policing deregulated electricity and natural-gas markets. + He said that if the FERC doesn't act, the state of California may + find ways to + discipline the market, such as through the state attorney general's + office. The + attorney general has been investigating the state's electricity + market for many + months but hasn't brought any court action. + Dynegy Inc., a big owner of power plants in California, said it will + provide + additional information to FERC supporting its position that the + prices it has + charged for power have been ""just and reasonable."" The Houston + company was one + of 13 energy suppliers that the FERC this month ordered to pay + refunds totaling + $124 million or ""show cause"" why it should be excused. Dynegy said + the FERC + analysis was flawed, because it used ""inaccurate"" prices for natural + gas and + pollution credits. + While big power producers such as Dynegy came under attack, small + power + producers won a potentially significant victory in a state court in + Southern + California's Imperial County. A judge granted 10 geothermal plants + operated by + the CalEnergy Co. unit of MidAmerican Energy Holdings Co., a unit of + Berkshire + Hathaway Inc., of Omaha, Neb., permission to suspend deliveries of + electricity + to Southern California Edison Co. and instead seek other buyers. + These plants, known as ""qualifying facilities,"" are under long-term + contract to + Edison and other utilities but haven't been paid for months. Edison, + a unit of + Edison International, of Rosemead, Calif., says it has been unable to + pay + hundreds of millions of dollars in power bills to CalEnergy and + others because + it has been driven to the brink of insolvency by the state's failed + utility-deregulation plan. + While the CalEnergy case involves only about 320 megawatts of power, + the + repercussions could be far greater. Collectively, hundreds of + qualifying + facilities, or QFs, produce as much as 30% of California's + electricity needs. + QFs totaling 3,000 megawatts cut their production in recent weeks for + lack of + payment. This loss of output was a significant cause of the blackouts + that hit + California this week. + Observers believe the CalEnergy court decision could give other QFs + an + opportunity to sell power in the open market, presumably to the state + government + that now is California's biggest energy buyer. An hour after the + court decision + yesterday, some 400 megawatts of power came back into the market, the + ISO said. + However, additional QF power sales on the open market could + substantially + increase the state's tab. Already, the state has allocated more than + $4 billion + for electricity purchases. + Separately, Edison said in a Securities and Exchange Commission + filing that its + unpaid power bills could contribute to a write-off of as much as $2.7 + billion + for 2000. Because of uncertainty caused by the energy crisis, the + company hasn't + yet reported year-end earnings. + + + + Power regulators debate who should be exempted from blackouts + By KAREN GAUDETTE + Associated Press Writer + 03/22/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + SAN FRANCISCO (AP) - State power regulators said Thursday they are + working to + exempt all California hospitals, regardless of size, from rolling + blackouts. + The Public Utilities Commission met with representatives from + hospitals and + investor-owned utilities after Los Angeles lawyer David Huard filed + an emergency + motion with the PUC on behalf of more than 500 hospitals throughout + the state. + + Under PUC rules, hospitals with more than 100 beds are exempt from + losing + electricity during power emergencies. But during rolling blackouts + Monday, at + least a dozen hospitals from Long Beach to Clearlake were forced to + use their + backup generators. + Pacific Gas and Electric Co. and Southern California Edison Co. say + they blacked + out those hospitals specifically because they have backup generators. + Both + utilities said the temporary blackouts were part of their overall + efforts to + spread the burden of blackouts over more of their customers. + Linda Ziegler, director of business and regulatory planning for SoCal + Edison, + said the utility is following state law and will implement new + guidelines if the + PUC changes them. + But hospitals say there is a 10-second lapse before emergency + generators kick + in, which could harm patients in the midst of delicate surgical + procedures such + as organ transplants or brain surgery. + ""You wouldn't fly a plane with only your emergency backup systems in + place,"" + said Ann Mosher, a spokeswoman for California Pacific Medical Center + in San + Francisco. ""Backup generators are just that, they're not designed to + keep the + hospital up and running at full capacity."" + Ziegler said that power still goes out for reasons beyond the energy + crisis, + from incidents like lightning or a knocked-down power pole. + ""If it's a serious problem for the hospital it's certainly something + they should + be address just from an ongoing basis,"" she said. + The exemption would cover all hospitals within the territory of the + state's + investor owned utilities PG&E, Southern California Edison and San + Diego Gas and + Electric. + Hospitals within the range of municipally owned utilities, such as + the Los + Angeles Department of Water and Power, are separately regulated. + For more than two decades, prisons, hospitals with more than 100 beds + and + emergency services such as fire and police departments have been + classified as + ""essential"" services, and are exempted from blackouts by order of + state power + regulators. + After rolling blackouts began darkening the state in January, many + other public + service groups began seeking relief from power interruptions, + including transit + systems, schools and water districts. + --- + On the Net: + http://www.cpuc.ca.gov + + + + Federal Judge Orders Reliant To Keep Selling Pwr To Calif + 03/22/2001 + Dow Jones Energy Service + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + SACRAMENTO, Calif. (AP)--A federal judge issued a preliminary + injunction + Wednesday ordering a major electricity wholesaler to continue selling + to + California despite its fear that it will not get paid. + U.S. District Judge Frank C. Damrell Jr. said Californians were at + risk of + irreparable harm if Reliant Energy (REI) stopped selling power to the + Independent System Operator, which oversees the state's power grid. + The ISO buys + last-minute power on behalf of utilities to fill gaps in supply. + + Damrell dismissed Reliant's attempt to force the state Department of + Water + Resources to back the ISO's purchases for the state's two biggest + utilities. The + state has been spending about $50 million a day on power for Pacific + Gas and + Electric Co. and Southern California Edison, both denied credit by + suppliers + after amassing billions of dollars in debts. + The judge said he had no authority to force the DWR to pay for that + power. + Gov. Gray Davis has said the state isn't responsible for purchasing + the costly + last-minute power ISO buys for Edison and PG&E, despite a law + authorizing state + power purchases on the utilities' behalf. + ISO attorney Charles Robinson said the ruling gives ISO operators ""a + tool to + assist them in keeping the lights on in California."" + ""Had the decision gone the other way, one could expect other + generators to + simply ignore emergency orders,"" Robinson said. + Damrell's preliminary injunction will remain in effect until the + Federal Energy + Regulatory Commission rules on the matter. + Damrell denied the ISO's request for preliminary injunctions against + three other + wholesalers - Dynegy Inc. (DYN), AES Corp. (AES) and Williams Cos. + (WMB) - which + agreed to continue selling to the ISO pending the FERC ruling. + Spokesmen for Reliant, Dynegy, AES and Williams were out of the + office Wednesday + night and didn't immediately return calls from The Associated Press + seeking + comment on the ruling. + The ISO went to court in February after a federal emergency order + requiring the + power sales expired. The judge then issued a temporary restraining + order, + requiring the sales, but dropped it after the suppliers agreed to + continue sales + to California pending his Wednesday ruling. + The ISO said it would lose about 3,600 megawatts if the suppliers + pulled out, + enough power for about 2.7 million households. One megawatt is enough + for + roughly 750 homes. + Grid officials said Reliant's share alone is about 3,000 megawatts. + Reliant said + the amount at issue actually is less than a fourth of that, because + most of its + output is already committed under long-term contracts. + Reliant, which currently provides about 9% of the state's power, + worries it + won't get paid due to the financial troubles of PG&E and Edison. PG&E + and Edison + say that together they have lost about $13 billion since June due to + soaring + wholesale electricity costs that California's 1996 deregulation law + bars them + from passing onto customers. + + + Calif Small Pwr Producers To Shut Plants If Rates Capped + By Jason Leopold + Of DOW JONES NEWSWIRES + 03/22/2001 + Dow Jones Energy Service + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + LOS ANGELES -(Dow Jones)- Many of California's independent power + producers late + Wednesday threatened to take their small power plants offline this + week if state + lawmakers pass legislation that would cap the rates the generators + charge for + electricity they sell directly to the state's three investor-owned + utilities. + At issue is a bill that would repeal a section of the state's Public + Utilities + Code, which links the 688 so-called qualifying facilities' + electricity rates to + the monthly border price of natural gas. + + Lawmakers, however, are poised to pass the legislation. + State regulators are then expected to approve a measure that would + restructure + the fluctuating rates the QFs charge PG&E Corp. (PCG) unit Pacific + Gas & + Electric, Edison International (EIX) unit Southern California Edison, + and Sempra + Energy (SRE) unit San Diego Gas & Electric from $170 a megawatt-hour + to + $69-$79/MWh, regardless of the price of natural gas. + Whereas each of the 688 QF contracts differed, largely because + natural gas + prices are higher in Southern California than Northern California, + the state + wants the QFs to sign a general contract with the utilities. + The cogeneration facilities, which produce about 5,400 megawatts of + electricity + in the state, said the rates are too low and they won't sign new + supply + contracts with the utilities. + ""For $79/MWh, natural gas would have to be $6 per million British + thermal unit + at + the Southern California border,"" said Tom Lu, executive director + of + Carson-based Watson Cogeneration Company, the state's largest QF, + generating 340 + MW. ""Our current gas price at the border is $12.50."" + Other gas-fired QFs said the state could face another round of + rolling blackouts + if lawmakers and state regulators pass the legislation, which is + expected to be + heard on the Senate floor Thursday, and allow it to be implemented by + Public + Utilities Commission next week. + Lu, whose company is half-owned by BP Amoco PLC (BP) and is owed $100 + million by + SoCal Ed, said the proposals by the PUC and the Legislature ""will + only make + things worse."" + David Fogarty, spokesman for Western States Petroleum Association, + whose members + supply California with more than 2,000 MW, said the utilities need to + pay the + QFs more than $1 billion for electricity that was already produced. + State Loses 3,000 MW QF Output Due Of Financial Reasons + + + The QFs represent about one-third, or 9,700 MW, of the state's total + power + supply. Roughly 5,400 MW are produced by natural gas-fired + facilities. The rest + is generated by wind, solar power and biomass. + About 3,000 MW of gas-fired and renewable QF generation is offline in + California + because the power plant owners haven't been paid hundreds of millions + of dollars + from cash-strapped utilities SoCal Ed and PG&E for nearly four + months. + Several small power plant owners owed money by SoCal Ed have + threatened to drag + the utility into involuntary bankruptcy if the utility continues to + default on + payments and fails to agree to supply contracts at higher rates. + The defaults have left many of the renewable and gas-fired QFs unable + to operate + their power plants because they can't afford to pay for the natural + gas to run + their units. Others continue to produce electricity under their + contracts with + the state's utilities but aren't being paid even on a forward basis. + The California Independent System Operator, keeper of the state's + electricity + grid, said the loss of the QF generation was the primary reason + rolling + blackouts swept through the state Monday and Tuesday. + Gov. Gray Davis, recognizing the potential disaster if additional QFs + took their + units offline, held marathon meetings with key lawmakers Monday and + Tuesday to + try and hammer out an agreement that would get the QFs paid on a + forward basis + and set rates of $79/MWh and $69/MWh for five and 10 year contracts. + He also + said he would direct the PUC to order the utilities to pay the QFs + for power + they sell going forward. + ""After next week the QF problem will be behind us,"" Davis said + Tuesday. ""We want + to get the QFs paid...the QFs are dropping like flies...and when that + happens + the lights go out."" + But this just makes the problem worse, said Assemblyman Dean Florez, + D-Shafter, + a member of the Assembly energy committee. + ""I don't know how we are going to keep the lights on,"" Florez said in + an + interview. ""Many of these congenerators are in my district. They said + if the + legislation doesn't change they are going offline. This compounds the + issue of + rolling blackouts, especially now when we need every megawatt."" + Davis, who didn't meet with people representing the QFs, said he was + handing the + QF issue to the PUC because lawmakers failed to pass legislation that + would have + set a five-year price for natural gas and allow the QFs to sign + individual + contracts with the utilities. In addition, SOCal Ed opposed the + legislation, + saying the rates should be below $50/MWh. + Some renewable power producers said they aren't vehemently opposed to + the new + rate structure because it guarantees them a higher rate than what was + originally + proposed. + QFs Want Third Party Supply Contracts + + + John Wood, who represents the SoCal Ed Gas Fired Creditors Committee, + one of a + handful of groups that have formed since January to explore options + on getting + paid by the utilities, said his group of gas-fired QF creditors want + to be + released from their supply contracts and sell to third parties. + ""Under our plan, we would be permitted to sell electricity to third + parties + (including the state Department of Water Resources) until a + resolution to the + crisis can be accomplished,"" wood said. + Hal Dittmer, president of Sacramento-based Wellhead Electric in + Sacramento, + which is owed $8 million by PG&E, has 85 MW of gas-fired generation + units + offline. + Under the state's plan, Dittmer said he risks going out of business. + ""I can't buy natural gas for what I would be paid under this + decision,"" he said. + ""The state needs to quit kidding themselves that they don't need to + raise + electricity rates. All of this is being driven by an artificial + construct that + California can avoid raising rates."" + + -By Jason Leopold, Dow Jones Newswires; 323-658-3874; + jason.leopold@dowjones.com + + + Power Strain Eases but Concerns Mount Energy: Officials say summer + prices will be high, and a state report shows that contracts with + generators are far short of goals. + DAN MORAIN; JENIFER WARREN + TIMES STAFF WRITERS + 03/22/2001 + Los Angeles Times + Home Edition + A-3 + Copyright 2001 / The Times Mirror Company + + SACRAMENTO -- California's fragile electricity system stabilized + Wednesday, but + a Davis administration report suggested troubles ahead because the + state could + be forced to buy most of its power for the coming summer on the + costly and + volatile spot market. + After two days of statewide blackouts, power plants that had been + shut down were + cranked up. Unseasonable heat tapered off. The operators of the + statewide power + grid relaxed their state of emergency. + + But plenty of ominous signs remained. Many small producers remained + shut down, + skeptical about Gov. Gray Davis' plan for utilities to pay them. + State Controller Kathleen Connell issued a sharp warning about the + high cost of + the state's foray into the power business and announced that she will + block an + administration request that she transfer $5.6 billion into an account + that could + be tapped to pay for state purchases of electricity. + And a report from the administration summarizing contracts between + Davis and + independent power generators showed that the state has signed + contracts for only + 2,247 megawatts of electricity, significantly less than the 6,000 to + 7,000 + megawatts previously claimed. + While there are agreements in principle for the full amount, the + report notes + that generators can back out of the contracts for a variety of + reasons, + including the state's failure to sell bonds to finance power + purchased by July + 1. The Legislature has approved plans to sell $10 billion in bonds, + but none + have yet been issued. + ""We are exposed enormously this summer,"" Senate Energy Committee + chairwoman + Debra Bowen (D-Marina del Rey) said after looking at the report. ""We + owe the + people the truth about how difficult this summer is going to be. We + don't have a + power fairy."" + Perhaps most significant, the report suggests that the contracts fall + significantly short of Davis' stated goal of buying no more than 5% + of the + state's summer needs on the spot electricity market, where prices can + be many + times those of long-term contracts. + After reading the report, Frank Wolak, a Stanford University + economist who + studies the California electricity market, said the numbers suggested + that the + state's long-term contracts will cover less than half of what the + state will + need this summer. + ""We're definitely short this summer, next summer and the summer of + 2003,"" he + said. + California was forced to start buying electricity in December--at a + cost of $50 + million a day--because producers refused to sell to Southern + California Edison + and Pacific Gas & Electric. The two utilities amassed billions of + dollars in + debt when prices for wholesale power soared on the spot market. + Vikram Budhraja, a consultant retained by Davis to negotiate deals + with + generators, said the report represents a ""work in progress."" He said + the state + may yet sign new contracts. + However, Wolak said the contract figures confirm what he and others + have been + dreading: that summer is going to be rife with rolling blackouts + unless serious + steps to cut demand are taken immediately. + Wolak and other experts say large industrial customers must be + switched to + real-time meters and pricing to persuade them to use the bulk of + their energy at + times of low demand. + The head of the Energy Foundation, a San Francisco-based nonprofit + that promotes + sustainable sources of power, made the same proposal to Davis on + Wednesday. + ""The government need not ask customers to swelter in the dark this + summer,"" + foundation President Hal Harvey argued in a letter. + He also proposed a crash campaign to boost sales of efficient + appliances and + lightbulbs. He said the state needs to take over the utilities' + contracts with + alternative energy providers to ensure they stay in business, and + sign new + contracts for 1,500 megawatts of new wind power--the cheapest, + fastest and + cleanest source of new supply. + Davis had proposed a formula Tuesday to force private utilities to + pay the + alternative producers, some of which have not been paid since + November. But some + of them warned Wednesday that Davis' plan offers them little + incentive to turn + on their generators. + Alternative energy producers supply more than a quarter of the + electricity + consumed in California. + Many producers generate electricity from wind, sun and geothermal + sources. But + most of them generate power using natural gas--and the cost of + natural gas has + been soaring. Several natural gas users said Davis' plan, which caps + rates, + won't cover their fuel costs. + Davis assumes that the price of natural gas will fall. But small + generators say + they don't have sufficient purchasing power or sophistication to + gamble on + future prices. + The Public Utilities Commission is expected to approve Davis' + proposal next + week. It offers producers two choices: 7.9 cents a kilowatt-hour if + they agree + to supply power for five years, or 6.9 cents a kilowatt-hour over 10 + years. + ""The price of natural gas is higher than that,"" said Marty Quinn, + executive vice + president and chief operating officer of Ridgewood Power LLC, which + owns three + natural gas-fired co-generation plants. ""If we operate, we'll lose + money."" + Ridgewood is not operating, having been cut off by gas suppliers. The + company + sued PG&E last month seeking overdue payments and release from its + contracts + with the utility. + A hearing is scheduled in El Centro today in another lawsuit filed by + a small + energy producer, an Imperial Valley geothermal producer that sued + Edison for + refusing to let it break its contract and sell on the open market. + CalEnergy + says Edison owes it about $140 million for energy sold since + November. + A company spokesman, Jay Lawrence, said CalEnergy was going ahead + with its suit + despite Davis' proposal. ""We've had promises before,"" he said. + In other developments: + * A federal judge in Sacramento on Wednesday ordered Reliant Energy + of Houston, + a major producer, to continue selling power to California during + emergencies, + despite the company's argument that it may not be fully reimbursed. + The order + will remain in effect for 60 days or until the U.S. Federal Energy + Regulatory + Commission decides a related case. + * Connell said the state budget surplus has shrunk to $3.2 billion + because the + state has spent roughly $2.8 billion on electricity. She criticized + the + administration for withholding basic information about state + finances, and said + she will begin an audit on Monday of the Department of Water + Resources, which is + responsible for purchasing power. + Davis' aides said Connell took her action because the Democratic + governor + endorsed one of Connell's foes this week in the race for Los Angeles + mayor, + former Assembly Speaker Antonio Villaraigosa. A Connell aide scoffed + at the + notion. + * Sen. Dianne Feinstein (D-Calif.) said she ""never has had a + response"" from + President Bush after writing him last month for an appointment to + discuss the + California energy crisis. + In a wide-ranging lunch talk with reporters in Washington, she + deplored the fact + that ""huge, huge profits are being made"" in the California crisis, + and said ""an + appropriate federal role"" would be to guarantee a reliable source of + power until + the state can get nine new generators online. + * + Times staff writers Mitchell Landsberg in Los Angeles and Robert L. + Jackson in + Washington contributed to this report. + (BEGIN TEXT OF INFOBOX / INFOGRAPHIC) + Power Points + Daily Developments + * Wholesale electricity suppliers overcharged by about $5.5 billion + between May + and last month, and that money should be refunded to taxpayers and + utilities, + according to a Cal-ISO report. + * The state may have to buy most of its power for summer on the + costly spot + market, which could drive consumers' bills up, a Davis administration + report + concludes. + * State Controller Kathleen Connell said she will block a request by + the Davis + administration for $5.6 billion for state purchases of electricity. + Verbatim + ""We owe the people the truth about how difficult this summer is going + to be. We + don't have a power fairy."" + Debra Bowen (D-Marina del Rey), Senate Energy Committee chairwoman + + + CPUC Must Address Rates In QF Repayment Order - SoCal Ed + 03/21/2001 + Dow Jones Energy Service + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + LOS ANGELES -(Dow Jones)- Any order from the California Public + Utilities + Commission requiring utilities to pay small, independent generators + going + forward must determine how that could be done within the existing + rate + structure, a spokesman for Edison International (EIX) utility + Southern + California Edison said Wednesday. + The utility was responding to a PUC proposed decision that would + require + utilities to pay small generators, called qualifying facilities, $79 + a megawatt + hour within 15 days of electricity delivery. The decision will be + voted March 27 + by the CPUC. + + ""We're still reviewing (the decision) and should have more to say in + a day or + two. To the extent that the commission orders us to pay going forward + of course + we will. But it needs to address how we will pay the QFs,"" a SoCal + Edison + spokesman said. + SoCal Edison and PG&E Corp. (PCG) unit Pacific Gas & Electric Co. are + struggling + under nearly $13 billion in uncollected power costs due to an + inability to pass + high wholesale power costs to customers under a rate freeze. + Gov. Gray Davis Tuesday blasted the utilities for not having paid + their QF bills + in full since December. Pacific Gas & Electric Co. has made some + partial + payments to QFs, but SoCal Edison has paid nothing. Together, they + owe the QFs + about $1 billion, but the order doesn't address that debt. + An Edison executive said, in reaction to the governor's sharp + comments, that the + company simply doesn't have the money to pay creditors. + ""The root problem here is there just isn't enough money in the + current rate base + to pay our bills,"" said Edison Senior Vice President of Public + Affairs Bob + Foster. ""We understand the financial distress (the QFs) face; we are + facing + financial distress ourselves."" + The proposed PUC order would also require the state's investor-owned + utilities + to offer the small generators five- and 10-year contracts for power + for $79/MWh + and $69/MWh, respectively. + The QFs ""may be able to live with"" the PUC proposal, but the five- + and 10-year + contract prices may be inadequate if natural gas prices at one of the + California + borders are high, said Jan Smutny-Jones, president of the Independent + Energy + Producers Association. Natural gas prices into California are + currently higher + than anywhere in the country. + But some say the proposed decision may not be enough to prevent the + QFs from + filing involuntary bankruptcy proceedings against the utilities for + the money + they are still owed. + ""There's still a lot of skepticism. To say our position has changed + based on the + CPUC decision or the governor's announcement is not accurate. A lot + still has to + happen,"" said Jay Lawrence, a spokesman for a renewable creditors + committee. + -By Jessica Berthold, Dow Jones Newswires; 323-658-3872; + jessica.berthold@dowjones.com -0- 22/03/01 01-27G + + + + State Says It's Accelerating Plan to Buy Power Utilities' Grid + Government: Talks with Edison are reported near completion, but + agreement with heavily indebted PG&E has a way to go. + RONE TEMPEST; DAN MORAIN + TIMES STAFF WRITERS + 03/21/2001 + Los Angeles Times + Home Edition + A-22 + Copyright 2001 / The Times Mirror Company + + SACRAMENTO -- As blackouts hit California for a second day Tuesday, a + key + consultant to Gov. Gray Davis said negotiations to buy the power grid + owned by + the state's largest utilities ""are proceeding at an accelerated + pace."" + Wall Street consultant Joseph Fichera said talks with Southern + California Edison + could be wrapped up within days, although those with PG&E are much + less + advanced. + + The administration and PG&E have not reached even an agreement in + principle, he + said. PG&E, which has more debt than Edison, says its transmission + lines are + more extensive than those of its Southern California counterpart. + The state wants to buy the utilities' transmission lines and other + assets for + about $7 billion to provide cash to the utilities, help stabilize the + electricity supply and ease the power crunch that has plagued + California for + months. To research the grid purchase, Fichera said, the state has + had to pore + over 80,000 documents just to assess the utilities' liabilities. + ""We are working at a good pace,"" said Fichera, chief executive of the + New York + firm Saber Partners. "" . . . If we get to a deal-breaker, it might be + longer."" + By making Fichera, who is also a consultant to the Texas Public + Utilities + Commission, available to reporters Tuesday, the Davis administration + was clearly + trying to reassure the public that progress is being made on the + governor's plan + to pull the state out of the crisis. + Since mid-January, when the big utilities' credit failed and + suppliers stopped + selling to them, the state has spent nearly $3 billion buying + electricity from a + handful of large suppliers in Texas, Oklahoma, Georgia and North + Carolina. Not a + cent has gone to the hundreds of alternative energy suppliers in + California who + provide about a quarter of the state's electricity. + The Monday and Tuesday blackouts occurred partly because many of the + cash-strapped alternative suppliers, including solar, biomass and + wind power + units, cut their normal supply to the system in half. They say Edison + and PG&E + have not paid them since November; the utilities say they are out of + cash. + Assemblyman Fred Keeley (D-Boulder Creek) said the plight of the + alternative + suppliers has dragged on because of the complexity of dealing with + ""almost 700 + individual contractors."" + Another delaying factor, said Keeley, who with state Sen. Jim Battin + (R-La + Quinta) worked for almost three months to come up with a legislative + plan to + lower the small producers' prices, was ""the huge enmity . . . + manifested between + the utilities and the qualifying facilities. These people just don't + like each + other."" + This week's blackouts provided two painful lessons for the Davis + administration: + + * When it comes to electricity, size doesn't matter--every kilowatt + counts. + During peak use, a small wind power facility in Riverside County can + make the + difference between full power and blackouts. + * There is no such thing as a partial solution. Unless the whole + energy equation + is balanced, the parts don't work. + For the Davis plan to work, several key elements need to come + together or + utility customers will almost certainly face rate increases above the + 19% + already set in motion * The cost of power purchased by the state must + be reduced + through long-term contracts with the big out-of-state producers. + These contracts, the details of which the Davis administration has + kept + confidential, are still being negotiated by Davis consultant Vikram + Budhraja of + the Pasadena firm Electric Power Group. The administration says it + has concluded + 40 contracts with generators, about half of which have been signed. + According to the most recent statistics released by the Department of + Water + Resources, which buys power for the state, current prices are still + well above + the rate state Treasurer Phil Angelides says is necessary for a + planned + $10-billion bond offering to succeed. + The bonds, set for sale in May, will be used to reimburse the state + for the + money it will have spent by that time to buy electricity. The state + is currently + spending at a rate of $58 million a day to buy power. If prices stay + high, the + $10 billion in bonds will not cover the state's power purchases by + the end of + the summer. + Angelides says he cannot proceed with bridge financing for the bonds + until the + Public Utilities Commission devises a formula to guarantee that a + portion of + utility bills will be dedicated to bond repayment. Angelides has + estimated that, + under the January law that put the state in the power buying + business, the state + must be reimbursed $2.5 billion annually, and that $1.3 billion is + needed to + service the debt. + PUC Administrative Law Judge Joseph R. DeUlloa is expected to + announce his + ruling on the reimbursement rate later this week, leading to a PUC + vote on the + matter as early as next week. + * The rates charged for electricity by the alternative producers, + known as + qualifying facilities, must be cut at least in half, down from an + average of + more than 17 cents per kilowatt-hour. In his news conference Tuesday, + Davis said + he will ask the PUC to set QF rates at 6.9 cents for 10-year + contracts and 7.5 + cents for five-year contracts. + Meanwhile, PUC Chairman Loretta Lynch, a Davis appointee, said + Tuesday that the + commission will vote next week on a proposed order requiring Southern + California + Edison and Pacific Gas & Electric to pay the QFs for electricity in + the future. + Lynch said a recent PUC assessment showed that the utilities have + enough cash on + hand for that. + ""We are trying to make sure the folks providing the power get paid,"" + Lynch said. + ""The qualified facilities have demonstrated that they haven't been + paid and that + it is impairing their ability to provide power."" + The utilities contend that if they pay the small providers what they + owe them, + there will not be enough money left to pay other creditors. + ""There is not enough money in the current rate structure to pay the + [alternative + producers], pay the [Department of Water Resources] and pay the + utilities for + their generation,"" said John Nelson, a spokesman for PG&E. + * The utilities must sell to the state the power they produce + themselves, mainly + from hydro and nuclear sources, at a rate only slightly above the + cost of + producing it. This is tied to the ongoing negotiations between the + Davis + administration and the utilities to restore the near-bankrupt + utilities to + solvency. + * + Times staff writers Julie Tamaki, Miguel Bustillo and Tim Reiterman + contributed + to this report. + + + Davis OKs Subsidy of Pollution Fees Smog: As part of secret deal to + get long-term energy contracts, state would pay for some of the + credits that allow excess power plant emissions. Critics renew call + for full disclosure. + DAN MORAIN + TIMES STAFF WRITER + 03/21/2001 + Los Angeles Times + Home Edition + A-23 + Copyright 2001 / The Times Mirror Company + + SACRAMENTO -- As part of his closed-door negotiations to buy + electricity, Gov. + Gray Davis has agreed to relieve some generators from having to pay + potentially + millions of dollars in fees for emitting pollutants into the air, + Davis said + Tuesday. + Davis announced two weeks ago that his negotiators had reached deals + with 20 + generators to supply $43 billion worth of power during the next 10 + years. + + However, the Democratic governor has refused to release any of the + contracts or + detail various terms, contending that release of such information + would hamper + the state's ability to negotiate deals with other generators and + therefore + ultimately would raise prices Californians pay for electricity. + Sources familiar with the negotiations, speaking on condition of + anonymity, said + the agreement reached with Dynegy Inc., a power company based in + Houston, is one + that includes language requiring that the state pay the cost of + credits that + allow emissions. Dynegy spokesman Steve Stengel declined to discuss + the + company's deal with the state. + ""We couldn't get them to sign contracts; it was a sticking point,"" + Davis said of + the decision to pay the fees of some generators. ""We had to lock down + some power + so we were not totally dependent on the spot market."" + The fees in question are part of an emission trading system known as + RECLAIM. + Under the system, companies are allotted a certain amount of + allowable + pollution. If their operations pollute more, companies are required + to purchase + credits on an open market. Currently the credits cost about $45 per + pound of + pollution--an amount that can lead to a bill of well over $10 million + a year for + a power plant. + The South Coast Air Quality Management District, which regulates + pollution in + the Los Angeles Basin, is considering steps to significantly lower + the cost of + the system--a step that could considerably cut the state's potential + cost, Davis + said. + Senate Energy Committee Chairwoman Debra Bowen (D-Marina del Rey) + defended the + decision to cover the power company's costs. + ""It is a question of whether it brings down the price of power,"" she + said. ""If + it brings down the price of power, I don't have a problem with it."" + Nevertheless, word that the contracts could bind the state to pay + pollution fees + caused some critics of Davis' policy to renew calls for Davis to + reconsider the + secrecy surrounding the power negotiations. The payment provision + underscores + the fact that the contracts involve more than merely the prices the + state will + pay for its megawatts, the critics note. + ""The Legislature should have known about it,"" said Senate President + Pro Tem John + Burton (D-San Francisco). ""It is going to cost taxpayers money. It + makes you + wonder. . . . This was a policy issue that was never discussed with + the + Legislature."" + V. John White, a lobbyist for the Sierra Club, who also represents + alternative + energy producers, called the contract proposal ""a horrible + precedent."" + ""Until we know exactly what the state has agreed to and how much of a + subsidy + this represents, we can't determine how serious the breach of + principle this + is,"" White said. + Another critic of the secrecy of the negotiations, Terry Francke, + general + counsel for the California First Amendment Coalition, said the + provision in + question ""raises the possibility that there are other [concessions]"" + that have + not yet come to light. + In the summer, when demand for power is highest, some generators + probably will + exceed pollution limits set by regional air quality management + districts. + To avert blackouts, state officials might ask the companies to keep + plants + running. In such cases, some sources familiar with aspects of the + contracts + said, the contract language could be interpreted to suggest that the + state would + cover any fines--although Davis said Tuesday the state will not cover + the cost + of fines. + A recent Dynegy filing with the Securities and Exchange Commission + underscores + the rising cost of pollution-related measures. The company, which is + partners + with NRG Energy in three California plants in El Segundo, Long Beach + and + Carlsbad in San Diego County, said its ""aggregate expenditures for + compliance + with laws related to the regulation of discharge of materials into + the + environment"" rose to $14.3 million in 2000, from $3.6 million in + 1999. + A South Coast Air Quality Management spokesman said Dynegy's + facilities appear + to be fairly clean--although Sierra Club lobbyist White said Dynegy + has been + seeking a permit at one of its plants to burn fuel oil, which is + dirtier than + natural gas. + Davis said he intends to ""make this information public,"" but he added + that ""we + do not want to put the public's interest in jeopardy by asking them + to pay + higher prices."" + ""Nobody likes the notion that [the administration is] not being fully + forthcoming,"" Davis said. ""But I also have a corollary responsibility + that I + don't stick these generators with a higher rate."" + + + FERC ORDERS WILLIAMS ENERGY AND AES TO EXPLAIN THEIR REFUSAL TO MAKE + CERTAIN RMR UNITS AVAILABLE TO CALIFORNIA ISO LAST YEAR + 03/21/2001 + Foster Electric Report + 5 + (c) Copyright 2001, Foster Associates, Inc. + + Following a preliminary, non-public investigation, FERC directed AES + Southland + Inc. and Williams Energy Marketing & Trading Co. (IN01-3) on March 14 + to show + cause why they did not violate section 205 of the Federal Power Act + (FPA) by + failing to provide power to the California ISO from two reliability + must-run + (RMR) generator units during a period in April and May 2000. The + investigation + responded to a matter referred by the Cal-ISO. If a violation is + found, Williams + Energy and AES could be required to refund excess profits of $10.9 + million (as + calculated by FERC) and face restrictions on their market-based rate + authority + for a year. + The show cause order involves two generation units (Alamitos 4 and + Huntington + Beach 2), owned and operated by AES. Williams Energy markets all + output from the + Alamitos and Huntington Beach plants, including the two units at + issue here, + pursuant to a tolling agreement filed with the Commission. The + Cal-ISO + designated the two units as RMR units that it could call on when + necessary to + provide energy and ancillary service essential to the reliability of + the + California transmission network. The Cal-ISO makes both a fixed + payment to the + RMR owner or operator to compensate for the RMR unit's availability + and a + variable payment for the RMR unit's output (if the unit is not + otherwise + participating in the market). Williams Energy and the Cal-ISO + executed RMR + agreements, filed as rate schedules with the Commission, allowing the + Cal-ISO to + dispatch units ""solely for purposes of meeting local reliability + needs or + managing intra-zonal congestion."" The ISO may dispatch a non-RMR unit + if the + designated RMR unit is not available. Under its RMR agreement with + the ISO, + Williams is paid the greater of its contract price or marginal cost + for + operating RMR units. However, if a non-RMR unit has to be dispatched + because a + designated RMR unit is unavailable, Williams will be paid its bid + price, not the + RMR contract price. + + During the April to May 2000 period, the Cal-ISO sought to dispatch + both + Alamitos 4 and Huntington Beach 2 as RMR units to provide voltage + support. + However, according to the FERC order, Williams Energy refused to make + Alamitos 4 + available from April 25 through May 5, and to make Huntington Beach 2 + available + from May 6 through May 11, ""for reasons not directly related to the + necessary + and timely maintenance of the units."" Consequently, the Cal-ISO was + forced to + dispatch non-RMR units at a higher cost, namely, Williams Energy's + bid price for + service provided by the replacement units. + By contrast, if the RMR units had not experienced outages and been + available + from April 25 through May 11, Williams Energy would have received + either (1) the + market revenues only from the respective units, which would have + resulted in no + payments for RMR output from the ISO to Williams Energy, or (2) + Williams + Energy's variable cost for operating the RMR units less the market + revenues from + the respective units' output. Accordingly, FERC observed, Williams + Energy had ""a + financial incentive to prolong any outages of Alamitos 4 and + Huntington Beach 2 + in April and May 2000."" + The bid price for the non-RMR units was at or near the Cal-ISO's + then-effective + bid cap of $750/MWh, FERC continued. Therefore, Williams Energy + received + payments from the Cal-ISO of more than $11.3 million, or about $10.3 + million + greater than the estimated average variable operating cost of the + non-RMR units + (approximately $63/MWh) during the period in question. This indicates + a refund + amount, including interest, of nearly $10.9 million. + The information in this order and a non-public appendix, the + Commission + declared, suggests that AES declared outages at the two RMR units and + maintained + Huntington Beach 2 in a manner inconsistent with good utility + practice, and that + Williams Energy took action to extend the outage at Alamitos 4 and to + make + Huntington Beach 2 unavailable for ""pretextual reasons."" + Based on this information coupled with Williams Energy's financial + incentive not + to make the Alamitos 4 and Huntington Beach 2 units available, FERC + found + serious questions about whether (1) AES and Williams Energy violated + applicable + RMR contracts and tariffs on file with the Commission pursuant to FPA + section + 205 when they refused to make Alamitos 4 and Huntington Beach 2 + available for + dispatch by the Cal-ISO; (2) whether Williams acted inconsistently + with its + market-based rate authority and the market monitoring information + protocols of + the Cal-ISO's tariff regarding the unavailability of the RMR units + during the + period at issue; and (3) whether AES violated a tolling agreement on + file with + the Commission pursuant to section 205. + The Commission identified two remedies for these potential + violations: a refund + by Williams Energy and/or AES of revenues received greater than the + amount that + would have collected from the ISO if the RMR units had been + available, and a + condition on Williams Energy's market-based rate authority. + Specifically, for a + one-year period, if an RMR unit were not available when dispatched by + the + Cal-ISO, a non-RMR unit dispatched in its place would only receive + payment + according to the terms of the applicable RMR contract. In other + words, Williams + Energy would not receive the bid price for operation of the + substitute, non- RMR + unit. + The Commission directed Williams Energy and AES to show cause, within + 20 days, + why they should not be found to have committed the above-described + violations + and why the specified remedies should not be imposed. + Further, to ensure procurement of all relevant information, the + Commission + instituted a formal, non-public investigation into the operation, + maintenance + and sales of power from the Alamitos and Huntington Beach plants in + 2000 and + 2001. + + + Calif Consumers Failing To Conserve Pwr Despite Blackouts + 03/20/2001 + Dow Jones Energy Service + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + LOS ANGELES -(Dow Jones)- California consumers haven't been + conserving enough + electricity to relieve strain on the power grid and reduce demand in + the state, + a spokesman with the Independent System Operator said Tuesday. + The ISO said that despite two straight days of statewide rolling + blackouts, + consumers aren't using less electricity, which means additional + megawatts will + be taken off the grid. As a result, blackouts could last longer and + impact + additional communities, the ISO said. + + ISO spokesman Pat Dorinson said Monday ""conservation in California is + no longer + an option,"" but consumers in the state aren't heeding the call to + reduce + consumption. + Conservation efforts during rolling blackouts Monday and Tuesday were + far less + than Jan. 17 and Jan. 18, when blackouts swept through Northern + California due + to transmission constraints. Jim Detmers, the ISO's vice president of + operation, + said consumers saved the state about 1,000 megawatts of electricity, + enough + power for 1 million houses. + The ISO said conservation efforts Monday were about 500 MW or less. + ""We would be very happy if we saw the same amount this time,"" Detmers + said. + The state's Energy Commission said consumers think it's no longer + important to + save electricity until blackouts are imposed. + ""People have been saving generally, but it isn't a big bump from hour + to hour,"" + a spokesman for the Energy Commission said. + Gov. Gray Davis launched a massive conservation campaign this month, + promising + consumers a rebate on their summer electricity bill if they save at + least 20% of + electricity, compared with last summer. + The governor said he believes conservation this summer will amount to + possibly + saving 5,000 MW and averting the chance of rolling blackouts. + -By Jason Leopold; Dow Jones Newswires; 323-658-3874; + jason.leopold@dowjones.com + + + Gas Co.'s Success Opens Debate Southern California energy supplier + has reaped + millions of dollars in state incentives for keeping down its costs. + Though + consumers get a share of the windfall, regulators are asking whether + they should + get more of the bonus, which is expected to be huge this year, as a + form of + price relief. The natural gas provider says it deserves to keep its + reward. + TIM REITERMAN + TIMES STAFF WRITER + 03/18/2001 + Los Angeles Times + Home Edition + C-1 + Copyright 2001 / The Times Mirror Company + + SAN FRANCISCO -- While consumers suffer soaring energy bills and the + big + electric utilities lurch toward insolvency, the news is not all dire + at Southern + California Gas Co. + Through vigorous deal making, the Sempra Energy subsidiary has + consistently + beaten the volatile natural gas market during the last year, and the + company + stands to reap millions of dollars in savings through a state + incentive program + that rewards utilities for keeping costs down. + + For several years, the utility has been splitting the savings 50-50 + with + ratepayers whenever the company's gas costs fall slightly below + market levels. + Those savings, Gas Co. executives acknowledged, have shot to + unprecedented + heights during the state's power crisis. + Now, in this climate of high consumer gas bills and runaway market + prices, + regulators are taking another look at the program. The question + before the + Public Utilities Commission: Should Gas Co. ratepayers, who endured + huge bill + increases this winter, get a bigger share of the savings? + The total windfall under the incentive program has in some years + exceeded $20 + million. But the amount for the last 12 months is expected to + multiply many + times over, company executives said, partly because the Gas Co. has + done so well + in the wild market by selling, lending and trading gas as well as + buying it. + ""The recent market conditions . . . could possibly result in some + unintended + consequences that result in shared savings of benefits that may be + more + appropriately allocated entirely to ratepayers,"" the PUC's consumer + protection + arm, the Office of Ratepayer Advocates, reported Oct. 30, even before + the latest + upward market spirals. + Gas Co. representatives express frustration, saying they have done + what the + state has requested under its gas-cost incentive program: Buy + smarter, and pass + the savings along to its 5 million residential and small-business + customers. The + company contends it has worked hard to keep bills down and should be + rewarded + for taking risks to obtain gas at the lowest possible cost. + ""The PUC, every time we do well, raises the bar on us,"" said Jim + Harrigan, + director of gas acquisition. ""I don't necessarily agree with it."" + By virtue of its purchasing power and storage and pipeline capacity, + the Gas Co. + has become a big player in the regional natural gas market. In the + company's + bustling trading room at its Los Angeles headquarters, 15 employees + track price + movements, pipeline supplies and even the weather via computer, while + cutting + deals and arranging gas shipments. + Although the Gas Co. buys the commodity for its customers, the + company also + sells to marketers, other utilities and producers. State officials + say the + number of transactions by the company has risen steeply to 10,000 to + 20,000 a + year, including gas sales along California's border, where prices + have rocketed. + + The PUC created the cost incentive program for the state's three + major gas + utilities--San Diego Gas & Electric Co. in 1993, Southern California + Gas the + next year and PG&E Corp.'s Pacific Gas & Electric Co. in 1997. Like + Southern + California Gas, SDG&E is a subsidiary of Sempra Energy. + The program was designed to give utilities added motivation for + obtaining gas at + the best price for customers. It replaced lengthy and contentious + reviews by the + PUC, which assessed whether utilities had purchased gas at reasonable + prices and + sometimes ordered them to return millions of dollars to customers. + An annual audit of the Gas Co. program and a staff evaluation + requested by the + PUC recently concluded that the program has achieved many of its + goals, but it + also proposed adjustments that would give customers a greater share + of the + rewards. + ""These incentives were designed in less volatile times,"" said program + supervisor + Mark Pocta of the Office of Ratepayer Advocates, which conducted the + audit. + ""There is a question of how much should go to ratepayers and + shareholders."" His + office also plans to assess whether the Gas Co.'s trading had any + negative + effects on the gas market, resulting in diminished supplies or higher + prices for + other utilities and their customers. + Under the program, the Gas Co. shares risks and rewards with its + ratepayers, but + since the program was launched, it has consistently produced awards. + If the cost + of gas is 0.5% or more below a benchmark based on monthly gas market + indexes, + the company and its customers split the savings 50-50. + California's gas utilities are not allowed to profit on their raw + commodity + costs; they merely pass along those costs to ratepayers with no + markup. The + savings under the incentive program are automatically reflected in + consumers' + monthly gas bills but are not itemized. + At the end of the year, the utilities request their share of the + savings, and + the PUC has routinely granted approval. Then the companies, and thus + their + shareholders, are paid through customer utility bills. + The resulting bill increases typically have been modest, less than + 1%. But as + the awards increase, regulators say, the effect on customers will + become more + significant unless the present structure is changed. + ""There's no question, when you start to talk about $100 million [or + more in + savings], and add [the company's award] into rates in a year, it will + make a + noticeable difference,"" said Los Angeles economist Jeff Leitzinger, + president of + Econ One, who has done consulting for the Gas Co. + Still, he said, ratepayers should bear in mind that they already + benefit from + below-market gas and transportation costs. + In the early years of the program, records show, the Gas Co.'s awards + went from + zero to $3.2 million, $10.6 million, $2 million and $7.7 million. + Last year's + award of $9.8 million is awaiting PUC approval. + This year's proposed award, covering the period through the end of + this month, + has not yet been submitted by the Gas Co. But the utility has + provided monthly + figures and oral updates on a confidential basis to PUC officials, + who declined + to provide figures. + Harrigan of the Gas Co. said the savings are expected to multiply + ""many times + over,"" largely because the company was well-equipped for the market + fluctuations + and tried to insulate its customers from high gas prices. + ""Any trading company, especially one with assets like we have, has + benefited + from volatility in the market,"" he said. + Harrigan said, however, that he does not believe the company's level + of activity + has adversely affected the market and that its trading pales in + volume to that + of unregulated energy companies. + Anne Smith, the Gas Co.'s vice president of customer service and + marketing, said + the utility will not release figures for this year's incentive + program until + they are filed with the PUC in June. + ""I don't want to interrupt that process,"" Smith said, noting that the + PUC + ultimately will determine the company's award. ""I think they need to + focus on + what [the Gas Co.] has done for the ratepayers. It has been immense."" + Although the typical monthly gas bill has risen to $80 from $50 a + year ago, Gas + Co. customers tend to have lower rates than those of other California + utilities. + + The company's gas procurement cost in February was 66 cents per + therm, or 100 + cubic feet. That's more than twice last year's cost but only about + half what + sister company SDG&E paid for its 740,000 customers in February. It's + also much + lower than the $1.09 per therm PG&E pays. + ""We were as upset about the overall [gas price] increase as anyone + else,"" + Harrigan said. ""I would rather see the prices of a year ago, even + though we + managed to do a little better in the [recent] environment."" + When it comes to keeping down costs, regulators say, the Gas Co. has + advantages + over other utilities in the marketplace. For one, the company has so + much + pipeline capacity at major gas basins that it purchases a relatively + small + portion of its needs--about 10% to 15%--at the California border, + where prices + in December briefly rose to the equivalent of $6 per therm, or 20 + times those a + year earlier. + This presents opportunities. + ""At the beginning of the month, they forecast a certain amount of gas + they have + to buy,"" said Pocta of the Office of Ratepayer Advocates. ""If they go + out and + buy and do not need to use as much because the weather is more + moderate than + expected, they can either inject the gas into storage or they can + make sales at + the border."" + With gas price run-ups like those seen in the last year, Pocta said, + ""there is a + question: Should that benefit be shared, or flow entirely to + ratepayers?"" + Customers, he pointed out, may be entitled to additional benefits + because they + pay for the interstate and intrastate pipeline capacity and the gas + storage that + give the company the flexibility to make advantageous deals. + ""By the same token, we want [the Gas Co.] . . . to go into the market + and + generate cost savings that can be passed on to the customers,"" he + added. ""We + want them to have incentives. The question is how to balance them."" + Under deregulation, the Gas Co. adopted the nontraditional role of + marketer, + according to a PUC Energy Division report in January. The company + makes gas + sales at various locations. It engages in exchanges. It makes futures + transactions to help stabilize costs. + ""They look for ways to lower the gas cost,"" said Richard Myers, + program + supervisor at the Energy Division. ""Before they were lots more + risk-averse. Now + they feel they can take risks and make money for shareholders, and it + is a + benefit for ratepayers at the same time."" + The incentive programs are tailored to individual utilities, so it is + difficult + to compare them. Records show that the shared savings at SDG&E, a + much smaller + utility, declined steadily from $9.2 million in the 1996-97 cycle to + $560,000 in + 1999-2000. + Spokesman Ed Van Herik said the falloff largely represents a drop in + gas + purchases, especially as the company sold off its own gas-fired + electricity-generating plants. He said the company does not yet know + how much + savings have accrued in the last year. + In an annual report to the PUC in February, PG&E said it had no + savings under + the incentive program and thus it is not entitled to any award for + the 1999-2000 + cycle. + The Utility Reform Network, a San Francisco-based consumer advocacy + group, said + it will closely watch the PUC's evaluation of the incentive program + at the Gas + Co. + ""We want to make sure, given the dramatic changes in the gas market + and prices, + ratepayers are not left out of the [additional] benefits,"" TURN + attorney Marcel + Hawiger said. ""We'll look to see whether the mechanism should be + changed."" + Severin Borenstein, director of the Energy Institute at UC Berkeley, + said the + program should be changed to provide more incentive for utilities to + enter + long-term contracts that would smooth out volatility in the market. + ""Unfortunately, under the system,"" he said, ""the only incentive is to + beat the + [spot] market."" + + + Use this file to download and print all the articles in this section + (See attached file: Dow Jones + Interactive-california-03233001-selected.doc) + + + + IMPLICATIONS FOR OTHER MARKETS + + (For easier printing of all the articles in this section use the file + at the end of the section) + + + + New York: New York at the crossroads + Wednesday, March 21, 2001 + + + Energy Insight + + + + (Embedded image moved to file: pic24389.pcx) + + + + By Dave Todd + + + + dtodd@ftenergy.com + + + + U.S. Energy Secretary Spencer Abraham declared this week that the Big + Apple is on the verge of being bitten hard by power cuts and rising + energy prices. + + + Delivering the keynote address at the U.S. Chamber of Commerce's + national energy summit in Washington Monday, Abraham said, + ""California is not the only state facing a mismatch between supply + and demand,"" what with ""electricity shortages predicted for New York + City and Long Island this summer"" and low capacity margins + threatening electricity reliability elsewhere across the country. But + how likely is it that New Yorkers will face blackouts of the sort + confronting Californians? + + + Not very, says energy trade specialist Edward Krapels, managing + director of Boston-based METIS Trading Advisors. Krapels, a + consultant helping major Northeastern utilities, such as Consolidated + Edison, design market-hedging programs, adamantly decried what he + said are facile comparisons between conditions in New York and + California, there being ""more differences than there are + similarities"" between those two industrial cornerstones of the + country's economy in respect to energy security management. + + + ""First of all, New York has a more varied portfolio of energy + generation sources than California,"" he said. California has hydro, + nuclear and gas, but when it lost a lot of hydro, the state needed + gas to pick up the slack, and the ""capacity just wasn't there."" In + New York's case, the state has oil and coal still in the mix and its + overall dependence on gas is much lower than California's, Krapels + added. + + + New York avoids making same mistakes + + + Portfolio diversity is one pillar of any effective plan to help New + York avoid the same errors made in redesigning California's + marketplace. New York's Independent System Operator (ISO), in a new + report warning that the state is at an ""energy crossroads"" in terms + of its capacity adequacy in the immediate future, argues that a + concerted effort is required to arrest declining in-state generation + capacity reserve margins, and a strategy must be put in place, + whether or not new generation comes on-line, in accordance with + current anticipated scenarios. + + + A measure of New York's essential difficulty is that, between 1995 + and 2000, statewide demand for electricity grew 2,700 MW, while + generating capacity expanded by only 1,060 MW. With no major new + generating plants in downstate New York fully approved, the gap is + expected to continue to widen. To avoid ""a replication of + California's market meltdown"" the New York ISO calculates the state's + daily generating capacity needs to grow by 8,600 MW by 2005, with + more than half of that located in New York City and on Long Island. + Expressing concern this may be too big a burden for the current + bureaucratic process to bear, the ISO wants to see a state-appointed + ombudsman named to help would-be merchant power plant investors plow + through red tape. + + + ""Increasing New York's generating capacity will also lessen the + state's escalating and risky reliance on out-of-state sources of + electricity,"" the ISO added. ""Since 1999, New York State has been + unable to cover its reserve requirements from in-state sources."" + + + Not everyone agrees with that analysis, insofar as it argues for + circling the wagons inward. Some analysts believe the ultimate + solution lies not in tying in more inwardly dedicated power, but in + expanding the marketplace by breaking down inter-jurisdictional + barriers. In any case, New York energy regulatory authorities and + those responsible elsewhere in the U.S. Northeast, such as PJM + (Pennsylvania-New Jersey-Maryland) Interconnection and the New + England Power Pool, are in vastly better shape in terms of + ""cross-border"" cooperation than California and its neighbors in that + efforts are being made among various authorities toward developing an + integrated regional electricity market. In California, by contrast, + the state's focus?for example, in the case of new gas-fired power + plant development?has been to ensure dedicated supply to the + California market alone, rather than on a regional marketplace. + + + + + (Embedded image moved to file: pic05075.pcx) + + The New York ISO's new broad-based analysis of market-restructuring + needs argues that the relatively stronger health of its reformed + environment is ""due in large part to the ability of New York's + utilities to enter into long-term power contracts."" + + + What needs to be done most, it says, is to move aggressively to build + some of the more than 29,000 MW of ""proposed new generation in the + siting pipeline."" + + + In the meantime, the 30,200 MW of electricity New Yorkers used on a + peak day last summer shouldn't be eclipsed on too many days this + coming summer (given early long-range weather forecasts). Demand, + however, is expected to increase at an annual average rate of up to + 1.4%. + + + So while New York City, the rest of the state and adjacent parts + might breathe easy this year, it could be a brief rest from the fray. + Meanwhile, a 4% shortfall is still being planned for this summer that + is not yet provided for, as authorities hurriedly seek to arrange new + generation plants around Manhattan, on Long Island and even on barges + offshore. + + + One way or another, whether it is the weather or the politics of + siting new energy facilities, it's going to be a hot time in the + city. + + + Long-term solutions hit brick wall + + + Meanwhile, attempts at longer-term solutions continue to run into + trouble. Last week, Connecticut state regulators came out against a + proposal to run a new underwater cable under Long Island Sound that + Hydro-Quebec subsidiary TransEnergie U.S. Ltd. wants to build to pump + more juice into Long Island Power Authority's load pocket. Despite + strong promises from TransEnergie to be diligent in avoiding damage + to oyster beds in Long Island Sound, the proposal failed to convince + authorities, who were persuaded the pipeline project could lead to + diversion of electricity from Connecticut. + + + In similar fashion, private companies wanting to build 10 small + independent power plants and temporary generators offshore New York + City are running into intense opposition from environmental groups + and citizen orga +nizations?some of whom have taken their cases to the + state assembly in Albany. + + + The David vs. Goliath nature of such controversies has further + alerted energy companies to the difficulties of addressing complex + energy supply issues that may ultimately devolve to people not + wanting things in their backyard, regardless of what the alternative + might mean to their fellow citizens or the greater public good. + + + But suddenly, in New York, California's troubles?while still distant + in their intensity? may not be so far away. By some estimates, this + summer's bills for Consolidated Edison customers could be up as much + as one third or more over last year's charges. + + + Letting the time slip when it comes to building new infrastructure + isn't going to make the pain go away. + + + + NEW YORK: NY-ISO REPORT SAYS STATE NEEDS 4,000 - 5,000 MW OF NEW + GENERATION SOON TO AVOID SEVERE SHORTAGES; NY-ISO ALSO ASKS FERC TO + EXTEND BID CAP AND TEMPORARY EMERGENCY PROCEDURES + 03/21/2001 + Foster Electric Report + 2 + (c) Copyright 2001, Foster Associates, Inc. + + Raising the specter of an East Coast version of the California + crisis, the New + York Independent System Operator, Inc. (NY-ISO) is warning of serious + electricity shortages, air quality deterioration and stunted economic + growth + without immediate approval of between 4,000-5,000 MW of new + generating capacity + in the state. Of this amount, 2,000-3,000 MW is needed to serve New + York City. + Another 8,600 MW of new capacity will have to be built by 2005, the + NY-ISO said + in a recent report, Power Alert: New York's Energy Crossroads. + ""New York is heading towards a very serious situation unless it acts + immediately + to get new supply sited within its borders,"" said NY-ISO president + William + Museler in a statement accompanying the report. ""This report is + essentially a + caution light at New York's energy crossroads."" + + Sources in the New York Public Service Commission have downplayed the + NY-ISO's + warning, asserting that a process for bringing on new generation is + well + underway, with more than 85 projects in the approval pipeline. + In a related development, the NY-ISO asked FERC to approve a proposed + tariff + amendment (ER01-1517) extending existing bids caps in some of its + markets until + 10/31/02, and a separate and related amendment (ER01-1489) extending + the + NY-ISO's so-called temporary extraordinary procedures (TEP) that + allow the ISO + to make price adjustments and take other corrective actions if it + finds evidence + of market power abuse. + The NY-ISO Report --The NY-ISO likened the situation in New York to + that faced + by California, where a relentless increase in demand has not been met + with an + equal increase in supply. The NY-ISO said that between 1995 and 2000, + statewide + demand for electricity rose by 2,700 MW, while generating capacity + increased by + only 1,060 MW. With no major new generating plants in downstate New + York fully + approved for construction at this time and generation demand in the + state + expected to grow around 1.3 percent annually for the next several + years, the + NY-ISO said this gap will continue to widen. + The inevitable result of this trend is large rate increases for New + York's power + consumers. The NY-ISO's modeling suggests that ""by 2005, statewide + prices are + likely to be more than 20-25 percent lower in the case in which new + plants are + built than in the case where they are not."" In New York City, ""the + price to + consumers of electric power could be reduced by as much as 28 percent + when + compared to the case of no new supply or load management programs."" + Besides large rate increases, the NY-ISO asserted that a failure to + site and + build new plants in New York will threaten power reliability in the + state and + lead to increasing reliance on out-of-state resources. The report + said that if + no new in-state generation comes on line in the next five years, the + state's + generation reserve margins will shrink from the current 14.9 percent + above peak + demand ""to a dangerously low 8.4 percent by 2005."" Pointing to + California's + situation, the report added that increased reliance on power imports + ""can + subject electrical suppliers and customers in New York to + transmission + restrictions and political and economic considerations beyond the + control or + influence of responsible New York State entities."" + To avoid these harsh consequences, the NY-ISO said New York's new + siting law, + known as the Article X process, needs to be modified. Since the law + was passed + 18 months ago, the report noted that only two plants have been + approved (both + upstate) and neither has yet been built. The problem, according to + the NY-ISO, + is that the siting process ""requires the cooperation of multiple + state + agencies."" To expedite the process, the report suggested the ""clear + designation + of a lead agency and the adoption of an `ombudsman program' to + expedite and + coordinate the work of the agencies responsible for the Article X + process must + be made."" The NY-ISO added that an expedited approval process would + improve the + environment because older, more polluting power plants would be + replaced by + cleaner gas-fired units. + On a more positive note, the NY-ISO reported that New York's + restructured power + market ""is far healthier than that in California, due in large part + to the + ability of New York `s utilities to enter long-term power contracts. + The basic + structure of the New York market will also reduce unwarranted price + spikes and + other market disruptions through mitigation programs which + automatically correct + price spikes due to market power abuses."" + ""Nevertheless, California `s experience raises a caution flag for all + New + Yorkers,"" the report continued. ""The deregulated market in New York + cannot + achieve lower costs through competition without an increase in + generating + capacity similar in magnitude to the recommendations of this report, + along with + simultaneous efforts to institute greater conservation, better load + management + and alternative energy supply initiatives. Additionally, closer + integration with + regional suppliers of power is both inevitable and beneficial."" + The report also recommended (1) accelerating conservation, real-time + metering + and price-sensitive load programs; and (2) upgrading the state's and + the + Northeast's transmission infrastructure. + The Proposed Tariff Amendments -- New York's Article X siting process + and + continuing tight supplies were also cited in the NY-ISO's request to + extend from + 4/30/01 until 10/31/02 its $1,000/MWh bid caps. FERC first approved + the + 1,000/MWh bid caps in July 2000 (see REPORT No.197, pg.6), and + subsequently + extended them. + The NY-ISO's board ""is sensitive to the Commission's concerns about + undue + intervention in energy markets,"" the filing related. ""Nevertheless, + the NY-ISO + is submitting this request because it believes that delays in New + York state's + `Article X' process for licensing and siting new generating capacity + is + inhibiting supply from increasing to match continued demand growth. . + . . + Moreover, although the NY-ISO proposes to implement several + demand-side measures + this summer, it is not yet clear whether they will make demand + sufficiently + price-responsive to avoid periods of high prices that would not occur + if there + were an efficient demand-side response."" + Thus, the NY-ISO insisted that the requested extension is needed to + provide more + time for the development of additional generation and to gauge the + effectiveness + of the NY-ISO's proposed demand-side response mechanisms ""in order to + avoid + exposing consumers to price spikes that are not a product of the + interplay of + competitive market forces."" + Other problems cited in the NY-ISO's filing which keep New York's + power market + from being fully competitive include continuing capacity and + operating + constraints at the state's Central-East interface, and questions over + adequate + gas supply. + ""The NY-ISO remains acutely aware that taking steps to deal with + price + abnormalities can have undesirable consequences,"" the filing + continued. + ""Nevertheless, the NY-ISO believes that the $1,000/MWh cap that has + been used in + the PJM's markets since inception does not appear to have had an + adverse impact + there. . . . The permanent bid caps in PJM, and the interim bid caps + in ISO New + England (proposed for extension through the end of 2001) also make + continuation + of the NY-ISO's bid caps more important in order to maintain + uniformity across + the Northeastern markets. The NY-ISO also continues to believe that + suppliers + will not be materially harmed by the continuation of bid caps, which + are likely + to come into effect very rarely and are set at levels that prevent + only + artificially high run-ups in prices."" + The NY-ISO's request to extend its TEP procedures (which also were + previously + extended) through 10/31/02 cited similar problems with New York's + power markets, + but claimed that the NY-ISO ""has made great strides"" toward + eliminating market + design and software flaws. ""The TEPs were, and remain, an + indispensable tool for + responding to and correcting market flaws and other instances where + the markets + are not operating as the NY-ISO and the Commission intended,"" the + filing + insisted. + + + MASSACHUSETTS: Attorney general says summer poses electricity + concerns + By JOHN McELHENNY + Associated Press Writer + 03/19/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + BOSTON (AP) - The state's top consumer advocate warned that + Massachusetts may + see ""California-type"" electricity blackouts this summer when + temperatures rise + and residents turn on air conditioners and fans. + ""It would be a mistake to feel this is a cold weather problem,"" said + Attorney + General Thomas Reilly in an interview with The Associated Press. ""Our + major + problem will come this summer."" + + State deregulation of the electric industry has been among the + factors blamed + for local power outages in California, and on Monday, California for + the first + time suffered rolling blackouts across the entire state. + Massachusetts relaxed regulations on its own electric industry in + 1998 to + attract more companies to stir competition. But that hasn't happened + yet, + largely because the current high cost of oil and gas make it + expensive to + produce electricity. + ""The promise of deregulation was that there was going to be + competition,"" said + Reilly, a Democrat. ""That competition in the wholesale market is not + happening."" + + Hot summer weather drives up electricity use as residents turn on air + conditioners and fans, and Reilly said a few particularly hot days + could strain + the grid that provides the region's power. + A spokeswoman for the region's power grid said electricity use is + expected to + rise 1.5 to 2 percent this year, but the region should have enough + power because + of six new power plants that have begun generating electricity in the + past 18 + months. + ""The situation is unlike California because we have new generation + coming on + line that is outpacing demand,"" said Ellen Foley, spokeswoman for ISO + New + England Inc., which manages the grid of 330 generators connected by + 8,000 miles + of high voltage transmission lines. + Still, a particularly hot day and an unforeseen power generation + breakdown could + prompt ISO to ask residents to conserve electricity, a situation that + arose once + last summer, Foley said. + In order to avoid any power outages and protect consumers, Reilly + repeated calls + for electric companies to build more power lines and to offer more + options for + new customers who have signed up since deregulation. Those customers + typically + pay more than long-term customers. + Electric transmission companies should also be allowed to enter into + two-year + contracts with suppliers, instead of the six-month contracts many + have now, to + avoid short-term price spikes for consumers, Reilly said. + The Attorney General's Office acts as an advocate for consumers. + Michael Monahan, a spokesman for NSTAR, which provides electricity to + more than + 1 million customers, is upgrading some of its power lines and last + year built a + new line to Cape Cod, but currently has no lines under construction. + ""I wholeheartedly concur with the attorney general that it's + something we have + to focus on,"" Monahan said, but he added, ""The indications I see are + that we + have an ample supply of electricity."" + California's statewide outages were ordered on Monday after a + transformer fire, + high demand and a lack of electricity imports pushed power reserves + to near + zero. + California partially deregulated its electric industry in 1996, two + years before + Massachusetts. + --- + On the Net: + Attorney General's Office: http://www.ago.state.ma.us + NSTAR: http://www.nstaronline.com + ISO New England Inc.: http://www.iso-ne.com + + + NEVADA: Discussion of bill stopping power plant sales to continue + Wednesday + By JOHN WILKERSON + Associated Press Writer + 03/19/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + CARSON CITY, Nev. (AP) - Lawmakers hit more delays Monday in trying + to pass a + measure that pulls the plug on the sale of Nevada power plants to + avoid + California-style energy problems. + ""The goal of this bill is only stopping the divestiture of power + plants and + making sure it's constitutional,"" said Senate Commerce and Labor + Chairman + Randolph Townsend, R-Reno. ""And that's not as easy as it sounds."" + + Townsend's comment just before his committee began working on SB253 + was + prophetic - witnesses kept bringing up the need for more flexibility + in the + measure. + Translation: Don't kill all deals by stopping Reno-based Sierra + Pacific Power + and Las Vegas-based Nevada Power from selling their Nevada power + plants until + June 2003 - and possibly until 2006. + Pete Ernaut, a lobbyist for Reliant Energy which has been trying to + buy a power + plant, said unforeseen market changes could make a plant sale before + 2003 a deal + that would be in the public's interest. + ""If you put a two-year moratorium on these plants, all these deals + are going to + go away,"" he said. ""When the cow leaves the barn, it's difficult to + catch."" + Townsend had hoped to wrap up committee work on SB253 on Monday. Now + it's up for + review again Wednesday in the Commerce and Labor Committee. + Reliant isn't the only company trying to keep power plant purchases + alive. + Earlier this month, executives of Pinnacle West Energy told the + committee that + it's in the public's interest to allow Sierra Pacific Resources to + sell its + Harry Allen power plant. + The Harry Allen plant produces about 72 megawatts out of the 2,900 + megawatts of + energy that Nevada utilities generate. Pinnacle has plans to expand + that to 700 + megawatts by 2004. + Other provisions not strictly related to the plant divestitures, such + as ways in + which Sierra Pacific and Nevada Power can recover the cost of undoing + the sales + contracts, don't have to be included in SB253, Townsend said. + Townsend said the other concerns dealing with the energy crisis and + utility + deregulation can be handled in later bills - but the power plant sale + issue must + be handled now. + Nevada's PUC and the Federal Energy Regulatory Commission had + directed Sierra + Pacific and Nevada Power to sell the plants as a condition of the + companies' + merger in 1999 under the parent company Sierra Pacific Resources. + Critics of the plant sales say the plants generate about half the +state's + electricity - and if they're sold, the unregulated new owners could + sell the + power to other states and put Nevada into the energy dilemma + California faces of + shrinking supply and rising prices. + The Southern Nevada Water Authority has presented an analysis stating + that rate + payers will save from $1.7 billion to $3.5 billion by July 2001 if + the power + plant sales are stopped. + Nevada's Consumer Advocate's Office previously had projected a + conservative + estimate of $915 million in savings. + + + MAINE: Panel of experts would review impact of energy deregulation + By GLENN ADAMS + Associated Press Writer + 03/19/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + AUGUSTA, Maine (AP) - In the wake of rolling blackouts in California + and rate + spikes in their home state, Maine's top legislators proposed a study + Monday into + the effects of deregulation of the energy industry. + ""Deregulation of electricity is a new idea and we still have a lot to + learn,"" + Senate President Michael Michaud said as he called for the analysis. + + A panel of industry insiders, elected officials and consumers would + study issues + such as what standard rate consumers can expect and the likelihood of + energy + shortfalls over the next three years, and whether Maine consumers are + vulnerable + to anti-competitive activities. + In addition, the Blue Ribbon Commission would look into whether + changes in + Maine's deregulation law are needed to encourage more generating + capacity, + improve conservation and spur competition. + The study is being proposed as consumers remain mindful of a power + crisis in + California that resulted from high wholesale energy costs, a consumer + rate cap + and too few power plants in that deregulated state. + Maine's deregulation law is designed to avoid such pitfalls, said + Rep. William + Savage, D-Buxton, House chairman of the Legislature's Utilities + Committee. + Maine's law does not cap consumer prices, as California's does, and + the state + has more than enough generating facilities to meet the state's energy + needs, + Savage said. + Since Maine's deregulation law took effect in March 2000, Bangor + Hydro-Electric + Co. rates have increased 19 percent. The Public Utilities Commission + approved a + residential standard rate increase as recently as last month. + Federal energy regulators are reviewing their decision to allow steep + fee + increases for utilities and power wholesalers that fail to arrange + enough + capacity to meet customers' peak load. Gov. Angus King and all four + members of + Maine's congressional delegation oppose the hike. + The PUC has approved standard rate increases for energy delivered by + Central + Maine Power Co. to medium-sized and large industrial users. + On the other hand, some towns and school districts are saving money + on energy + through deals they can get in the deregulated market. + In the meantime, legislation has been introduced in response to some + of the + changes that have occurred in Maine's deregulated energy industry. + One would use some of the money from the sale of power-generating + assets to + offset an increase in rates paid by large industrial users, said Sen. + Norman + Ferguson, R-Hanover, Senate chairman of the Utilities Committee. + Supporters of the utility study that was proposed Monday said they + are not + looking to make changes in Maine's deregulation law, but if it needs + fixing it + could be done during next year's session. + The lawmakers' primary interest is to find out how trends in a new + environment + designed to encourage competition will affect consumers, and to try + to identify + what consumers can expect in the few years ahead. + House Speaker Michael Saxl, D-Portland, said the Legislature ""has a + fundamental + public policy interest in making sure rate-payers and businesses are + protected + against exorbitant rate hikes."" + Michaud, D-East Millinocket, said he's interested in finding out how + future + changes in electric prices and availability might affect businesses + and + consumers in northern Maine. + ""The economy in my part of the state is the most vulnerable, and I + want to make + certain we are leaving no stone unturned in our effort to prevent any + shocks to + the economy in northern, western and eastern Maine,"" Michaud added. + The commission would include House and Senate members from each + party, a utility + executive, and representatives of energy producers, providers, a + large + commercial consumer and individual consumers. + + + OREGON: State Senate moves to combat energy crisis + 03/16/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + SALEM, Ore. (AP) - In an attempt to avoid a California-like energy + crisis, the + Oregon Senate approved a bill Friday that would quicken the process + of siting + power plants that use gas and renewable resources. + ""It's important for Oregon. It makes sure that energy will be + available to + everyone,"" said Sen. Lee Beyer, D-Springfield. + + The measure, SB843, would shorten the siting process for power plants + that use + gas and renewable resources, like wind, from a year and a half to a + matter of + months. + The speeded-up process would be in effect for two years. + ""If we can act now, we can actually start to solve power supply + problems by this + summer,"" said Sen. Jason Atkinson, R-Jacksonville + California's strict regulations on the construction of new power + plants has + contributed to its current shortage and legislators took note. Beyer + said though + California was definitely a wake-up call, the measure is a reaction + to the + larger power picture in the Northwest. + With low rainfall, hydroelectric generators will have trouble meeting + demand, + Beyer said. Gas-fired and wind plants could come online as soon as + this fall and + would provide relief. + ""We are not in a position to sit back and do nothing about the energy + crisis the + Northwest and the country are experiencing,"" said Senate Minority + Leader Kate + Brown, D-Portland. + Conservationists, however, caution that lawmakers should be careful + not to rush + to provide power at the expense of environmental standards. + + + + WISCONSIN: Two utilities to add 975 megawatts in plan to avoid + energy crisis + By The Associated Press + 03/22/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + Plans of two state utilities to add 975 megawatts to Wisconsin's + electric power + grid as a way of avoiding an energy crisis similar to California's + were + questioned Thursday by a consumer advocate who said too many power + plants may be + in the works. + ""Certainly nobody wants to see blackouts like you have in California + but there + is the danger Wisconsin could be overbuilding,"" said Steve Hiniker, + executive + director of the Citizens' Utility Board, which represents consumer + interests in + utility rate cases. He noted that plant construction costs ultimately + are born + by the utility customers. + + Alliant Energy Corp. announced its proposal Wednesday - in a filing + with the + state Public Service Commission - to spend $1 billion to build one + coal and two + gas-fired power plants. + Alliant has proposed building a 500 megawatt coal-fired plant and a + 100 megawatt + natural-gas fired plant by 2006. It also wants to build a 200 + megawatt natural + gas-fired facility in 2011. Wisconsin has not built a coal-fired + plant in more + than two decades. + Alliant has not determined the plants' locations. + Also, Madison Gas & Electric, the state's smallest investor-owned + utility, said + Wednesday that it had signed deals to buy 175 megawatts of power from + three + generating plants in Wisconsin and Illinois. + ""Three out of the four past summers, we've had public appeals for + conservation + due to shortages somewhere in the state. We need to take steps to + avoid that, + and the California situation makes that even more clear,"" said + Alliant spokesman + Chris Schoenherr. ""Getting more iron in the ground will give us more + flexibility + in the state to be able to react."" + Alliant acknowledged the new plants will probably mean rate + increases, but it + was too early to say how much rates would go up. + California's problems, which this week resulted in the first + deliberate + blackouts since World War II, stemmed from underestimating the + state's power + needs, forcing utilities to sell their power plants but not allowing + them to + secure long-term supply contracts, and freezing rates, among other + things. + But Wisconsin's situation is far different. + The state has moved slower than California toward deregulation, and + there has + been no desire here to speed up the process in recent years as power + reliability + became a problem. + The PSC estimates that Wisconsin will need an additional 3,000 + megawatts of + power over the next decade. + Hiniker said Wisconsin needs to coordinate its planning to avoid + overbuilding. + The costs of new power plants are passed on to ratepayers, meaning + electric + bills will increase as new generation is added. In addition, + coal-generated + power plants are a major source of air pollution in the state. + ""We don't have the advance planning that has kept Wisconsin from + overbuilding in + the past,"" said Hiniker. ""This is something the PSC should be doing."" + MG&E's deals are: + -A 10-year contract to buy 75 megawatts from Calpine Energy Services + starting in + May 2004. The power will come from the natural gas-fired plant Rock + River Energy + Center, near Beloit. + Calpine Energy Services is a unit of San Jose, Calif.-based Calpine + Energy Corp. + The plant is being built by Northbrook, Ill.-based SkyGen Energy LLC, + which + Calpine bought last year from SkyGen President Michael Polsky and + Wisvest Corp., + a unit of Wisconsin Energy Corp. + -A 10-year contract to buy 50 megawatts of power from the Rainy River + Energy + Corp. starting in May 2002. The power is coming from a natural + gas-fired plant + near Joliet, Ill. owned by LS Power Co. Rainy River is a unit of + Duluth-based + Minnesota Power Inc. + -A five-year contract to buy 50 megawatts from an El Paso Merchant + Energy plant + near Cordova, Ill., in western Illinois. + The owner of the natural gas facility is the Cordova Energy Center + Co., which is + a unit of Iowa-based MidAmerican Energy Holdings. + Alliant also offered support in the Wednesday filing for a $7 billion + plan of + Milwaukee-based Wisconsin Energy, which includes five new power + plants in Oak + Creek and Pleasant Prairie. + -- + On the Net: + CUB: http://www.wiscub.org/ + Alliant Energy: http://www.alliant-energy.com + Wisconsin Public Service Commission: http://www.psc.state.wi.us + Wisconsin Energy: http://www.wisenergy.com/ + Madison Gas & Electric: http://www.mge.com + + + + Use this file to download and print all the articles in this section + (See attached file: Dow Jones + Interactive-california-03233001-implications.doc) + + + + If you wish to be removed from the distribution list for this update + please contact Pru Sheppard - DC. + + + + + All recipients of this message have been Bcc'd as part of industry + best practice for broadcast emails. + + + + + + + ++-------------------------------------------------------------+ +| This message may contain confidential and/or privileged | +| information. If you are not the addressee or authorized to | +| receive this for the addressee, you must not use, copy, | +| disclose or take any action based on this message or any | +| information herein. If you have received this message in | +| error, please advise the sender immediately by reply e-mail | +| and delete this message. Thank you for your cooperation. | ++-------------------------------------------------------------+ + - Dow Jones Interactive-california-03233001-selected.doc + - pic24389.pcx + - pic05075.pcx + - Dow Jones Interactive-california-03233001-implications.doc",Tuesday,2001,March,19,1 +165,INTERNAL,Thank you all very much for your support - NOT!,"I genuinely believed in Enron and the Values of the company + +You demonstrated that that trust was misplaced and worth nothing + +I particularly like your adherance to the core values - you ""respected"" us, +you ""communicated"" brilliantly with us, your fucking us over was +""excellent"", your ""integrity"" was without question + +You load of bastards - you screwed us all and got fat on the profits of our +sweat + +I hope that the board and upper management rot in jail and never see the +light of day again - apart from when you are exercising in the open prison +yard in your shackles + +Just Another Fucked Over Ex-Employee + +_________________________________________________________________ +Get your FREE download of MSN Explorer at http://explorer.msn.com/intl.asp",Friday,2001,November,7,0 +168,INFLUENCE,[Second Delivery: WPTF Friday Amen Burrito],"Sorry about this gang, but my new computer messed up the e-mail list. +It's 4 am and I think I have fixed it. Maybe. Bear with me if you are +getting this for the second time this morning. + +gba + +X-Mozilla-Status2: 00000000 +Message-ID: <398A81DA.E883D290@idt.net> +Date: Fri, 04 Aug 2000 01:42:26 -0700 +From: Gary Ackerman +Reply-To: foothi19@idt.net +Organization: Foothill Services +X-Mailer: Mozilla 4.74C-CCK-MCD {C-UDP; EBM-APPLE} (Macintosh; U; PPC) +MIME-Version: 1.0 +To: webmaster +Subject: WPTF Friday Amen Burrito +Content-Type: multipart/alternative;=20 +boundary=3D""------------5CA857B6E2003A3BEF3A907F"" + +?=20 +THE FRIDAY BURRITO=20 +""...more fun than a fortune cookie, and at least as accurate.""=20 + +Everyone is getting into the act.? When I started this gig, I was the only= +=20 +guy in town writing to folks like you about the power industry in=20 +California.? I wrote about what=01,s new, what=01,s happening, and all the= +=20 +important stuff.? This week, Governor Gray Davis decided to write his own= +=20 +Burrito.? His epistle got more press than mine, but why is he muscling in o= +n=20 +my turf?? Not to be outdone, PUC President Loretta Lynch released a report= +=20 +which looks into every facet of California=01,s power business.? No stone l= +eft=20 +unturned. I=01,m telling you, there isn=01,t enough room in this business f= +or all=20 +of us.? They need to clear out.=20 + +With people like Herr (Hair?) Peace, Governor I=01,m-Not Mr.-Rogers Davis a= +nd=20 +Let=01,s Do Lynch, who needs a Friday Burrito?? They re-define our reality = +each=20 +week with mind-numbing aplomb.? For example, starting in early June, the PX= +=20 +was ordered to compete for business against other Qualified Trading=20 +Vehicles.? Then, two weeks later, the Energy F_hrer legislated that idea to= +=20 +an early death which kept the status quo for at least one year.? This week= +=20 +the PUC approved 5-year bilateral deals for PG&E and SCE, thereby opening t= +he=20 +PX to competition, and emasculating the PX=01,s Block Forward Market. Zip, = +bam,=20 +boom.=20 + +I can=01,t wait to see what next week will bring.? I hear Senator Bowen is= +=20 +holding Committee hearings on re regulating the industry, and the Governor= +=01,s=20 +new Energy Security Council will meet to decide six things:=20 + +What=01,s for lunch?=20 +Who will sit at the head of the table?=20 +Does anyone have good seats for next week=01,s Democratic convention?=20 +Is there anyone we haven=01,t indicted yet in the power industry?=20 +Who will crank up the air conditioning in this room?? It=01,s getting too w= +arm.=20 + +Then, they will collect data from innocent businesses under subpoena, ignor= +e=20 +the facts, and publish a report.? It makes one want to take a deep breath,= +=20 +and inhale the scented fumes of democracy.=20 + +You know, I can=01,t think about where to begin, so let=01,s start somewher= +e.=20 + +Things on the Island of California=20 +?@@@ Is there anyone left at SDG&E with a brain?=20 +?@@@ The PUC issues its scathing report=20 +?@@@ The ISO invokes $250 price caps.? Duh!=20 + +Things at the throne of FERC=20 +?@@@ Amen for the Morgan Stanley Order=20 + +Odds and Ends (_!_)=20 + +Things on the Island of California=20 +?@@@ Is there anyone left at SDG&E with a brain?=20 + +Well, the answer very clearly is no.? I have been astounded by repeated=20 +attempts of SDG&E=01,s most senior people to ape humans, but instead they m= +imic=20 +apes.=20 + +Consider the following.? First, they waltz their default customers into the= +=20 +summer with little of no protection from price spikes in the wholesale=20 +market.? Forgivable in that it is human to err.? The prices skyrocket in=20 +June, and they start looking for who to blame.? =01&Must be them damn=20 +independent generators,=018 say their managers.? Gary Cotton informs the IS= +O=20 +Governing Board that hedging SDG&E=01,s position in the Block Forward Marke= +t=20 +wouldn=01,t have made any difference.? There=01,s one nobel laureate who mi= +ssed his=20 +prime.=20 + +Next, under pressure, they ask for help from suppliers and anyone else who= +=20 +will assist the utility and their customers.? Nine offers show up at their= +=20 +table, and they can=01,t choose any of them.? Again, Mr Cotton tells his fe= +llow=20 +ISO Governing Board members that these things take time, and we don=01,t to= + rush=20 +since there are many legislative barriers, and, well, the surfing was good= +=20 +this week so why spoil it?=20 + +Now they are in a panic because the Energy F_hrer is visiting old ladies=20 +living in trailer parks, advising them not to pay their SDG&E electricity= +=20 +bill, and to continue to operate their air conditioners.? SDG&E puts a full= +=20 +page ad in the local newspaper telling everyone that SDG&E is doing=20 +everything it can to lower their electric bills, including asking the ISO f= +or=20 +a $250 price cap, but the public can help by calling the ISO [address and= +=20 +phone number provided in the ad] and urging them to lower the cap.? I alway= +s=20 +thought the location of the ISO was a State secret for security reasons.? N= +o=20 +secrets in San Diego.=20 + +But we are not done.? No sir, we are not.? Those buffalo heads who run that= +=20 +company decide they will win a gold star on their collective foreheads, and= +=20 +implement one of the four resolutions passed by the Electric Oversight=20 +Board.? The one they pick is to petition FERC on an expedited basis to cap = +at=20 +$250, the price at which sellers may bid energy or ancillary services into= +=20 +the ISO and the PX.? The primary reason is that Western power markets are n= +ot=20 +workably competitive.? In other words, they want FERC to set a max price on= +=20 +what generators can sell in addition to the price limit at which the ISO ca= +n=20 +buy!=20 + +What I find most astounding about this double talk is that SDG&E continues = +to=20 +collect tons of money from the sales of regulatory must run energy into the= +=20 +PX.?? These are sales from their stranded assets.? Their grief hasn=01,t ab= +ated=20 +their greed.=20 + +So, to recap, SDG&E missed the boat on price hedging, failed to win consume= +r=20 +confidence in public meetings, asked for help from suppliers and did nothin= +g=20 +in response, then filed at FERC to cap the sale price because the wholesale= +=20 +market into which they sell (over-priced?) energy is not workably=20 +competitive.? Too much time in the direct sun light.=20 + +Things on the Island of California=20 +?@@@ The PUC issues its scathing report=20 + +The PUC report released yesterday is a gem with which I have not spent enou= +gh=20 +time.? I only read the Executive Summary, and that only because our counsel= +,=20 +Dan Douglass forwarded me a copy. Let me pick out some of the gems in=20 +President Lets Do Lynch=01,s burrito.? I would recommend reading the whole = +text=20 +if you have time, and if you seek perverse entertainment.=20 + +=01&California is experiencing major problems with electricity supply and= +=20 +pricing caused by policies and procedures adopted over the past ten years.= +=20 + +=01& Since June, wholesale prices for electrical power in California have= +=20 +increased on average 270% over the same period in 1999, resulting in over $= +1=20 +billion in excess?? payments for electricity.=20 + +=01&Hot weather, aging power plant and transmission infrastructure, and=20 +dysfunctional bidding behavior in the wholesale power markets combined to= +=20 +drive prices up ...=20 + +=01&Because of serious market defects and tight supply of electricity,=20 +purchasers of California power will likely pay billions more in electricity= +=20 +costs this year. Moreover, these price increases do not necessarily fund ne= +w=20 +investments in electricity supply or delivery reliability - they may flow= +=20 +solely to power producer profit margins.=20 + +=01&Despite the Electricity Oversight Board's legislative mandate to overse= +e=20 +those institutions, we have been unable to obtain [bid] data. Nevertheless,= +=20 +... , we believe enough evidence of questionable behavior exists that the= +=20 +Attorney General should conduct an investigation into these statewide marke= +t=20 +practices, coordinating with other State agencies, including the PUC and th= +e=20 +EOB. Such an investigation would provide the factual foundation that=20 +California policy makers and regulators need to recover any illegally=20 +obtained profits.=20 + +=01&A momentous consequence of California's attempt to create a market in= +=20 +electricity is that the federal government now regulates California's=20 +electric system. Washington D.C. now controls pricing decisions directly at= +=20 +the wholesale level and indirectly at the retail level and, to the extent= +=20 +that supply incentives are correlated to prices, Washington, D.C. now affec= +ts=20 +California's ability to attract new investment in power plants.=20 + +=01&Past administrations' willingness to cede the State's authority to the= +=20 +federal government combined with the legislative creation of two non-public= +=20 +supervisory organizations that have no duty to protect the public or consid= +er=20 +the retail customer. The ""Independent System Operator"" (ISO) and the ""Power= +=20 +Exchange"" (PX), the nonprofit private corporations that operate the State's= +=20 +transmission system and control wholesale pricing policies, are governed by= +=20 +boards whose members can have serious conflicts of interest. Some of these= +=20 +board members or their companies financially benefit from higher prices in= +=20 +electricity markets. Neither of these private organizations is accountable = +to=20 +the State or its consumers ....=20 +?=20 + +=01&Despite the federalization and the fragmentation of the State's electri= +c=20 +services, the State of California should protect its businesses and consume= +rs=20 +from cartel pricing; collusive behavior; inadequate power plant maintenance= +=20 +and lack of market planning for adequate electricity supplies.=20 + +=01&California consumers and businesses deserve to know in advance - as San= +=20 +Diegans did not this summer - how and when the price of an essential servic= +e=20 +like electricity will double. California is now largely constrained by=20 +federal mandates from providing comprehensive retail price relief as long a= +s=20 +wholesale prices remain so high. If California tried to re-impose a price= +=20 +freeze in San Diego now, federal regulators would likely prevent that=20 +action.? ... Short-term price relief, however, cannot resolve market gaming= +=20 +or fundamental wholesale pricing problems controlled by federal regulators.= +=20 + +?=01&We have been precluded from obtaining the data necessary to know if th= +e ISO=20 +and PX failed to detect manipulation and gaming on several fronts. We do no= +t=20 +know how market players acted in price offering and bidding and scheduling.= +=20 +The FERC has just announced an inquiry into national pricing and energy=20 +market issues. California should not wait for national findings before it= +=20 +investigates California market practices. We recommend that the California= +=20 +Attorney General immediately subpoena relevant records and data to determin= +e=20 +the pricing and offering behavior of market participants; the actions of th= +e=20 +ISO and its board members; and the actions of generators in supplying=20 +California's energy needs.=20 + +=01&Ten Actions to Consider or Act Upon to Prevent Current Electricity Prob= +lems=20 +From Spreading in 2001: ...=20 +?=20 +? 2. Create a California Energy Council, modeled on the National Security= +=20 +Council, to unify State action to resolve energy problems and to perform=20 +integrated energy planning;=20 + +3. Ask FERC for extended wholesale price cap authority to moderate Californ= +ia=20 +wholesale market pricing;=20 + +4. Ask FERC to recognize the defects in the California and western regional= +=20 +markets and find that no competitive market exists in California power=20 +markets;=20 +?...=20 +? ?8. Eliminate potential conflicts of interest in ISO/PX stakeholder board= +s;=20 + +9. Improve California's ability to obtain ISO and generator data and enhanc= +e=20 +the State's enforcement capability for power plant maintenance; price=20 +manipulation and generation gaming, consistent with protection of proprieta= +ry=20 +business information;=20 + +10. Provide the EOB with effective enforcement ability and additional=20 +oversight authority for the ISO and PX. + + +=01&Ten Issues to Consider or Act Upon Within the Next Six Months: ...=20 +? 4. Streamline state power plant siting procedures; consistent with=20 +environmental requirements, and prioritize applications to advance clean,= +=20 +BACT+ power plant proposals.=20 + +5. Institute ""use-it -or- lose-it"" permitting power plant licensing and=20 +emissions credits rules to ensure power plants get built;=20 + +...=20 + +?8. Reform PX pricing protocols and structures to lower wholesale and retai= +l=20 +prices and reduce excess profits=018 + + +I told you I don=01,t need to write a Burrito anymore.? The Democrats in=20 +Sacramento are doing that for me.? Welcome comrade.=20 + +Things on the Island of California=20 +?@@@ The ISO invokes $250 price caps.? Duh!=20 + +It is really hard to describe the drama of an ISO Governing Board meeting,= +=20 +especially when our favorite topic arises.? It seems the only time the Boar= +d=20 +becomes animated is when one of three issues are on the agenda: price caps,= +=20 +FTRs, and priorities for software enhancements. Otherwise, its pretty much= +=20 +hum-drum.=20 + +=01+Round and =01+round we went, once again.? A few more forced votes tippe= +d the=20 +scale in favor of the cap.? There were 15 yes votes, which included a force= +d=20 +yes vote from our friend Jerry Toenyes by order of Secretary of Energy Mr.= +=20 +Richardson. [Jerry, did you realize that the last letters of your name coul= +d=20 +be re-arranged to spell =01&NO ET YES=018?? Kind of a french thing.] I=01,m= + sorry=20 +about that vote, Jerry.? You still go in my book as one of the brave and bo= +ld=20 +for standing up to that sort of intimidation for so long.? Your picture in= +=20 +the SF Chron said it all.=20 + +The brave souls who stood tall and voted NO included David Parquet (Enron),= +=20 +Jan Smutny-Jones (IEP), Barbara Barkovich (CLECA), Caolyn Kehrein (CMA), Da= +n=20 +Kirshner (EDF), and Stacy Roscoe (Procter & Gamble).? Now, I must admit tha= +t=20 +Dynegy=01,s Greg Blue did help by voting a Texas No, spelled =01&A-B-S-T-A-= +I-N=018.??=20 +I have instructed Dynegy trader Dave Francis in Houston to work with Greg t= +o=20 +correct that problem.? We=01,re going to work things out.=20 + +The Energy F_hrer addressed the Board, again.? I didn=01,t mind that I only= + had=20 +a few brief, very brief moments to address the Board, and Herr (Hair?) Peac= +e=20 +got over 20 minutes.? That didn=01,t bother me at all.? He did more damage = +to=20 +himself in 20 than I could do in 2.? He blasted away at everyone who oppose= +d=20 +him.? He pined about Camden quitting the Board.? He said he knew how prices= +=20 +and markets work, that it isn=01,t the way those academic egg-head, FERC-lo= +ving=20 +economists tell you who pray to the gods of competition.? He lambasted WAPA= +=20 +for withholding generation to protect fish and wildlife (what was that all= +=20 +about?).? He predicted that on Thursday=01,s PUC meeting he and all the oth= +er=20 +powerful Democrats, Republicans and angry citizens of San Diego would deman= +d=20 +that the PUC impose a rate cap on retail electric rates in San Diego that a= +re=20 +just and reasonable (it didn=01,t happen).? And on and on and on.? This man= + is=20 +very delusional. He believes that Steve, and only Steve Peace can save the= +=20 +world.? He believes that political will trumps judicial, quasi-judicial, or= +=20 +independent Board actions.? This man makes relevant all the abstract musing= +s=20 +of the philosopher Friedrich Nietzsche (1844-1900) ... The will to power, t= +he=20 +?bermensch, the transvaluation of values, etc.=20 + +But we are getting under (uber?) his skin, with the help of the press.?=20 +Wednesday afternoon I called Commissioner Dick Bilas to see if he thought= +=20 +whether the next day=01,s PUC meeting was going to be a roll over. Dick sai= +d he=20 +got a call from Peace, and that Peace said he would not come to the meeting= +.?=20 +Apparently, Peace had received a lot of press, and all of it bad.=20 + +That=01,s the thin line of freedom which keeps tyranny at least one step aw= +ay=20 +from our front door.=20 + +?>>> Things at the throne of FERC=20 +?@@@ Amen for the Morgan Stanley Order=20 + +And now, the good news.? You deserve this.? FERC gave the California market= + a=20 +little wiggle room last Friday.? FERC issued a last minute reply to the=20 +complaint by Morgan Stanley Capital Group relating to the ISO=01,s intent t= +o=20 +lower the price cap.? FERC denied the complaint, but they didn=01,t waste t= +ime=20 +with an Order to simply deny a complaint.? FERC danced on the head of the I= +SO=20 +and pulled the bite out of the price cap.=20 + +Here are some excerpts:=20 + +=01&We accepted this [Amendment 21], not because it was a cap on sellers=01= +, prices=20 +but because it would promote order and transparency in the market by clearl= +y=20 +telling sellers of the maximum price the ISO was willing to pay and allowin= +g=20 +sellers to make informed economic choices on whether to sell in the ISO=20 +market or to sell elsewhere...=20 + +=01& ... The ISO has no more or less ability to procure capacity and energy= + than=20 +any other buyer of these services ... If the ISO is unable to elicit=20 +sufficient supplies at or below its announced purchase price ceiling (becau= +se=20 +generators are free to sell elsewhere if they choose), it will have to rais= +e=20 +its purchase price to the level necessary to meet its needs. ... Therefore,= +=20 +an increase in out-of-market (OOM) calls for generation may be necessary to= +=20 +maintain system reliability.? Because the current payment for OOM is not=20 +subject to a maximum purchase price, the resulting overall payments may be= +=20 +higher.=20 + +=01&To the extent the ... ISO Board resolution contemplates implementing a= +=20 +directive that generators must bid their capacity into the ISO markets unde= +r=20 +any circumstances (e.g., when system load exceeds 38,000 MW), such a=20 +requirement is not permitted by our ... Order and the ISO tariff. ... Futur= +e=20 +implementation of the ISO Board resolution with regard to a requirement to= +=20 +sell would require significant revisions to the ISO market rules.? Such=20 +market changes could not become effective absent a corresponding amendment = +to=20 +the ISO tariff which would have to be filed under section 205 of the FPA.= +=018=20 + +Well. What do you think about that?=20 + +Just wait.? Here is what the sleeping bear, Commissioner Hebert said in his= +=20 +concurring remarks:=20 + +=01&Getting to the bottom of the problem, in my view, requires us to begin = +a=20 +proceeding to rescind our approval of the ISO as the operator of the=20 +California grid.? The record supports such a move. ... A memorandum to the= +=20 +ISO from a stakeholder who resigned from the governing board eloquently=20 +brings to our attention repeated attempts to undermine the independence of= +=20 +the ISO. The memorandum also thoughtfully outlines consequences to the=20 +markets of a return to =01+command and control.=01,=20 + +=01&Because these allegations come from a non-market participant, especiall= +y=20 +should we take heed.? We must also take notice of the public pressure on th= +e=20 +Board to compromise its independence.=018=20 + +Amen, brother, amen.=20 + +Odds and Ends (_!_)=20 + +As you can imagine, this week, like an endless string of weeks before this= +=20 +has been interminable.? I get about three phone calls a day from press=20 +reporters, very little of which ever sees print.? My shtick is just too=20 +complex for casual readers.? But I do notice that the reporters are asking= +=20 +better questions.? The public is becoming more savvy.? The information flow= +=20 +is moving in our favor, and will disarm the forces of evil, in about 10=20 +years.=20 + +I have other problems on my mind.? I am working on a new computer system.?= +=20 +Really, it=01,s just an upgrade of an older computer that is a bit faster t= +han=20 +the laptop I tried to upgrade, very unsuccessfully.? As a result of the all= +=20 +the new hardware and software I purchased, my office looks like a war zone= +=20 +with an odd mix of PUC service copies, computer documentation, and diskette= +s=20 +laying all around. Quite a mess.=20 + +Prepare for the future.? Our next general meeting is scheduled for Thursday= +=20 +and Friday, October 5 and 6 at Moro Bay.? Barb Ennis will prepare a blurb f= +or=20 +us in next week=01,s Burrito about room reservations, timing, golf, etc.? O= +ur=20 +guest speakers will include MSC Chairman Professor Frank Wolak who will tal= +k=20 +on the subject of his choice, Ms. Irene Moosen of Grueneich Resource=20 +Advocates who will make a presentation on the distributed generation case= +=20 +before the PUC, and William Freddo of PG&E National Energy Group who will= +=20 +give us some education on operating a power plant inside the New England IS= +O.=20 + +Now for your daily bread, provided this week by Dan Douglass.? Last week we= +=20 +had a joke about Catholics.? This week it=01,s agnostics.=20 +=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=20 +An atheist was taking a walk thru the woods, admiring all that the accident= +?=20 +of evolution had created.? ""What majestic trees!? What powerful rivers! Wha= +t?=20 +beautiful animals!""? he said to himself.=20 + +As he was walking alongside the river he heard a rustling in the bushes?=20 +behind him.? As he turned to look, he saw a 7 foot grizzly bear charging?= +=20 +towards him. He ran as fast as he could up the path.? He looked over his?= +=20 +shoulder and saw that the bear was closing in on him.? He tried to run even= +?=20 +faster, so scared that tears were coming to his eyes. His heart was pumping= +?=20 +frantically as he tried to run even faster, but he tripped and fell on the?= +=20 +ground.? He rolled over to pick himself up and saw the bear right on top of= +?=20 +him raising its paw to kill him.=20 + +At that instant he cried out ""Oh my God!"" And time stopped. The bear froze.= +?=20 +The forest was silent.? The river even stopped flowing.? A bright light=20 +shone? upon the man, and a voice out of the sky said, ""You deny my existenc= +e=20 +all? these years, teach others I don't exist and even credit my creation to= +=20 +a? cosmic accident, and now do you expect me to help you out of this?=20 +predicament?? Am I to count you as a believer?""=20 + +The atheist, ever so proud, looked into the light and said, ""It would be=20 +rather hypocritical to ask to be counted as a believer after all these=20 +years,? but could you make the bear a believer?""=20 + +""Very well"" said the voice. And the light went out, the river flowed, the?= +=20 +sounds of the forest continued, and the bear brought both paws together,?= +=20 +bowed his head, and said, ""Lord, I thank you for this food which I am about= +?=20 +to receive.""=20 +=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=20 + +Amen.? And have a great weekend.? Oh, and thanks to all of you who sent me= +=20 +happy birthday wishes.? It was very much appreciated.=20 + +KSB=20 +gba",Thursday,2000,August,20,0 +207,CALIFORNIA CRISIS,Re: Two Governor's Press Releases--More Courage from the Capitol,"Preempt me, please! + + + + +Jeff Dasovich@EES +09/13/2000 06:22 PM +To: Mary Hain/HOU/ECT@ECT, Joe Hartsoe/Corp/Enron@ENRON, Cynthia +Sandherr/Corp/Enron@ENRON, Sarah Novosel/Corp/Enron@ENRON, Paul +Kaufman/PDX/ECT@ECT, Sandra McCubbin/SFO/EES@EES, Mona L +Petrochko/SFO/EES@EES, Susan J Mara/SFO/EES@EES, James D Steffes/HOU/EES@EES, +mpalmer@enron.com, Karen Denne/Corp/Enron@ENRON, Richard Shapiro/HOU/EES@EES, +Steven J Kean/NA/Enron@Enron +cc: + +Subject: Two Governor's Press Releases--More Courage from the Capitol + + +---------------------- Forwarded by Jeff Dasovich/SFO/EES on 09/13/2000 06:18 +PM --------------------------- + + +""Julee Malinowski-Ball"" on 09/13/2000 06:10:16 PM +Please respond to ""Julee Malinowski-Ball"" +To: ""Baker Carolyn (E-mail)"" , ""Bill Carlson +(E-mail)"" , ""Bill Woods (E-mail)"" +, ""Curt Hatton (E-mail)"" , +""Curtis Kebler (E-mail)"" , ""David Keane +(E-mail)"" , ""David Parquet (E-mail)"" +, ""Duane Nelsen (E-mail)"" , ""Ed +Tomeo (E-mail)"" , ""Edward Maddox (E-mail)"" +, ""Eileen Kock (E-mail)"" , +""Ellery Bob (E-mail)"" , ""Escalante Bob (E-mail)"" +, ""Frank DeRosa (E-mail)"" +, ""Greg Blue (E-mail)"" , +""Hap Boyd (E-mail)"" , ""Jack Pigott (E-mail)"" +, ""Jan Smunty-Jones (E-mail)"" , ""Jim +Willey (E-mail)"" , ""Joe Greco (E-mail)"" +, ""Joe Ronan (E-mail)"" , ""John Stout +(E-mail)"" , ""Jonathan Weisgall (E-mail)"" +, ""Katie Kaplan (E-mail)"" , ""Kent Fickett +(E-mail)"" , ""Lynn Lednicky (E-mail)"" , +""Marty McFadden (E-mail)"" , ""Paula Soos +(E-mail)"" , ""Robert Lamkin (E-mail)"" +, ""Roger Pelote (E-mail)"" +, ""Steve Ponder (E-mail)"" , +""Steven Kelly (E-mail)"" , ""Sue Mara (E-mail)"" +, ""Tony Wetzel (E-mail)"" , ""Trond +Aschehoug (E-mail)"" , ""William Hall (E-mail)"" +, ""Richard Hyde (E-mail)"" , +""Sandi McCubbin (E-mail)"" , ""Stephanie Newell +(E-mail)"" , ""Jeff Dasovich (E-mail)"" + +cc: ""Karen Edson"" +Subject: Two Governor's Press Releases + + +GOVERNOR DAVIS PRESSES FERC FOR ACTION ON WHOLESALE POWER RATES: Calls on +Federal Regulators to Reduce Prices, Issue Refunds + +GOVERNOR DAVIS NAMES KAHN CHAIR OF THE GOVERNOR'S CLEAN ENERGY GREEN TEAM + + + +OFFICE OF THE GOVERNOR +---------------------------------------------------------------------------- +---- +PR00:238 +FOR IMMEDIATE RELEASE +September 12, 2000 + +GOVERNOR DAVIS PRESSES FERC FOR ACTION ON WHOLESALE POWER RATES +Calls on Federal Regulators to Reduce Prices, Issue Refunds + +SAN DIEGO - At a Federal Energy Regulatory Commission (FERC) hearing today +in San Diego, Governor Gray Davis reiterated his call to federal regulators +to intervene ""to the fullest extent possible"" to lower electricity prices in +California. + +""FERC bears responsibility to ensure that a workably competitive market +exists before California consumers and California's economy are subjected to +unconstrained, market-based electricity prices,"" said Governor Davis in a +statement read by Energy Oversight Board Chairman Michael Kahn. +""Consequently, I renew my prior request that the Commission act with utmost +speed to intervene to the fullest extent possible to restore wholesale +prices to fair levels and to remedy harms that have resulted from the +exercise of market power."" + +Governor Davis noted that he and state lawmakers have taken dramatic action +in recent weeks to provide rate relief. ""While these actions should provide +short-term rate predictability and longer-term benefits to customers in +terms of improved supplies, the fundamental problem of exorbitant wholesale +prices still exists and remains the responsibility of FERC to address,"" said +the governor. ""No combination of state actions can substitute for federal +action to ameliorate the problems of California's wholesale markets."" + +Governor Davis has taken the following actions in reaction to rising +electricity prices in San Diego: + +On June 14, he called for emergency reduction of electricity use by all +state facilities in the San Francisco Bay area in response to electricity +emergency and rolling blackouts. + +On June 15, he called on chairpersons of the Public Utilities Commission +(PUC) to analyze the conditions that led to electricity shortages in the San +Francisco Bay area the previous day, including a statewide perspective on +the price and delivery of electricity. Report was completed, submitted to +the governor and released on August 2. + +On July 27, 2000, Governor Davis called on federal and state regulators to +take swift action to extend the caps on wholesale electric rates in +California and provide San Diego ratepayers with million of dollars in +refunds. + +In letters written by the governor to two state regulatory agencies and two +California-based panels charged with overseeing California's power market, +he called for a coordinated state effort to urge federal regulators to take +strong measures to reduce power rates in both the short- and long-term. + +On August 2, 2000, Governor Davis issued three Executive Orders designed to +reduce energy consumption by state government and speed up the time it takes +new power generating facilities to win approval from state agencies. + +On August 9, 2000, Governor Davis called on the Public Utilities Commission +(PUC) to establish a two-year plan that would cut electricity rates by +nearly half for residential and business customers of San Diego Gas & +Electric. + +The governor also reached an agreement with the California Grocers +Association that will save enough electricity to provide power to between +50,000 and 60,000 homes during periods of peak demand, as grocers agreed to +reduce power consumption by 10 percent during Stage One emergencies. + +On August 10, 2000, Governor Davis wrote a letter to President Clinton +urging him to expedite FERC's investigation to determine whether current +electric rates in San Diego were unjust. + +On August 22, 2000, Governor Davis called on President Clinton to release +emergency funds from the Low-Income Home Energy Assistance Program (LIHEAP) +to the state to help low-income Californians pay their rapidly-rising +electricity bills. + +On August 23, 2000, President Clinton responded to Governor Davis' request +by releasing $2.6 million in emergency funds to help low-income Southern +Californians cope with the surge in their electricity bills. The President +also asked federal regulators to speed up their investigation into the +operation of U.S. power markets and urged the Small Business Administration +to use its credit programs to help small firms hurt by the price increases. + +On August 23, 2000, Governor Davis reached agreement with legislators on +legislation to provide relief to San Diego ratepayers. The governor signed +two bills into law on September 6, 2000. + +Please see attached letter (below). + +# # # + +SEPTEMBER 12, 2000 + +STATEMENT OF GOVERNOR GRAY DAVIS + +TO THE FEDERAL ENERGY REGULATORY COMMISSION CONCERNING ITS INVESTIGATION OF +WHOLESALE PRICE ESCALATION IN CALIFORNIA + +The Summer of 2000 has confronted California with an electricity crisis that +seriously threatens the safety, health and well being of citizens and +businesses throughout the state. At the heart of the crisis is the +extraordinary run up in prices for wholesale electric energy and ancillary +services, accompanied by deteriorating service and reliability. In San +Diego, electric customers' bills have more than doubled this summer, +threatening permanent harm to businesses and the health and welfare of +residential customers in the warm southern climate. All remaining California +electric consumers are faced with similar prospects as their legislated rate +freeze periods come to an end. In San Francisco we saw rolling blackouts for +the first time in our history. + +As soon as the dimensions of the crisis became evident, I directed +California regulators, including the Public Utilities Commission and the +Electricity Oversight Board, and the Independent System Operator, to take +immediate steps to identify and implement specific measures to mitigate the +damage, including restoring price caps at Summer 1999 levels. I am happy to +report that those measures have been adopted, although not without +considerable resistance from self-interested parties. + +In recent weeks, I have worked with the California Legislature to enact +further relief within the existing framework of options now available to the +state. These include provisions to stabilize retail rates, expedite +generation licensing where possible, implement targeted demand reduction and +demand response and remove constraints in transmission and distribution +systems. I have also established a task force comprised of key state +officials which is developing measures to increase energy efficiency and +alternative supplies and to expedite permitting by state agencies. + +While these actions should provide short-term rate predictability and +longer-term benefits to customers in terms of improved supplies, the +fundamental problem of exorbitant wholesale prices still exists and remains +the responsibility of the Federal Energy Regulatory Commission to address. +No combination of state actions can substitute for federal action to +ameliorate the problems in California's wholesale markets. + +A joint report submitted to me on August 2nd by the Chairman of the +California Electricity Oversight Board and the President of the California +Public Utilities Commission concluded that exorbitant wholesale prices in +California result from wholesale market dysfunction and the exercise of +market power by sellers. Subsequent reports by the Market Analysis +Department and the Market Surveillance Committee of the California +Independent System Operator reach the same conclusions. Subsequent behavior +of wholesale electric prices during August confirms their conclusions, and +subjects California to further economic damage. While I remain hopeful that +California wholesale markets may ultimately become competitive and become +capable of serving the interests of consumers and the public, I cannot and +will not accept the liabilities to California that result from the current +situation for even a short period. I intend to take any and all steps +necessary to restore economic stability to the electric service +infrastructure of California. + +FERC bears the responsibility under its organic act to assure just and +reasonable wholesale electric rates. FERC bears responsibility to ensure +that a workably competitive market exists before California consumers and +California's economy are subjected to unconstrained, market-based +electricity prices. Consequently, I renew my prior request that the +Commission act with utmost speed to intervene to the fullest extent possible +to restore wholesale prices to fair levels and to remedy harms that have +resulted from the exercise of market power. + +### + +OFFICE OF THE GOVERNOR +---------------------------------------------------------------------------- +---- +A00:245 +FOR IMMEDIATE RELEASE +September 12, 2000 + +GOVERNOR DAVIS NAMES KAHN CHAIR OF THE GOVERNOR'S CLEAN ENERGY GREEN TEAM +SACRAMENTO - Governor Gray Davis today announced the appointment of Michael +A. Kahn as chairman of the newly-created Governor's Clean Energy Green Team. +The Team was created by Governor Davis' signing of AB 970 by Assemblywoman +Denise Moreno Ducheny (D-San Diego) on Wednesday. + +Mr. Kahn, 51, of San Francisco, is the chairman of the California +Electricity Oversight Board, and he also serves as vice-chair of the +California Commission on Judicial Performance. He has been senior partner +and head of litigation at Folger Levin & Kahn LLP since 1979. Mr. Kahn has +held numerous state and federal government appointments and assignments over +the last 15 years. + +Mr. Kahn is the author of several articles and reports on litigation +practice and Supreme Court history. He is a magna cum laude, Phi Beta Kappa +graduate of the University of California, Los Angeles. Mr. Kahn also earned +master of arts and juris doctorate degrees from Stanford University, where +he was an editor of the Law Review. After graduation, he served for a year +as a law clerk to Judge Ben C. Duniway of the Ninth Circuit Court of Appeals +in San Francisco. + +The signing of AB 970 established the Governor's Clean Energy Green Team, +which works to streamline the process of creating new power plants to ensure +that an adequate supply of power will exist to make a deregulated +marketplace work. The Team does this by working with local governments, +identifying environmental impacts, developing recommendations for low +interest financing programs for renewable energy and obtaining input on +natural gas supply, emission offsets and water supply. + +Members do not receive a salary. This position does not require Senate +confirmation. + +# # # + +Julee Malinowski-Ball +Edson + Modisette +Associate +925 L Street Suite 1490 +Sacramento CA 95814 +916-552-7070 +FAX-552-7075 +jmball@ns.net + + + + + + +",Friday,2000,September,0,1 +211,CALIFORNIA CRISIS,California Power Crisis Update (No. 10),"We have been pulling together these weekly(sometimes more often) summaries +for internal purposes. Would you find it helpful to be on the distribution +list? Hope you are doing well. Look forward to touching base soon. +----- Forwarded by Suzanne Nimocks/HOU/NorthAmerica/MCKINSEY on 03/28/2001 +03:41 AM ----- + Memorandum + + TO: Pru Sheppard + BCC: Suzanne Nimocks + + + FROM: Pru Sheppard + B. Venki Venkateshwara + DATE: March 27, 2001 + + California Power Crisis Update (No. 10) + + DEVELOPMENTS THIS WEEK, 3/23/2001 + + The weeks highlights include: + + + ? Continued indications that the issue of market power and possible + remedies for it is likely to remain a high profile issue in + California and elsewhere (both retroactively and prospectively) + ? An ironical situation with respect to QFs in which QF power under + contract is effectively being released into the market at higher + prices + ? A court order requiring Reliant to continue to sell power to the + ISO even if it is not being paid in a full and timely manner + ? Another Stage 3 emergency and rolling blackouts + + Market power + + + There are continued indications that the issue of market power + will not be settled simply. This week there was a lengthy and + politically influential front page story in the New York Times about + FERCs passive approach to policing generators (Critics Say U.S. + Energy Agency Is Weak in Oversight of Utilities). The story was by + Jeff Gerth and Joseph Kahn. (Jeff Gerth's 1992 story on the + Whitewater deal is viewed by journalists to have been the origin of + what eventually became a multi-year investigation of Bill Clinton.) + + + The key issues are familiar: + + + ? Does market power exist to a degree that warrants remedies such + as price caps, refunds, and so on? + ? If so, what is the basis for asserting that market power exists + and what is the remedy? (See the discussion in the New York Times + article on the ""good hours"" vs. ""bad hours"" approach and the + associated political decision not to deal with ""good hours""). + ? Can market power be used as leverage to eventually settle + generator bills in California at something less than 100 cents on the + dollar. (The California ISO filed a complaint claiming $6 billion + in overcharges this week.) + + The QF irony + + + Through the 1990s, QF contracts were projected to be the source + of stranded costs because they were priced ""way above market."" In + recent months, in California, they look like a bargain (although some + are not such great bargains because a portion of their price is tied + to gas). You would think that the utilities would request QFs to + maximize their output. But credit problems have created an ironical + situation. The facts: + + + ? PG&E and Edison have not been paying the QFs fully and promptly + for some time. + ? The QFs form a creditors committee and threaten to push PG&E and + Edison into bankruptcy. (Some gas-fired QFs had to shut down because + they did not have money to pay for the gas.) + ? Last week's court decision allows MidAmerican/CalEnergy to + essentially sell its power to others even though the QF contract + ""dedicates"" the output to the purchasing utility. + ? CalEnergy does so immediately, selling to El Paso. + + The Reliant Order + + + A court ordered Reliant to continue to sell to the ISO, when + requested, regardless of whether Reliant had been paid fully and + promptly for past deliveries to the ISO. Reliant announced it will + appeal the order. + + + This is somewhat of a contrast to the QF situation except that + the circumstances governing the 2 situations are probably different. + The QF contracts pre-date the ISO and are with the utilities and most + likely make no reference to providing power during emergencies. In + fact, many QF contracts have the opposite provision: authority for + the utility to cut takes during so-called ""light load"" periods. + + + Stage 3 emergency and rolling blackouts--again + + + There was another Stage 3 emergency in California ? with rolling + blackouts this week. This prompted everyone to wonder why this was + happening in March. Among the factors: + + + ? Increased demand from summer-like temperatures + ? Cutbacks in imports + ? Loss of 1400 MW due to a transformer fire at an Edison plant + ? Loss of about 3100 MW from QF plants that were forced to shutdown + because they could not afford gas bills (VV) + + + MARKET COMMENTARY + + (For easier printing of all the articles in this section use the file + at the end of the section) + + + Critics Say U.S. Energy Agency Is Weak in Oversight of Utilities + By JEFF GERTH and JOSEPH KAHN + 03/23/2001 + The New York Times + Page 1, Column 1 + c. 2001 New York Times Company + + WASHINGTON, March 22 -- The pressure was intense when federal + regulators met + privately last month to debate remedies for soaring electricity + prices in + California. + Officials of the Federal Energy Regulatory Commission, the agency + whose mandate + is to ensure ''just and reasonable'' electricity rates nationwide, + had evidence + that a few companies had been selling electricity to California at + prices far + above the cost of generating it. The agency faced an imminent + deadline to + challenge those prices or let the companies possibly pocket hundreds + of millions + of dollars in unfair profits. + + An internal memorandum laid out two choices. The agency could audit + and punish + ''bad actors,'' the companies that were exploiting the market. Or it + could + identify ''bad hours,'' when electricity shortages were most acute + and spiking + prices were arguably nobody's fault, and order refunds for only the + most + exorbitant prices. + ''It may be easier to identify bad hours than bad actors,'' the + memorandum said. + + The commission took the easier way. It decided not to investigate + reports of + abuses by companies, but issued an order that could require them to + refund to + the state utilities up to $124 million collected during a relatively + few ''bad + hours'' in January and February. That is hundreds of millions of + dollars less + than California might have claimed, since the most potential + overcharging + occurred during ''good hours,'' when power was more plentiful but + prices were + often just as extreme. The order ignored those hours. + Today, in a criticism of the agency's lack of aggressiveness, + California + regulators estimated that generators had charged $6.2 billion above + competitive + levels over 10 months. They urged the agency to dig deeper, hoping it + would + demand more refunds or other stiff remedies. But the agency's track + record -- + one of complacency in the eyes of state officials -- leaves + California + regulators skeptical that Washington will confront the big power + producers. + The small, obscure agency, tucked behind the rail yard of Union + Station here, + has largely soft-pedaled its role as the electricity industry's top + cop, even + though it has wide authority to keep power companies in line. To keep + rates + reasonable, it can impose price caps, strip companies of the right to + charge + market rates, force them to return excessive profits and even suspend + deregulation altogether. + Instead, the agency has largely left it to private companies to pry + open the + $250 billion electricity industry, which has historically been + controlled by + monopoly utilities and state officials. The agency's defenders, + including its + chairman, Curt Hebert Jr., a fierce advocate of unfettered markets, + say that its + largely hands-off approach reflects the delicate balancing of + competing + interests -- a commitment to protect consumers while not stifling + market forces. + + But politicians, utility executives, energy economists and local + regulators say + California's rolling blackouts and skyrocketing electricity prices + are the signs + of a market running amok. They accuse the agency of standing aside as + companies + manipulate their way to windfall profits. The agency's critics, who + include one + of its own commissioners and numerous staff members, say that its + enforcement + mission has been blunted by free-market passions and the influence of + industry + insiders in its ranks. + When the agency began its first national investigation of high + electricity + prices last year, it named a newly recruited industry insider, Scott + Miller, to + lead the effort. Mr. Miller and his colleagues said in their report + that there + was ''insufficient data'' in California to prove any profiteering by + generating + companies. Yet his own former employer, PG&E Energy Trading, was at + the time a + subject of a civil antitrust investigation by the Justice Department + that + focused on electricity market abuses in New England. + The agency has given state regulators a lead role in monitoring local + power + markets. Yet even as these regulators have urged the agency to be + more + aggressive in investigating suspicions that companies have abused + their power in + California, New England, the Midwest and the mid-Atlantic, they have + frequently + been ignored or rebuffed. + Critics say that the agency began deregulation before it was ready or + willing to + make sure the markets worked effectively. They accuse it of showing + favoritism + to industry -- allowing companies, for example, to ignore + requirements to file + detailed reports of market transactions that are critical to proving + accusations + of market abuses. + ''We need to wake up to the fact that this is a dysfunctional market + that is + being gamed and manipulated by those who participate in it,'' said + William + Massey, a commissioner of the agency who has become one of its + leading critics. + The agency's inaction, the critics say, leads to ''gaming'' -- + jockeying for + profits that does not necessarily involve illegality -- and outright + market + manipulation. Consumers and utilities are the victims, paying + billions of + dollars more for electricity than if the markets were truly + competitive. + Agency officials acknowledge that enforcement of market rules to curb + gaming and + manipulation had not been a high priority in previous years. But they + defended + their recent California order as proof that they intend to keep + markets free of + abuse. They add that the agency is also pressuring two generators to + refund + almost $11 million for possibly manipulating the California market + last spring. + Agency officials and some outside analysts say that poorly conceived + deregulation plans by states, a shortage of power plants, rising + natural gas + prices, and even the weather have had more impact on electricity + prices than + abuses by companies or any failings by the agency. They say the + agency must + balance the competing interests of generators, local regulators and + utility + companies if it is to keep deregulation on track. + ''We're trying to craft a system that gives breathing room to develop + a market, + but not so much room that undue market power punishes consumers,'' + Mr. Hebert + said. + Fight Over Deregulation + Today's debate traces back to the 1930's, when President Franklin D. + Roosevelt + backed legislation to break up utility monopolies. The Federal Power + Act of 1935 + gave the Federal Power Commission a mandate to ensure ''just and + reasonable'' + electricity rates. The Federal Power Commission was abolished in 1977 + and + replaced by the Federal Energy Regulatory Commission, an independent + agency with + 1,200 employees that also oversees oil pipelines and the natural gas + market. The + president appoints the chairman and four commissioners -- two + Democrats and two + Republicans with staggered terms of five years. Two Republican seats + are + currently unfilled. + The deregulation of the electricity markets began in the late 1980's, + after the + agency had begun opening the gas markets. By 1996, the commissioners + issued a + landmark order that forced utility companies to open their + transmission lines to + other utilities and electricity wholesalers. The commission and many + private + economists expected that by prying open protected markets, + electricity prices + would immediately fall. + That possibility set off a deregulation frenzy, most prominently in + California, + New York, New England and the mid-Atlantic states. Generating + companies rushed + to expand in the new, borderless market. + But the agency's balancing act has grown more difficult as + electricity + deregulation has spread nationwide. Congress has forced it to trim + its staff in + recent years. Officials complain that investigating abuses in + electricity + markets strains their resources. + And as the California crisis has worsened, the commissioners have + begun sparring + publicly among themselves about what to do. This week, Mr. Massey, a + Democratic + commissioner, and Mr. Hebert (pronounced AY-bear), a Republican, sat + side by + side before a House panel and argued diametrically opposed positions. + Mr. Hebert + said high prices in California ''were sending the right signals to + get supply + there.'' Mr. Massey called the prices that generators were charging + ''unlawful'' + and said that his agency, by not reining them in, ''is simply not + doing its + job.'' + The agency's leadership has been in flux for months. Congressional + and industry + officials in Washington say President Bush is considering replacing + Mr. Hebert, + whom he named to the top post less than two months ago, with Pat + Wood, who runs + the Texas public utility commission. A White House spokeswoman had no + comment on + the reports. + Though Mr. Hebert's positions are not far from those of the Bush + administration, + his relations with California leaders may have made his position + tenuous. Mr. + Hebert, a Mississippian who is a close ally of the Senate majority + leader, Trent + Lott, has warred with California politicians who have proposed new + solutions to + the crisis there. + Mr. Hebert, who has served as a commissioner since 1997, has often + taken the + most ideologically free-market position of any commissioner. He + flatly rejects + the idea of price caps on electricity as hopelessly ineffective and + contrary to + market forces. When Gov. Gray Davis outlined a plan to have the state + buy + transmission lines to relieve utility companies' debt, Mr. Hebert's + response was + dismissive. ''It's not in the interest of the American public,'' he + pronounced. + Even as new electricity markets opened in the summer of 1999, they + started + producing nasty shocks. The mid-Atlantic region experienced some + early + volatility. + As the turmoil grew, economists began raising the alarm about a + phenomenon + called ''market power,'' the ability of energy traders in the new + national + market to sustain prices above the competitive level. Proving such + abuses is + difficult, because it requires comparing tens of thousands of + separate + electricity transactions with the costs of the generators that + initiated them. + Joseph Bowring, who heads the market monitoring unit of the nonprofit + entity + that operates the mid-Atlantic transmission system, said that power + companies + there had exercised some market power. But only the Federal Energy + Regulatory + Commission, not local regulators, had the authority to collect the + data to + determine how much market power had been exercised and whether it had + been + abusive or not, he said. + Mr. Bowring said he talked to agency officials about doing so. In the + end, Mr. + Bowring and several agency officials said, the agency chose not to + investigate. + The decision roiled some agency officials. + Ron Rattey, a veteran agency economist, wrote a memorandum last June + describing + the staff as ''impotent in our ability to monitor, foster, and ensure + competitive electric power markets.'' The staff, the memorandum said, + did not + even enforce a requirement that power companies file detailed + quarterly reports + listing essentially every sale they make. Such data would have been + useful to + Mr. Bowring. + Local-Federal Clash + Local regulators who want to ensure competitive prices often have to + act on + their own. Monitors in New England have intervened about 600 times + since 1999 to + correct prices they determined had been caused, at least in part, by + market + manipulation. + The federal agency has sometimes chastised them for interfering too + much. + The industry, not surprisingly, shares that view. One vocal critic + was Mr. + Miller. Before the agency recruited him last July to head its + division of energy + markets, he was director of policy coordination for the national + energy-trading + unit of PG&E Corporation, the California holding company whose assets + also + include Pacific Gas and Electric, the California utility. + Although the utility has lost billions of dollars during California's + crisis, + Mr. Miller's former unit has become one of the most profitable new + energy + traders nationwide. PG&E Energy Trading, by several estimates, is now + the + second-largest seller of electricity in New England. + The company has had a rocky relationship with regulators. They + intervened + several times in 1999 and 2000 to retroactively cancel auctions they + said + produced excessive profits for PG&E and other companies. Mr. Miller + denounced + the practice, though he acknowledged in public testimony that his + company + sometimes charged ''very high'' prices when it could. + ''One person's predatory pricing is another person's competitive + advantage,'' + Mr. Miller said at a public hearing on deregulation in Texas in 1999. + New + England regulators too often acted as ''judge, jury and executioner'' + when + overseeing the market, he said. + One year later, Mr. Miller and his new colleagues at the federal + agency got a + chance to examine New England's problems from the regulators' + perspective. Their + Nov. 1 report attributed New England's frequent price gyrations to + technical and + regulatory flaws. + As Mr. Miller's team was preparing its report, the Justice + Department, whose + threshold for stepping into possible industry wrongdoing is far + higher than the + agency's, began looking into whether price spikes in New England + pointed to + unlawful monopoly power or collusion, people contacted by the + department during + that inquiry said. + One subject of the civil inquiry is possible price manipulation in + one of New + England's ancillary services markets, people contacted by the + department said. + They said the department was examining whether PG&E and two other + companies + tried to corner that market for several months early last year. PG&E + confirmed + that the Justice Department had contacted it, but denies wrongdoing + and says it + has cooperated with the department's requests. + Mr. Miller has declined to comment on his role at PG&E or at the + agency. His + supervisors defended his work and said they had detected no conflict + of interest + between his work at PG&E and his duties at the agency. + Those duties brought Mr. Miller to California last August. With + electricity + prices there soaring, he and his colleagues sat down with several + utility + executives at the agency's San Francisco office. + One executive, Gary Stern, director of market monitoring for Southern + California + Edison, wanted the agency to stop what he suspected were market + abuses by power + generators. He provided a road map to help investigators figure out + how power + companies traded power contracts -- and whether they had manipulated + the + markets. + But when Mr. Miller and his team approached 11 generators and + marketers -- + including his old employer -- a few weeks later, they did it their + way. They + asked eight questions, many of them imprecise, like: ''Describe your + strategy + for bidding generation resources into market.'' + This question, Mr. Stern said in a recent interview, ''was equivalent + to asking + a suspected burglar how he spent his day.'' + Some agency officials also thought the team should probe deeper. Mr. + Rattey + recommended that Mr. Miller seek the quarterly pricing reports that + marketers + were supposed to file. But his suggestion was not adopted, agency + records show. + Daniel Larcamp, Mr. Miller's supervisor, said ''there might have been + more + information that could have been obtained'' in the California + inquiry. But he + said the commission gave the staff only three months to finish, + making it + impossible to collect and analyze the reams of data involved. + For Mr. Miller, agency documents show, the investigation was so + time-consuming + that he had no time to fill out the financial disclosure form + required of new + federal employees. Mr. Miller submitted his form in late January, + after a + reporter requested it. Agency lawyers approved the form, but only + after he + provided additional information about his job and compensation from + PG&E. The + lawyers said Mr. Miller's participation had been permissible because + PG&E was + not the subject of the investigation. + When the staff report was issued on Nov. 1, it found high prices and + problems in + the design of the California market. But while the companies ''had + the potential + to exercise market power,'' the commission said, there was + ''insufficient data'' + to prove that they did. + Some marketers saw the report as an exoneration. + ''This has been looked at several times, most notably by the FERC and + nobody has + found any evidence of market manipulation and profiteering,'' Rob + Doty, the + chief financial officer of Dynegy Inc., told a reporter earlier this + year. + California Inquiry + The agency has recently shown signs of wanting to apply pressure on + generators. + But its early efforts show how it is treading on new and uncertain + turf. + When the California crisis grew severe last December, the commission + issued a + refund order, a shot across the bow for generators charging high + prices. It + required them to submit detailed data any time they sold electricity + in + California for more than $150 per megawatt hour, considered at the + time a fair + estimate of the highest costs any of them faced. + It also told generators that for the next several months, they could + be forced + to give refunds if the agency found that they had charged excessive + prices. The + commission also said that it would examine bidding practices and + strategies for + withholding generating capacity to ferret out any efforts to + artificially raise + prices. + When the agency's own 60-day deadline for examining market data in + January + approached, however, it became clear that staff members had not made + any + detailed examination. Instead, staff members said, the agency + scrambled to forge + a last-minute compromise that would allow it to issue a statement + opposing high + prices in the state without a time-consuming investigation. + During this scramble, a senior staff member, Kevin Kelly, suggested + focusing on + bad hours instead of bad actors. + ''Our attempts to find illegal behavior or legal 'misbehavior' by + sellers ('bad + actors') always seems to fail,'' his memorandum said. It said that + the agency + could more easily blame high prices on acute shortages during the + most critical + hours. + The suggestion won the day. The commission decided to limit its order + to the + hours when California declared a Stage 3 emergency, when supplies are + critically + low. + Mr. Stern of Southern California Edison and several private-sector + economists + have attacked the economic logic of that order. They said that the + commission + has focused on times when prices might be legitimately high. The + bigger worry: + Generators can and often do sustain artificially high prices when + supplies are + not as tight, they say. + Mr. Massey, the Democratic commissioner, dissented from the decision + for those + reasons. Because most high-priced transactions in January and + February did not + occur during bad hours, he argued, the commission effectively chose + to bless as + ''just and reasonable'' the hefty profits generators are making from + the + California crisis. + ''The problem with my agency is that we're so carried away with the + rhetoric of + markets that we've gotten sloppy,'' Mr. Massey said. ''We're talking + about + electricity. It's the juice of the economy, so it's got to be + available and + reasonably priced.'' + + + Williams defends pricing of electricity + 03/23/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + TULSA, Okla. (AP) - Williams Cos. Inc. says it can justify the rates + it charged + for wholesale power, despite accusations from federal regulators that + it sold + over-priced electricity to California. + Federal regulators claim Williams Energy Marketing and Trading Co., a + unit of + Tulsa-based Williams, owes California more than $40 million in + refunds for power + it sold to the state's Independent System Operator. + + The Federal Energy Regulatory Commission says that Williams is one of + several + power providers responsible for $124 million in overcharges from + transactions in + January and February. + The Independent System Operator, which manages the state's power + grid, claims + the state was overcharged $6.2 billion by 21 wholesale power + providers, + including Williams, between May and February. + Williams says the rates it charged California were fair and were + based on + production costs and market conditions. + ""Williams is confident that it performed within the guidelines + established by + the ISO,"" said Williams spokeswoman Paula Hall Collins. ""We felt like + we had + worked within the regulations set up by ISO."" + According to the commission, power prices levied by Williams in + January and + February exceeded federal price ceilings based on the cost of natural + gas and + other market conditions. + However, the price ceilings were established after the ISO accepted + Williams' + power prices, Collins said. + The commission will review Williams' explanation and either accept + the + justification or order the company to pay refunds. + + + + Allegheny Energy makes big California connection + 03/23/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + HAGERSTOWN, Md. (AP) - Allegheny Energy Inc. said Thursday it has + agreed to sell + $4.5 billion worth of power to California's electricity-purchasing + agency over + the next 10 years. + The company said the contract call for Allegheny to provide up to + 1,000 + megawatts that the Hagerstown-based company has secured from western + generating + plants through its new energy trading division, Allegheny Energy + Global Markets + - formerly Merrill Lynch Global Energy Markets. + + ""This is a win-win for both the state of California and Allegheny + Energy. It + provides a long-term source of fixed-price energy and should help to + stabilize + prices in California,"" said Michael P. Morrell, president of the + Allegheny + Energy Supply division. + Allegheny Energy is the parent of Allegheny Power, which delivers + electric + energy and natural gas to parts of Maryland, Ohio, Pennsylvania, + Virginia and + West Virginia. + + + Williams plans expansion of pipeline to help power Calif. + 03/23/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + SALT LAKE CITY (AP) - The Williams Cos. plans to expands its Kern + River + pipeline, which runs through Utah, to provide more natural gas for + generating + plants in California. + Williams' gas pipeline unit in Salt Lake City said Thursday that it + plans to + construct nearly 700 miles of additional pipeline that will run + parallel to its + existing Kern River line. + + Construction on the $1 billion project is expected to begin next year + and is + scheduled for completion in May 2003, said Kirk Morgan, director of + business + development for Kern River pipeline. + ""Shippers are seeking more access to natural gas from the Rocky + Mountain basin, + where producers are aggressively stepping up production,"" Morgan + said. + The new pipeline is expected to deliver about 900 million cubic feet + of natural + gas per day to markets in Utah, Nevada and California. + Most of the gas will be used for generating plants planned in + California. If all + of the pipeline's capacity were used to generate electricity, it + could produce + about 5,400 megawatts. ""That is enough to light around 4.5 million + homes,"" + Morgan said. + The original Kern River line was completed in 1992. It enters Utah + from Wyoming + then crosses into the Salt Lake Valley near Bountiful. It turns south + near the + Salt Lake City International Airport then runs the length of the + state before + passing into southern Nevada and winding up near Bakersfield, Calif. + It currently transports 700 million cubic feet of natural gas per + day. Williams, + based in Tulsa, Okla., recently filed an emergency application with + federal + regulators to install additional pumping stations on the line to + increase its + capacity by 135 million cubic feet per day. That $81 million pumping + station + project should be completed by July 1. + During the 2002 construction period, the Kern River project will + employ between + 1,500 and 1,800 people. The company estimates annual property taxes + it pays to + Utah counties will increase from $3.5 million to about $7 million. + Questar will be one of the customers on the new pipeline, Morgan + said. + The utility wants to supply additional gas to southern Utah cities, + including + St. George and Cedar City. + ""Our own pipelines serving southern Utah are at full capacity so this + is an + opportunity to transport additional gas into those areas from + company-owned + supplies in Wyoming,"" said Questar Gas spokeswoman Audra Sorensen. + + + + Calif Energy Commission OKs 3 Pwr Plants Worth 2,076 MW + 03/23/2001 + Dow Jones Energy Service + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + (This article was originally published Thursday) + + LOS ANGELES -(Dow Jones)- The California Energy Commission Wednesday + approved + three power plants worth 2,076 megawatts, two of which are scheduled + to come on + line by the end of 2002, a CEC spokesman said Thursday. + + The plants approved include BP Amoco PLC (BP) unit ARCO Western + Energy's 500 + megawatt Western Midway Sunset Project, slated to come on line in + October 2002; + Caithness Energy's 520 MW Blythe Power Plant, to come on line by Dec. + 31, 2002; + and Thermo Ecotek's 1,056 MW Mountainview Power Plant, scheduled to + come on line + in April 2003. + All three of the new plants will be natural gas-fired combined-cycle + plants. + The $550 million Mountainview plant will be located in Southern + California, near + San Bernadino. The $300 million Western Midway-Sunset plant will be + located in + central Kern County, while the $250 million Blythe plant will be + located in the + city of Blythe in Riverside County. + The latest approvals bring to 13 the total number of plants approved + since April + 1999 by the CEC, a spokesman said. Those plants will supply 8,405 MW + to the + state, which has seen rolling blackouts and spiking wholesale power + prices in + the last six months, in part due to lack of supply. + -By Jessica Berthold, Dow Jones Newswires; 323-658-3872; + jessica.berthold@dowjones.com + + + Some CalEnergy Power Could Be Sold Outside Calif - CEO + 03/23/2001 + Dow Jones Energy Service + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + (This article was originally published Thursday) + + LOS ANGELES -(Dow Jones)- Some of CalEnergy Operating Corp's power + could end up + being sold outside of California, though that is not the company's + intent, + CalEnergy Chairman and CEO David Sokol said in a conference call + Thursday. + + CalEnergy, an affiliate of MidAmerican Energy Holdings Co, which is + majority + owned by Warren Buffett's Berkshire-Hathaway (BRKA), was given legal + authority + Thursday to suspend 270 megawatts of power delivery to Edison + International + (EIX) utility Southern California Edison and sell on the open market, + because + SoCal Edison has not paid its bills since November. + CalEnergy stopped supplying power to SoCal Ed immediately following + the court + ruling. + ""We stopped supplying power at 1 PM (PST) and have been selling to + parties that + will pay since then....We are selling it to marketers; our current + marketing + agent is El Paso Corp (EPG) and they will sell it for us,"" Sokol + said. + Sokol added that while it was his company's intention to have its + power sold to + California, that could not be guaranteed. + ""We leave the energy selling to El Paso....We've directed them that + we would + like the power to stay in California but we can't stop them,"" from + selling out + of state, Sokol said. + Wholesale prices on the open market are about $400-$500 a + megawatt-hour, three + times more than what the company had received under its contract with + SoCal Ed. + The court's ruling did not address the $45 million SoCal Ed still + owes CalEnergy + for November and December power, and Sokol said that his company's + separate + lawsuit on that matter sought to attach the utility's assets as + payment for that + debt. + Sokol said the court's ruling had ""significant implications"" for the + entire + community of small, independent generators, known as qualifying + facilities or + QFs, who have not received payment from SoCal Ed. + ""Edison's own lawyer said it best....that every QF in the state will + begin to + mitigate if the judge allowed us (to sell on the open market),"" Sokol + said. + Sokol said his company was prepared to push SoCal Ed into involuntary + bankruptcy + Friday if CalEnergy hadn't won the case, but said he couldn't + speculate whether + other QFs may be more or less inclined to do so as a result of the + court + outcome. + A group of renewable power suppliers, owed more than $100 million + from SoCal Ed, + said late Wednesday they want state lawmakers to release them for + their supply + contracts with PG&E Corp. (PCG) unit Pacific Gas & Electric and SoCal + Ed until + the utilities are restored to financial stability. + The utilities claim close to $13 billion in undercollections due to + an inability + to pass high wholesale power costs to customers under a rate freeze. + In a statement, SoCal Ed said it opposed CalEnergy's bid to suspend + its QF + contract because the utility believed Gov. Gray Davis and state + regulators are + close to resolving ""very legitimate financial concerns of CalEnergy + and other QF + suppliers."" + SoCal Ed said it was concerned that CalEnergy's request to sell to + third parties + would lead to a major supply shortage in California. + The utility said it has informed the QFs that it is working to + resolve the issue + without giving unfair advantage to one class of creditors. + While many of the state's large power suppliers have been paid by on + a forward + basis for the power they sell into California, the QFs, which make up + one-third + of the state's total power supply, haven't been paid by SoCal Ed + since November. + PG&E has made partial payments to its QFs. + -By Jessica Berthold, Dow Jones Newswires; 323-658-3872, + jessica.berthold@dowjones.com + (Jason Leopold contributed to this article.) + + + California and the West Judge Frees Small Firm From Edison Contract + KEN ELLINGWOOD; DAN MORAIN + TIMES STAFF WRITERS + 03/23/2001 + Los Angeles Times + Home Edition + A-3 + Copyright 2001 / The Times Mirror Company + + El CENTRO -- California's balance of electrical power shifted + slightly Thursday + when an Imperial County judge temporarily freed a small geothermal + energy + producer from its contract with Southern California Edison, allowing + it to sell + power on the open market. + The ruling by Superior Court Judge Donal B. Donnelly could lead to a + mass exodus + by hundreds of small energy producers that have been selling power to + the + state's financially troubled utilities for months without getting + paid. + + At the same time, it may have staved off plans by a group of the + small + generators to send Edison into involuntary bankruptcy as early as + today. + In Sacramento, energy legislation pushed by Gov. Gray Davis passed in + the state + Senate but foundered in the Assembly. The measure was intended to + ensure that + the state gets repaid for the electricity that it has been buying on + behalf of + Edison and Pacific Gas & Electric, which say they lack the cash and + credit to + purchase power. The bill also was supposed to guarantee that the + small, + alternative energy producers--which together provide nearly a third + of the + state's power--get paid. But Assembly Republicans opposed it, saying + it hadn't + been given sufficient scrutiny. + The impact of the small producers was made clear in Imperial County, + where + Edison's failure to pay CalEnergy, the county's biggest property + taxpayer, had + outsize implications. CalEnergy had put county officials on notice + that it was + about to miss a $3.8-million property tax payment. The uncertainty + had prompted + the tiny Calipatria Unified School District to postpone a bond issue + for badly + needed school repairs. + Among CalEnergy Chairman David Sokol's first acts after the judge's + ruling + Thursday was to promise Imperial County Supervisor Wally J. + Leimgruber that the + company would pay its property taxes on time. + ""That is great news,"" Leimgruber said. + Within hours of its court victory, CalEnergy had stopped transmitting + geothermal + power to Edison and begun selling it to El Paso Energy, a marketing + company that + purchased the energy at prevailing rates and resold it on the spot + market. + Some of the more than 700 other small energy producers in the state + said they + were considering similar action against Edison and Pacific Gas & + Electric. + ""We absolutely need the right to sell to third parties,"" said Dean + Vanech, + president of Delta Power, a New Jersey company that owns five small + gas-fired + plants in California and is owed tens of millions of dollars by + Edison. + Sokol praised the Imperial County judge and said his company simply + wanted the + authority to sell its power ""to a credit-worthy company that, in + fact, pays for + the power."" + An Edison spokesman said the company was disappointed with the + ruling, but + sympathized with CalEnergy and other small producers because + ""California's power + crisis has placed [them] in financial distress, just as it has placed + utilities + in financial distress."" + Edison expressed concern that the ruling would prompt CalEnergy and + other small + producers to sell their power out of state. Sokol said CalEnergy had + specifically told El Paso Energy that it hoped its power would remain + in + California, ""but if someone wants to pay a higher price out of state, + we can't + stop them."" + Sokol said that Edison still owes CalEnergy $140 million and that the + company--along with seven other small producers--had been prepared to + file a + petition in federal bankruptcy court in Los Angeles today forcing the + utility + into involuntary bankruptcy. He said his company no longer intends to + do so, and + he believed--but wasn't certain--that the other companies would + shelve their + plans. + Edison filed papers Thursday with the federal Securities and Exchange + Commission + showing that it owed $840 million to various small electricity + producers, many + of which rely on renewable energy sources such as geothermal steam, + solar energy + or wind. + The alternative energy producers--and utilities--strenuously objected + to the + legislation considered in Sacramento on Thursday. The bill, spelling + out how the + utilities are to pay the state and the small producers, passed the + Senate on a + 27-9 vote, the exact two-thirds margin required. But it stalled in + the Assembly + on a 46-23 party-line vote, well short of two-thirds. + ""When I was a citizen back in Lancaster, I heard these stories about + pieces of + legislation that were cooked up late at night, that . . . were cut + and pasted + together and were rammed through by the Legislature,"" Assemblyman + George Runner + (R-Lancaster) said. ""That's exactly what we have before us."" + The alternative electricity generators, including oil companies, + warned that + they would lose money under the Davis proposal, while representatives + of Edison + and PG&E, which have amassed billions in debt in the worsening energy + crisis, + said the legislation would push them deeper into the hole. + ""There isn't enough money,"" Edison attorney Ann Cohn testified at a + Senate + hearing on the bill Thursday. ""It is a very simple question: Dollars + going out + cannot be greater than dollars coming in."" + The bill, AB 8X, combined several proposals. First, it sought to + clarify earlier + legislation by spelling out that Edison and PG&E must pay the state + all money + collected from consumers for electricity that the state has been + buying. + Additionally, the bill would turn over to the California Public + Utilities + Commission the thorny issue of how much to pay alternative energy + producers for + their electricity. + Wind, solar and geothermal producers might agree to the prices + offered by the + administration. But most of the alternative energy producers, + including Chevron + and British Petroleum, use natural gas to generate electricity + through + ""cogeneration,"" a process of creating steam for both electric + generation and + heat. With natural gas prices high, they contend, they would lose + money at the + prices Davis is offering. + * + Ellingwood reported from El Centro, Morain from Sacramento. Times + staff writers + Mitchell Landsberg in Los Angeles and Jenifer Warren, Nancy Vogel and + Carl + Ingram in Sacramento contributed to this story. + (BEGIN TEXT OF INFOBOX / INFOGRAPHIC) + Power Points + Background + The state Legislature approved electricity deregulation with a + unanimous vote in + 1996. The move was expected to lower power bills in California by + opening up the + energy market to competition. Relatively few companies, however, + entered that + market to sell electricity, giving each that did considerable + influence over the + price. Meanwhile, demand has increased in recent years while no major + power + plants have been built. These factors combined last year to push up + the + wholesale cost of electricity. But the state's biggest + utilities--Pacific Gas & + Electric and Southern California Edison--are barred from increasing + consumer + rates. So the utilities have accumulated billions of dollars in debt + and, + despite help from the state, have struggled to buy enough + electricity. + * + Daily Developments + * Overcharges by major electricity suppliers were estimated at $6.3 + billion, up + from the $5.5 billion first thought, California's power grid operator + said. + * Electricity producers denied that they have profiteered and argued + that + Cal-ISO's figures don't take into account all their costs. + * A Superior Court judge's ruling Thursday freeing a small producer + from its + contract with Edison could lead to a mass exodus by small energy + producers that + have been selling to the utilities without getting paid. + * + Verbatim + ""If these guys have such high costs ... how come they're making so + much money?"" + --Gary Stern, Edison's director of market monitoring and analysis, + referring to + power producers + Complete package and updates at www.latimes.com/power + + + Grid Operator Says California Paid Too Much for Power + By Rebecca Smith and John R. Emshwiller + Staff Reporters of The Wall Street Journal + 03/23/2001 + The Wall Street Journal + A2 + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + California's electric-grid operator said power suppliers may have + overcharged + the state and its utilities by $6.2 billion, or a total of 30%, in a + 10-month + period, and has asked federal regulators to step up their policing of + electricity markets. + Meanwhile, a California state judge handed down a decision involving + small power + producers that could result in more electricity being made available + in the + energy-starved state, but likely at greater cost to the state + government. + + The $6.2 billion figure was contained in a market analysis by the + California + Independent System Operator filed yesterday with the Federal Energy + Regulatory + Commission. The ISO says it isn't seeking a refund -- for the May + through + February period -- because its analysis lacked important market data. + For example, it estimated costs for 21 suppliers based on published + prices for + natural gas, not on specific data showing what each generator + actually paid for + the fuel. ""We don't know how much gas actually was purchased at + spot-market + prices,"" said Anjali Sheffrin, the ISO's head of market analysis. + Charles Robinson, general counsel for the ISO, said FERC needs to + become ""more + aggressive about market-power mitigation."" The ISO's filing, he said, + was + intended to push the agency in that direction, since FERC is + responsible for + policing deregulated electricity and natural-gas markets. + He said that if the FERC doesn't act, the state of California may + find ways to + discipline the market, such as through the state attorney general's + office. The + attorney general has been investigating the state's electricity + market for many + months but hasn't brought any court action. + Dynegy Inc., a big owner of power plants in California, said it will + provide + additional information to FERC supporting its position that the + prices it has + charged for power have been ""just and reasonable."" The Houston + company was one + of 13 energy suppliers that the FERC this month ordered to pay + refunds totaling + $124 million or ""show cause"" why it should be excused. Dynegy said + the FERC + analysis was flawed, because it used ""inaccurate"" prices for natural + gas and + pollution credits. + While big power producers such as Dynegy came under attack, small + power + producers won a potentially significant victory in a state court in + Southern + California's Imperial County. A judge granted 10 geothermal plants + operated by + the CalEnergy Co. unit of MidAmerican Energy Holdings Co., a unit of + Berkshire + Hathaway Inc., of Omaha, Neb., permission to suspend deliveries of + electricity + to Southern California Edison Co. and instead seek other buyers. + These plants, known as ""qualifying facilities,"" are under long-term + contract to + Edison and other utilities but haven't been paid for months. Edison, + a unit of + Edison International, of Rosemead, Calif., says it has been unable to + pay + hundreds of millions of dollars in power bills to CalEnergy and + others because + it has been driven to the brink of insolvency by the state's failed + utility-deregulation plan. + While the CalEnergy case involves only about 320 megawatts of power, + the + repercussions could be far greater. Collectively, hundreds of + qualifying + facilities, or QFs, produce as much as 30% of California's + electricity needs. + QFs totaling 3,000 megawatts cut their production in recent weeks for + lack of + payment. This loss of output was a significant cause of the blackouts + that hit + California this week. + Observers believe the CalEnergy court decision could give other QFs + an + opportunity to sell power in the open market, presumably to the state + government + that now is California's biggest energy buyer. An hour after the + court decision + yesterday, some 400 megawatts of power came back into the market, the + ISO said. + However, additional QF power sales on the open market could + substantially + increase the state's tab. Already, the state has allocated more than + $4 billion + for electricity purchases. + Separately, Edison said in a Securities and Exchange Commission + filing that its + unpaid power bills could contribute to a write-off of as much as $2.7 + billion + for 2000. Because of uncertainty caused by the energy crisis, the + company hasn't + yet reported year-end earnings. + + + + Power regulators debate who should be exempted from blackouts + By KAREN GAUDETTE + Associated Press Writer + 03/22/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + SAN FRANCISCO (AP) - State power regulators said Thursday they are + working to + exempt all California hospitals, regardless of size, from rolling + blackouts. + The Public Utilities Commission met with representatives from + hospitals and + investor-owned utilities after Los Angeles lawyer David Huard filed + an emergency + motion with the PUC on behalf of more than 500 hospitals throughout + the state. + + Under PUC rules, hospitals with more than 100 beds are exempt from + losing + electricity during power emergencies. But during rolling blackouts + Monday, at + least a dozen hospitals from Long Beach to Clearlake were forced to + use their + backup generators. + Pacific Gas and Electric Co. and Southern California Edison Co. say + they blacked + out those hospitals specifically because they have backup generators. + Both + utilities said the temporary blackouts were part of their overall + efforts to + spread the burden of blackouts over more of their customers. + Linda Ziegler, director of business and regulatory planning for SoCal + Edison, + said the utility is following state law and will implement new + guidelines if the + PUC changes them. + But hospitals say there is a 10-second lapse before emergency + generators kick + in, which could harm patients in the midst of delicate surgical + procedures such + as organ transplants or brain surgery. + ""You wouldn't fly a plane with only your emergency backup systems in + place,"" + said Ann Mosher, a spokeswoman for California Pacific Medical Center + in San + Francisco. ""Backup generators are just that, they're not designed to + keep the + hospital up and running at full capacity."" + Ziegler said that power still goes out for reasons beyond the energy + crisis, + from incidents like lightning or a knocked-down power pole. + ""If it's a serious problem for the hospital it's certainly something + they should + be address just from an ongoing basis,"" she said. + The exemption would cover all hospitals within the territory of the + state's + investor owned utilities PG&E, Southern California Edison and San + Diego Gas and + Electric. + Hospitals within the range of municipally owned utilities, such as + the Los + Angeles Department of Water and Power, are separately regulated. + For more than two decades, prisons, hospitals with more than 100 beds + and + emergency services such as fire and police departments have been + classified as + ""essential"" services, and are exempted from blackouts by order of + state power + regulators. + After rolling blackouts began darkening the state in January, many + other public + service groups began seeking relief from power interruptions, + including transit + systems, schools and water districts. + --- + On the Net: + http://www.cpuc.ca.gov + + + + Federal Judge Orders Reliant To Keep Selling Pwr To Calif + 03/22/2001 + Dow Jones Energy Service + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + SACRAMENTO, Calif. (AP)--A federal judge issued a preliminary + injunction + Wednesday ordering a major electricity wholesaler to continue selling + to + California despite its fear that it will not get paid. + U.S. District Judge Frank C. Damrell Jr. said Californians were at + risk of + irreparable harm if Reliant Energy (REI) stopped selling power to the + Independent System Operator, which oversees the state's power grid. + The ISO buys + last-minute power on behalf of utilities to fill gaps in supply. + + Damrell dismissed Reliant's attempt to force the state Department of + Water + Resources to back the ISO's purchases for the state's two biggest + utilities. The + state has been spending about $50 million a day on power for Pacific + Gas and + Electric Co. and Southern California Edison, both denied credit by + suppliers + after amassing billions of dollars in debts. + The judge said he had no authority to force the DWR to pay for that + power. + Gov. Gray Davis has said the state isn't responsible for purchasing + the costly + last-minute power ISO buys for Edison and PG&E, despite a law + authorizing state + power purchases on the utilities' behalf. + ISO attorney Charles Robinson said the ruling gives ISO operators ""a + tool to + assist them in keeping the lights on in California."" + ""Had the decision gone the other way, one could expect other + generators to + simply ignore emergency orders,"" Robinson said. + Damrell's preliminary injunction will remain in effect until the + Federal Energy + Regulatory Commission rules on the matter. + Damrell denied the ISO's request for preliminary injunctions against + three other + wholesalers - Dynegy Inc. (DYN), AES Corp. (AES) and Williams Cos. + (WMB) - which + agreed to continue selling to the ISO pending the FERC ruling. + Spokesmen for Reliant, Dynegy, AES and Williams were out of the + office Wednesday + night and didn't immediately return calls from The Associated Press + seeking + comment on the ruling. + The ISO went to court in February after a federal emergency order + requiring the + power sales expired. The judge then issued a temporary restraining + order, + requiring the sales, but dropped it after the suppliers agreed to + continue sales + to California pending his Wednesday ruling. + The ISO said it would lose about 3,600 megawatts if the suppliers + pulled out, + enough power for about 2.7 million households. One megawatt is enough + for + roughly 750 homes. + Grid officials said Reliant's share alone is about 3,000 megawatts. + Reliant said + the amount at issue actually is less than a fourth of that, because + most of its + output is already committed under long-term contracts. + Reliant, which currently provides about 9% of the state's power, + worries it + won't get paid due to the financial troubles of PG&E and Edison. PG&E + and Edison + say that together they have lost about $13 billion since June due to + soaring + wholesale electricity costs that California's 1996 deregulation law + bars them + from passing onto customers. + + + Calif Small Pwr Producers To Shut Plants If Rates Capped + By Jason Leopold + Of DOW JONES NEWSWIRES + 03/22/2001 + Dow Jones Energy Service + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + LOS ANGELES -(Dow Jones)- Many of California's independent power + producers late + Wednesday threatened to take their small power plants offline this + week if state + lawmakers pass legislation that would cap the rates the generators + charge for + electricity they sell directly to the state's three investor-owned + utilities. + At issue is a bill that would repeal a section of the state's Public + Utilities + Code, which links the 688 so-called qualifying facilities' + electricity rates to + the monthly border price of natural gas. + + Lawmakers, however, are poised to pass the legislation. + State regulators are then expected to approve a measure that would + restructure + the fluctuating rates the QFs charge PG&E Corp. (PCG) unit Pacific + Gas & + Electric, Edison International (EIX) unit Southern California Edison, + and Sempra + Energy (SRE) unit San Diego Gas & Electric from $170 a megawatt-hour + to + $69-$79/MWh, regardless of the price of natural gas. + Whereas each of the 688 QF contracts differed, largely because + natural gas + prices are higher in Southern California than Northern California, + the state + wants the QFs to sign a general contract with the utilities. + The cogeneration facilities, which produce about 5,400 megawatts of + electricity + in the state, said the rates are too low and they won't sign new + supply + contracts with the utilities. + ""For $79/MWh, natural gas would have to be $6 per million British + thermal unit + at + the Southern California border,"" said Tom Lu, executive director + of + Carson-based Watson Cogeneration Company, the state's largest QF, + generating 340 + MW. ""Our current gas price at the border is $12.50."" + Other gas-fired QFs said the state could face another round of + rolling blackouts + if lawmakers and state regulators pass the legislation, which is + expected to be + heard on the Senate floor Thursday, and allow it to be implemented by + Public + Utilities Commission next week. + Lu, whose company is half-owned by BP Amoco PLC (BP) and is owed $100 + million by + SoCal Ed, said the proposals by the PUC and the Legislature ""will + only make + things worse."" + David Fogarty, spokesman for Western States Petroleum Association, + whose members + supply California with more than 2,000 MW, said the utilities need to + pay the + QFs more than $1 billion for electricity that was already produced. + State Loses 3,000 MW QF Output Due Of Financial Reasons + + + The QFs represent about one-third, or 9,700 MW, of the state's total + power + supply. Roughly 5,400 MW are produced by natural gas-fired + facilities. The rest + is generated by wind, solar power and biomass. + About 3,000 MW of gas-fired and renewable QF generation is offline in + California + because the power plant owners haven't been paid hundreds of millions + of dollars + from cash-strapped utilities SoCal Ed and PG&E for nearly four + months. + Several small power plant owners owed money by SoCal Ed have + threatened to drag + the utility into involuntary bankruptcy if the utility continues to + default on + payments and fails to agree to supply contracts at higher rates. + The defaults have left many of the renewable and gas-fired QFs unable + to operate + their power plants because they can't afford to pay for the natural + gas to run + their units. Others continue to produce electricity under their + contracts with + the state's utilities but aren't being paid even on a forward basis. + The California Independent System Operator, keeper of the state's + electricity + grid, said the loss of the QF generation was the primary reason + rolling + blackouts swept through the state Monday and Tuesday. + Gov. Gray Davis, recognizing the potential disaster if additional QFs + took their + units offline, held marathon meetings with key lawmakers Monday and + Tuesday to + try and hammer out an agreement that would get the QFs paid on a + forward basis + and set rates of $79/MWh and $69/MWh for five and 10 year contracts. + He also + said he would direct the PUC to order the utilities to pay the QFs + for power + they sell going forward. + ""After next week the QF problem will be behind us,"" Davis said + Tuesday. ""We want + to get the QFs paid...the QFs are dropping like flies...and when that + happens + the lights go out."" + But this just makes the problem worse, said Assemblyman Dean Florez, + D-Shafter, + a member of the Assembly energy committee. + ""I don't know how we are going to keep the lights on,"" Florez said in + an + interview. ""Many of these congenerators are in my district. They said + if the + legislation doesn't change they are going offline. This compounds the + issue of + rolling blackouts, especially now when we need every megawatt."" + Davis, who didn't meet with people representing the QFs, said he was + handing the + QF issue to the PUC because lawmakers failed to pass legislation that + would have + set a five-year price for natural gas and allow the QFs to sign + individual + contracts with the utilities. In addition, SOCal Ed opposed the + legislation, + saying the rates should be below $50/MWh. + Some renewable power producers said they aren't vehemently opposed to + the new + rate structure because it guarantees them a higher rate than what was + originally + proposed. + QFs Want Third Party Supply Contracts + + + John Wood, who represents the SoCal Ed Gas Fired Creditors Committee, + one of a + handful of groups that have formed since January to explore options + on getting + paid by the utilities, said his group of gas-fired QF creditors want + to be + released from their supply contracts and sell to third parties. + ""Under our plan, we would be permitted to sell electricity to third + parties + (including the state Department of Water Resources) until a + resolution to the + crisis can be accomplished,"" wood said. + Hal Dittmer, president of Sacramento-based Wellhead Electric in + Sacramento, + which is owed $8 million by PG&E, has 85 MW of gas-fired generation + units + offline. + Under the state's plan, Dittmer said he risks going out of business. + ""I can't buy natural gas for what I would be paid under this + decision,"" he said. + ""The state needs to quit kidding themselves that they don't need to + raise + electricity rates. All of this is being driven by an artificial + construct that + California can avoid raising rates."" + + -By Jason Leopold, Dow Jones Newswires; 323-658-3874; + jason.leopold@dowjones.com + + + Power Strain Eases but Concerns Mount Energy: Officials say summer + prices will be high, and a state report shows that contracts with + generators are far short of goals. + DAN MORAIN; JENIFER WARREN + TIMES STAFF WRITERS + 03/22/2001 + Los Angeles Times + Home Edition + A-3 + Copyright 2001 / The Times Mirror Company + + SACRAMENTO -- California's fragile electricity system stabilized + Wednesday, but + a Davis administration report suggested troubles ahead because the + state could + be forced to buy most of its power for the coming summer on the + costly and + volatile spot market. + After two days of statewide blackouts, power plants that had been + shut down were + cranked up. Unseasonable heat tapered off. The operators of the + statewide power + grid relaxed their state of emergency. + + But plenty of ominous signs remained. Many small producers remained + shut down, + skeptical about Gov. Gray Davis' plan for utilities to pay them. + State Controller Kathleen Connell issued a sharp warning about the + high cost of + the state's foray into the power business and announced that she will + block an + administration request that she transfer $5.6 billion into an account + that could + be tapped to pay for state purchases of electricity. + And a report from the administration summarizing contracts between + Davis and + independent power generators showed that the state has signed + contracts for only + 2,247 megawatts of electricity, significantly less than the 6,000 to + 7,000 + megawatts previously claimed. + While there are agreements in principle for the full amount, the + report notes + that generators can back out of the contracts for a variety of + reasons, + including the state's failure to sell bonds to finance power + purchased by July + 1. The Legislature has approved plans to sell $10 billion in bonds, + but none + have yet been issued. + ""We are exposed enormously this summer,"" Senate Energy Committee + chairwoman + Debra Bowen (D-Marina del Rey) said after looking at the report. ""We + owe the + people the truth about how difficult this summer is going to be. We + don't have a + power fairy."" + Perhaps most significant, the report suggests that the contracts fall + significantly short of Davis' stated goal of buying no more than 5% + of the + state's summer needs on the spot electricity market, where prices can + be many + times those of long-term contracts. + After reading the report, Frank Wolak, a Stanford University + economist who + studies the California electricity market, said the numbers suggested + that the + state's long-term contracts will cover less than half of what the + state will + need this summer. + ""We're definitely short this summer, next summer and the summer of + 2003,"" he + said. + California was forced to start buying electricity in December--at a + cost of $50 + million a day--because producers refused to sell to Southern + California Edison + and Pacific Gas & Electric. The two utilities amassed billions of + dollars in + debt when prices for wholesale power soared on the spot market. + Vikram Budhraja, a consultant retained by Davis to negotiate deals + with + generators, said the report represents a ""work in progress."" He said + the state + may yet sign new contracts. + However, Wolak said the contract figures confirm what he and others + have been + dreading: that summer is going to be rife with rolling blackouts + unless serious + steps to cut demand are taken immediately. + Wolak and other experts say large industrial customers must be + switched to + real-time meters and pricing to persuade them to use the bulk of + their energy at + times of low demand. + The head of the Energy Foundation, a San Francisco-based nonprofit + that promotes + sustainable sources of power, made the same proposal to Davis on + Wednesday. + ""The government need not ask customers to swelter in the dark this + summer,"" + foundation President Hal Harvey argued in a letter. + He also proposed a crash campaign to boost sales of efficient + appliances and + lightbulbs. He said the state needs to take over the utilities' + contracts with + alternative energy providers to ensure they stay in business, and + sign new + contracts for 1,500 megawatts of new wind power--the cheapest, + fastest and + cleanest source of new supply. + Davis had proposed a formula Tuesday to force private utilities to + pay the + alternative producers, some of which have not been paid since + November. But some + of them warned Wednesday that Davis' plan offers them little + incentive to turn + on their generators. + Alternative energy producers supply more than a quarter of the + electricity + consumed in California. + Many producers generate electricity from wind, sun and geothermal + sources. But + most of them generate power using natural gas--and the cost of + natural gas has + been soaring. Several natural gas users said Davis' plan, which caps + rates, + won't cover their fuel costs. + Davis assumes that the price of natural gas will fall. But small + generators say + they don't have sufficient purchasing power or sophistication to + gamble on + future prices. + The Public Utilities Commission is expected to approve Davis' + proposal next + week. It offers producers two choices: 7.9 cents a kilowatt-hour if + they agree + to supply power for five years, or 6.9 cents a kilowatt-hour over 10 + years. + ""The price of natural gas is higher than that,"" said Marty Quinn, + executive vice + president and chief operating officer of Ridgewood Power LLC, which + owns three + natural gas-fired co-generation plants. ""If we operate, we'll lose + money."" + Ridgewood is not operating, having been cut off by gas suppliers. The + company + sued PG&E last month seeking overdue payments and release from its + contracts + with the utility. + A hearing is scheduled in El Centro today in another lawsuit filed by + a small + energy producer, an Imperial Valley geothermal producer that sued + Edison for + refusing to let it break its contract and sell on the open market. + CalEnergy + says Edison owes it about $140 million for energy sold since + November. + A company spokesman, Jay Lawrence, said CalEnergy was going ahead + with its suit + despite Davis' proposal. ""We've had promises before,"" he said. + In other developments: + * A federal judge in Sacramento on Wednesday ordered Reliant Energy + of Houston, + a major producer, to continue selling power to California during + emergencies, + despite the company's argument that it may not be fully reimbursed. + The order + will remain in effect for 60 days or until the U.S. Federal Energy + Regulatory + Commission decides a related case. + * Connell said the state budget surplus has shrunk to $3.2 billion + because the + state has spent roughly $2.8 billion on electricity. She criticized + the + administration for withholding basic information about state + finances, and said + she will begin an audit on Monday of the Department of Water + Resources, which is + responsible for purchasing power. + Davis' aides said Connell took her action because the Democratic + governor + endorsed one of Connell's foes this week in the race for Los Angeles + mayor, + former Assembly Speaker Antonio Villaraigosa. A Connell aide scoffed + at the + notion. + * Sen. Dianne Feinstein (D-Calif.) said she ""never has had a + response"" from + President Bush after writing him last month for an appointment to + discuss the + California energy crisis. + In a wide-ranging lunch talk with reporters in Washington, she + deplored the fact + that ""huge, huge profits are being made"" in the California crisis, + and said ""an + appropriate federal role"" would be to guarantee a reliable source of + power until + the state can get nine new generators online. + * + Times staff writers Mitchell Landsberg in Los Angeles and Robert L. + Jackson in + Washington contributed to this report. + (BEGIN TEXT OF INFOBOX / INFOGRAPHIC) + Power Points + Daily Developments + * Wholesale electricity suppliers overcharged by about $5.5 billion + between May + and last month, and that money should be refunded to taxpayers and + utilities, + according to a Cal-ISO report. + * The state may have to buy most of its power for summer on the + costly spot + market, which could drive consumers' bills up, a Davis administration + report + concludes. + * State Controller Kathleen Connell said she will block a request by + the Davis + administration for $5.6 billion for state purchases of electricity. + Verbatim + ""We owe the people the truth about how difficult this summer is going + to be. We + don't have a power fairy."" + Debra Bowen (D-Marina del Rey), Senate Energy Committee chairwoman + + + CPUC Must Address Rates In QF Repayment Order - SoCal Ed + 03/21/2001 + Dow Jones Energy Service + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + LOS ANGELES -(Dow Jones)- Any order from the California Public + Utilities + Commission requiring utilities to pay small, independent generators + going + forward must determine how that could be done within the existing + rate + structure, a spokesman for Edison International (EIX) utility + Southern + California Edison said Wednesday. + The utility was responding to a PUC proposed decision that would + require + utilities to pay small generators, called qualifying facilities, $79 + a megawatt + hour within 15 days of electricity delivery. The decision will be + voted March 27 + by the CPUC. + + ""We're still reviewing (the decision) and should have more to say in + a day or + two. To the extent that the commission orders us to pay going forward + of course + we will. But it needs to address how we will pay the QFs,"" a SoCal + Edison + spokesman said. + SoCal Edison and PG&E Corp. (PCG) unit Pacific Gas & Electric Co. are + struggling + under nearly $13 billion in uncollected power costs due to an + inability to pass + high wholesale power costs to customers under a rate freeze. + Gov. Gray Davis Tuesday blasted the utilities for not having paid + their QF bills + in full since December. Pacific Gas & Electric Co. has made some + partial + payments to QFs, but SoCal Edison has paid nothing. Together, they + owe the QFs + about $1 billion, but the order doesn't address that debt. + An Edison executive said, in reaction to the governor's sharp + comments, that the + company simply doesn't have the money to pay creditors. + ""The root problem here is there just isn't enough money in the + current rate base + to pay our bills,"" said Edison Senior Vice President of Public + Affairs Bob + Foster. ""We understand the financial distress (the QFs) face; we are + facing + financial distress ourselves."" + The proposed PUC order would also require the state's investor-owned + utilities + to offer the small generators five- and 10-year contracts for power + for $79/MWh + and $69/MWh, respectively. + The QFs ""may be able to live with"" the PUC proposal, but the five- + and 10-year + contract prices may be inadequate if natural gas prices at one of the + California + borders are high, said Jan Smutny-Jones, president of the Independent + Energy + Producers Association. Natural gas prices into California are + currently higher + than anywhere in the country. + But some say the proposed decision may not be enough to prevent the + QFs from + filing involuntary bankruptcy proceedings against the utilities for + the money + they are still owed. + ""There's still a lot of skepticism. To say our position has changed + based on the + CPUC decision or the governor's announcement is not accurate. A lot + still has to + happen,"" said Jay Lawrence, a spokesman for a renewable creditors + committee. + -By Jessica Berthold, Dow Jones Newswires; 323-658-3872; + jessica.berthold@dowjones.com -0- 22/03/01 01-27G + + + + State Says It's Accelerating Plan to Buy Power Utilities' Grid + Government: Talks with Edison are reported near completion, but + agreement with heavily indebted PG&E has a way to go. + RONE TEMPEST; DAN MORAIN + TIMES STAFF WRITERS + 03/21/2001 + Los Angeles Times + Home Edition + A-22 + Copyright 2001 / The Times Mirror Company + + SACRAMENTO -- As blackouts hit California for a second day Tuesday, a + key + consultant to Gov. Gray Davis said negotiations to buy the power grid + owned by + the state's largest utilities ""are proceeding at an accelerated + pace."" + Wall Street consultant Joseph Fichera said talks with Southern + California Edison + could be wrapped up within days, although those with PG&E are much + less + advanced. + + The administration and PG&E have not reached even an agreement in + principle, he + said. PG&E, which has more debt than Edison, says its transmission + lines are + more extensive than those of its Southern California counterpart. + The state wants to buy the utilities' transmission lines and other + assets for + about $7 billion to provide cash to the utilities, help stabilize the + electricity supply and ease the power crunch that has plagued + California for + months. To research the grid purchase, Fichera said, the state has + had to pore + over 80,000 documents just to assess the utilities' liabilities. + ""We are working at a good pace,"" said Fichera, chief executive of the + New York + firm Saber Partners. "" . . . If we get to a deal-breaker, it might be + longer."" + By making Fichera, who is also a consultant to the Texas Public + Utilities + Commission, available to reporters Tuesday, the Davis administration + was clearly + trying to reassure the public that progress is being made on the + governor's plan + to pull the state out of the crisis. + Since mid-January, when the big utilities' credit failed and + suppliers stopped + selling to them, the state has spent nearly $3 billion buying + electricity from a + handful of large suppliers in Texas, Oklahoma, Georgia and North + Carolina. Not a + cent has gone to the hundreds of alternative energy suppliers in + California who + provide about a quarter of the state's electricity. + The Monday and Tuesday blackouts occurred partly because many of the + cash-strapped alternative suppliers, including solar, biomass and + wind power + units, cut their normal supply to the system in half. They say Edison + and PG&E + have not paid them since November; the utilities say they are out of + cash. + Assemblyman Fred Keeley (D-Boulder Creek) said the plight of the + alternative + suppliers has dragged on because of the complexity of dealing with + ""almost 700 + individual contractors."" + Another delaying factor, said Keeley, who with state Sen. Jim Battin + (R-La + Quinta) worked for almost three months to come up with a legislative + plan to + lower the small producers' prices, was ""the huge enmity . . . + manifested between + the utilities and the qualifying facilities. These people just don't + like each + other."" + This week's blackouts provided two painful lessons for the Davis + administration: + + * When it comes to electricity, size doesn't matter--every kilowatt + counts. + During peak use, a small wind power facility in Riverside County can + make the + difference between full power and blackouts. + * There is no such thing as a partial solution. Unless the whole + energy equation + is balanced, the parts don't work. + For the Davis plan to work, several key elements need to come + together or + utility customers will almost certainly face rate increases above the + 19% + already set in motion * The cost of power purchased by the state must + be reduced + through long-term contracts with the big out-of-state producers. + These contracts, the details of which the Davis administration has + kept + confidential, are still being negotiated by Davis consultant Vikram + Budhraja of + the Pasadena firm Electric Power Group. The administration says it + has concluded + 40 contracts with generators, about half of which have been signed. + According to the most recent statistics released by the Department of + Water + Resources, which buys power for the state, current prices are still + well above + the rate state Treasurer Phil Angelides says is necessary for a + planned + $10-billion bond offering to succeed. + The bonds, set for sale in May, will be used to reimburse the state + for the + money it will have spent by that time to buy electricity. The state + is currently + spending at a rate of $58 million a day to buy power. If prices stay + high, the + $10 billion in bonds will not cover the state's power purchases by + the end of + the summer. + Angelides says he cannot proceed with bridge financing for the bonds + until the + Public Utilities Commission devises a formula to guarantee that a + portion of + utility bills will be dedicated to bond repayment. Angelides has + estimated that, + under the January law that put the state in the power buying + business, the state + must be reimbursed $2.5 billion annually, and that $1.3 billion is + needed to + service the debt. + PUC Administrative Law Judge Joseph R. DeUlloa is expected to + announce his + ruling on the reimbursement rate later this week, leading to a PUC + vote on the + matter as early as next week. + * The rates charged for electricity by the alternative producers, + known as + qualifying facilities, must be cut at least in half, down from an + average of + more than 17 cents per kilowatt-hour. In his news conference Tuesday, + Davis said + he will ask the PUC to set QF rates at 6.9 cents for 10-year + contracts and 7.5 + cents for five-year contracts. + Meanwhile, PUC Chairman Loretta Lynch, a Davis appointee, said + Tuesday that the + commission will vote next week on a proposed order requiring Southern + California + Edison and Pacific Gas & Electric to pay the QFs for electricity in + the future. + Lynch said a recent PUC assessment showed that the utilities have + enough cash on + hand for that. + ""We are trying to make sure the folks providing the power get paid,"" + Lynch said. + ""The qualified facilities have demonstrated that they haven't been + paid and that + it is impairing their ability to provide power."" + The utilities contend that if they pay the small providers what they + owe them, + there will not be enough money left to pay other creditors. + ""There is not enough money in the current rate structure to pay the + [alternative + producers], pay the [Department of Water Resources] and pay the + utilities for + their generation,"" said John Nelson, a spokesman for PG&E. + * The utilities must sell to the state the power they produce + themselves, mainly + from hydro and nuclear sources, at a rate only slightly above the + cost of + producing it. This is tied to the ongoing negotiations between the + Davis + administration and the utilities to restore the near-bankrupt + utilities to + solvency. + * + Times staff writers Julie Tamaki, Miguel Bustillo and Tim Reiterman + contributed + to this report. + + + Davis OKs Subsidy of Pollution Fees Smog: As part of secret deal to + get long-term energy contracts, state would pay for some of the + credits that allow excess power plant emissions. Critics renew call + for full disclosure. + DAN MORAIN + TIMES STAFF WRITER + 03/21/2001 + Los Angeles Times + Home Edition + A-23 + Copyright 2001 / The Times Mirror Company + + SACRAMENTO -- As part of his closed-door negotiations to buy + electricity, Gov. + Gray Davis has agreed to relieve some generators from having to pay + potentially + millions of dollars in fees for emitting pollutants into the air, + Davis said + Tuesday. + Davis announced two weeks ago that his negotiators had reached deals + with 20 + generators to supply $43 billion worth of power during the next 10 + years. + + However, the Democratic governor has refused to release any of the + contracts or + detail various terms, contending that release of such information + would hamper + the state's ability to negotiate deals with other generators and + therefore + ultimately would raise prices Californians pay for electricity. + Sources familiar with the negotiations, speaking on condition of + anonymity, said + the agreement reached with Dynegy Inc., a power company based in + Houston, is one + that includes language requiring that the state pay the cost of + credits that + allow emissions. Dynegy spokesman Steve Stengel declined to discuss + the + company's deal with the state. + ""We couldn't get them to sign contracts; it was a sticking point,"" + Davis said of + the decision to pay the fees of some generators. ""We had to lock down + some power + so we were not totally dependent on the spot market."" + The fees in question are part of an emission trading system known as + RECLAIM. + Under the system, companies are allotted a certain amount of + allowable + pollution. If their operations pollute more, companies are required + to purchase + credits on an open market. Currently the credits cost about $45 per + pound of + pollution--an amount that can lead to a bill of well over $10 million + a year for + a power plant. + The South Coast Air Quality Management District, which regulates + pollution in + the Los Angeles Basin, is considering steps to significantly lower + the cost of + the system--a step that could considerably cut the state's potential + cost, Davis + said. + Senate Energy Committee Chairwoman Debra Bowen (D-Marina del Rey) + defended the + decision to cover the power company's costs. + ""It is a question of whether it brings down the price of power,"" she + said. ""If + it brings down the price of power, I don't have a problem with it."" + Nevertheless, word that the contracts could bind the state to pay + pollution fees + caused some critics of Davis' policy to renew calls for Davis to + reconsider the + secrecy surrounding the power negotiations. The payment provision + underscores + the fact that the contracts involve more than merely the prices the + state will + pay for its megawatts, the critics note. + ""The Legislature should have known about it,"" said Senate President + Pro Tem John + Burton (D-San Francisco). ""It is going to cost taxpayers money. It + makes you + wonder. . . . This was a policy issue that was never discussed with + the + Legislature."" + V. John White, a lobbyist for the Sierra Club, who also represents + alternative + energy producers, called the contract proposal ""a horrible + precedent."" + ""Until we know exactly what the state has agreed to and how much of a + subsidy + this represents, we can't determine how serious the breach of + principle this + is,"" White said. + Another critic of the secrecy of the negotiations, Terry Francke, + general + counsel for the California First Amendment Coalition, said the + provision in + question ""raises the possibility that there are other [concessions]"" + that have + not yet come to light. + In the summer, when demand for power is highest, some generators + probably will + exceed pollution limits set by regional air quality management + districts. + To avert blackouts, state officials might ask the companies to keep + plants + running. In such cases, some sources familiar with aspects of the + contracts + said, the contract language could be interpreted to suggest that the + state would + cover any fines--although Davis said Tuesday the state will not cover + the cost + of fines. + A recent Dynegy filing with the Securities and Exchange Commission + underscores + the rising cost of pollution-related measures. The company, which is + partners + with NRG Energy in three California plants in El Segundo, Long Beach + and + Carlsbad in San Diego County, said its ""aggregate expenditures for + compliance + with laws related to the regulation of discharge of materials into + the + environment"" rose to $14.3 million in 2000, from $3.6 million in + 1999. + A South Coast Air Quality Management spokesman said Dynegy's + facilities appear + to be fairly clean--although Sierra Club lobbyist White said Dynegy + has been + seeking a permit at one of its plants to burn fuel oil, which is + dirtier than + natural gas. + Davis said he intends to ""make this information public,"" but he added + that ""we + do not want to put the public's interest in jeopardy by asking them + to pay + higher prices."" + ""Nobody likes the notion that [the administration is] not being fully + forthcoming,"" Davis said. ""But I also have a corollary responsibility + that I + don't stick these generators with a higher rate."" + + + FERC ORDERS WILLIAMS ENERGY AND AES TO EXPLAIN THEIR REFUSAL TO MAKE + CERTAIN RMR UNITS AVAILABLE TO CALIFORNIA ISO LAST YEAR + 03/21/2001 + Foster Electric Report + 5 + (c) Copyright 2001, Foster Associates, Inc. + + Following a preliminary, non-public investigation, FERC directed AES + Southland + Inc. and Williams Energy Marketing & Trading Co. (IN01-3) on March 14 + to show + cause why they did not violate section 205 of the Federal Power Act + (FPA) by + failing to provide power to the California ISO from two reliability + must-run + (RMR) generator units during a period in April and May 2000. The + investigation + responded to a matter referred by the Cal-ISO. If a violation is + found, Williams + Energy and AES could be required to refund excess profits of $10.9 + million (as + calculated by FERC) and face restrictions on their market-based rate + authority + for a year. + The show cause order involves two generation units (Alamitos 4 and + Huntington + Beach 2), owned and operated by AES. Williams Energy markets all + output from the + Alamitos and Huntington Beach plants, including the two units at + issue here, + pursuant to a tolling agreement filed with the Commission. The + Cal-ISO + designated the two units as RMR units that it could call on when + necessary to + provide energy and ancillary service essential to the reliability of + the + California transmission network. The Cal-ISO makes both a fixed + payment to the + RMR owner or operator to compensate for the RMR unit's availability + and a + variable payment for the RMR unit's output (if the unit is not + otherwise + participating in the market). Williams Energy and the Cal-ISO + executed RMR + agreements, filed as rate schedules with the Commission, allowing the + Cal-ISO to + dispatch units ""solely for purposes of meeting local reliability + needs or + managing intra-zonal congestion."" The ISO may dispatch a non-RMR unit + if the + designated RMR unit is not available. Under its RMR agreement with + the ISO, + Williams is paid the greater of its contract price or marginal cost + for + operating RMR units. However, if a non-RMR unit has to be dispatched + because a + designated RMR unit is unavailable, Williams will be paid its bid + price, not the + RMR contract price. + + During the April to May 2000 period, the Cal-ISO sought to dispatch + both + Alamitos 4 and Huntington Beach 2 as RMR units to provide voltage + support. + However, according to the FERC order, Williams Energy refused to make + Alamitos 4 + available from April 25 through May 5, and to make Huntington Beach 2 + available + from May 6 through May 11, ""for reasons not directly related to the + necessary + and timely maintenance of the units."" Consequently, the Cal-ISO was + forced to + dispatch non-RMR units at a higher cost, namely, Williams Energy's + bid price for + service provided by the replacement units. + By contrast, if the RMR units had not experienced outages and been + available + from April 25 through May 11, Williams Energy would have received + either (1) the + market revenues only from the respective units, which would have + resulted in no + payments for RMR output from the ISO to Williams Energy, or (2) + Williams + Energy's variable cost for operating the RMR units less the market + revenues from + the respective units' output. Accordingly, FERC observed, Williams + Energy had ""a + financial incentive to prolong any outages of Alamitos 4 and + Huntington Beach 2 + in April and May 2000."" + The bid price for the non-RMR units was at or near the Cal-ISO's + then-effective + bid cap of $750/MWh, FERC continued. Therefore, Williams Energy + received + payments from the Cal-ISO of more than $11.3 million, or about $10.3 + million + greater than the estimated average variable operating cost of the + non-RMR units + (approximately $63/MWh) during the period in question. This indicates + a refund + amount, including interest, of nearly $10.9 million. + The information in this order and a non-public appendix, the + Commission + declared, suggests that AES declared outages at the two RMR units and + maintained + Huntington Beach 2 in a manner inconsistent with good utility + practice, and that + Williams Energy took action to extend the outage at Alamitos 4 and to + make + Huntington Beach 2 unavailable for ""pretextual reasons."" + Based on this information coupled with Williams Energy's financial + incentive not + to make the Alamitos 4 and Huntington Beach 2 units available, FERC + found + serious questions about whether (1) AES and Williams Energy violated + applicable + RMR contracts and tariffs on file with the Commission pursuant to FPA + section + 205 when they refused to make Alamitos 4 and Huntington Beach 2 + available for + dispatch by the Cal-ISO; (2) whether Williams acted inconsistently + with its + market-based rate authority and the market monitoring information + protocols of + the Cal-ISO's tariff regarding the unavailability of the RMR units + during the + period at issue; and (3) whether AES violated a tolling agreement on + file with + the Commission pursuant to section 205. + The Commission identified two remedies for these potential + violations: a refund + by Williams Energy and/or AES of revenues received greater than the + amount that + would have collected from the ISO if the RMR units had been + available, and a + condition on Williams Energy's market-based rate authority. + Specifically, for a + one-year period, if an RMR unit were not available when dispatched by + the + Cal-ISO, a non-RMR unit dispatched in its place would only receive + payment + according to the terms of the applicable RMR contract. In other + words, Williams + Energy would not receive the bid price for operation of the + substitute, non- RMR + unit. + The Commission directed Williams Energy and AES to show cause, within + 20 days, + why they should not be found to have committed the above-described + violations + and why the specified remedies should not be imposed. + Further, to ensure procurement of all relevant information, the + Commission + instituted a formal, non-public investigation into the operation, + maintenance + and sales of power from the Alamitos and Huntington Beach plants in + 2000 and + 2001. + + + Calif Consumers Failing To Conserve Pwr Despite Blackouts + 03/20/2001 + Dow Jones Energy Service + (Copyright (c) 2001, Dow Jones & Company, Inc.) + + LOS ANGELES -(Dow Jones)- California consumers haven't been + conserving enough + electricity to relieve strain on the power grid and reduce demand in + the state, + a spokesman with the Independent System Operator said Tuesday. + The ISO said that despite two straight days of statewide rolling + blackouts, + consumers aren't using less electricity, which means additional + megawatts will + be taken off the grid. As a result, blackouts could last longer and + impact + additional communities, the ISO said. + + ISO spokesman Pat Dorinson said Monday ""conservation in California is + no longer + an option,"" but consumers in the state aren't heeding the call to + reduce + consumption. + Conservation efforts during rolling blackouts Monday and Tuesday were + far less + than Jan. 17 and Jan. 18, when blackouts swept through Northern + California due + to transmission constraints. Jim Detmers, the ISO's vice president of + operation, + said consumers saved the state about 1,000 megawatts of electricity, + enough + power for 1 million houses. + The ISO said conservation efforts Monday were about 500 MW or less. + ""We would be very happy if we saw the same amount this time,"" Detmers + said. + The state's Energy Commission said consumers think it's no longer + important to + save electricity until blackouts are imposed. + ""People have been saving generally, but it isn't a big bump from hour + to hour,"" + a spokesman for the Energy Commission said. + Gov. Gray Davis launched a massive conservation campaign this month, + promising + consumers a rebate on their summer electricity bill if they save at + least 20% of + electricity, compared with last summer. + The governor said he believes conservation this summer will amount to + possibly + saving 5,000 MW and averting the chance of rolling blackouts. + -By Jason Leopold; Dow Jones Newswires; 323-658-3874; + jason.leopold@dowjones.com + + + Gas Co.'s Success Opens Debate Southern California energy supplier + has reaped + millions of dollars in state incentives for keeping down its costs. + Though + consumers get a share of the windfall, regulators are asking whether + they should + get more of the bonus, which is expected to be huge this year, as a + form of + price relief. The natural gas provider says it deserves to keep its + reward. + TIM REITERMAN + TIMES STAFF WRITER + 03/18/2001 + Los Angeles Times + Home Edition + C-1 + Copyright 2001 / The Times Mirror Company + + SAN FRANCISCO -- While consumers suffer soaring energy bills and the + big + electric utilities lurch toward insolvency, the news is not all dire + at Southern + California Gas Co. + Through vigorous deal making, the Sempra Energy subsidiary has + consistently + beaten the volatile natural gas market during the last year, and the + company + stands to reap millions of dollars in savings through a state + incentive program + that rewards utilities for keeping costs down. + + For several years, the utility has been splitting the savings 50-50 + with + ratepayers whenever the company's gas costs fall slightly below + market levels. + Those savings, Gas Co. executives acknowledged, have shot to + unprecedented + heights during the state's power crisis. + Now, in this climate of high consumer gas bills and runaway market + prices, + regulators are taking another look at the program. The question + before the + Public Utilities Commission: Should Gas Co. ratepayers, who endured + huge bill + increases this winter, get a bigger share of the savings? + The total windfall under the incentive program has in some years + exceeded $20 + million. But the amount for the last 12 months is expected to + multiply many + times over, company executives said, partly because the Gas Co. has + done so well + in the wild market by selling, lending and trading gas as well as + buying it. + ""The recent market conditions . . . could possibly result in some + unintended + consequences that result in shared savings of benefits that may be + more + appropriately allocated entirely to ratepayers,"" the PUC's consumer + protection + arm, the Office of Ratepayer Advocates, reported Oct. 30, even before + the latest + upward market spirals. + Gas Co. representatives express frustration, saying they have done + what the + state has requested under its gas-cost incentive program: Buy + smarter, and pass + the savings along to its 5 million residential and small-business + customers. The + company contends it has worked hard to keep bills down and should be + rewarded + for taking risks to obtain gas at the lowest possible cost. + ""The PUC, every time we do well, raises the bar on us,"" said Jim + Harrigan, + director of gas acquisition. ""I don't necessarily agree with it."" + By virtue of its purchasing power and storage and pipeline capacity, + the Gas Co. + has become a big player in the regional natural gas market. In the + company's + bustling trading room at its Los Angeles headquarters, 15 employees + track price + movements, pipeline supplies and even the weather via computer, while + cutting + deals and arranging gas shipments. + Although the Gas Co. buys the commodity for its customers, the + company also + sells to marketers, other utilities and producers. State officials + say the + number of transactions by the company has risen steeply to 10,000 to + 20,000 a + year, including gas sales along California's border, where prices + have rocketed. + + The PUC created the cost incentive program for the state's three + major gas + utilities--San Diego Gas & Electric Co. in 1993, Southern California + Gas the + next year and PG&E Corp.'s Pacific Gas & Electric Co. in 1997. Like + Southern + California Gas, SDG&E is a subsidiary of Sempra Energy. + The program was designed to give utilities added motivation for + obtaining gas at + the best price for customers. It replaced lengthy and contentious + reviews by the + PUC, which assessed whether utilities had purchased gas at reasonable + prices and + sometimes ordered them to return millions of dollars to customers. + An annual audit of the Gas Co. program and a staff evaluation + requested by the + PUC recently concluded that the program has achieved many of its + goals, but it + also proposed adjustments that would give customers a greater share + of the + rewards. + ""These incentives were designed in less volatile times,"" said program + supervisor + Mark Pocta of the Office of Ratepayer Advocates, which conducted the + audit. + ""There is a question of how much should go to ratepayers and + shareholders."" His + office also plans to assess whether the Gas Co.'s trading had any + negative + effects on the gas market, resulting in diminished supplies or higher + prices for + other utilities and their customers. + Under the program, the Gas Co. shares risks and rewards with its + ratepayers, but + since the program was launched, it has consistently produced awards. + If the cost + of gas is 0.5% or more below a benchmark based on monthly gas market + indexes, + the company and its customers split the savings 50-50. + California's gas utilities are not allowed to profit on their raw + commodity + costs; they merely pass along those costs to ratepayers with no + markup. The + savings under the incentive program are automatically reflected in + consumers' + monthly gas bills but are not itemized. + At the end of the year, the utilities request their share of the + savings, and + the PUC has routinely granted approval. Then the companies, and thus + their + shareholders, are paid through customer utility bills. + The resulting bill increases typically have been modest, less than + 1%. But as + the awards increase, regulators say, the effect on customers will + become more + significant unless the present structure is changed. + ""There's no question, when you start to talk about $100 million [or + more in + savings], and add [the company's award] into rates in a year, it will + make a + noticeable difference,"" said Los Angeles economist Jeff Leitzinger, + president of + Econ One, who has done consulting for the Gas Co. + Still, he said, ratepayers should bear in mind that they already + benefit from + below-market gas and transportation costs. + In the early years of the program, records show, the Gas Co.'s awards + went from + zero to $3.2 million, $10.6 million, $2 million and $7.7 million. + Last year's + award of $9.8 million is awaiting PUC approval. + This year's proposed award, covering the period through the end of + this month, + has not yet been submitted by the Gas Co. But the utility has + provided monthly + figures and oral updates on a confidential basis to PUC officials, + who declined + to provide figures. + Harrigan of the Gas Co. said the savings are expected to multiply + ""many times + over,"" largely because the company was well-equipped for the market + fluctuations + and tried to insulate its customers from high gas prices. + ""Any trading company, especially one with assets like we have, has + benefited + from volatility in the market,"" he said. + Harrigan said, however, that he does not believe the company's level + of activity + has adversely affected the market and that its trading pales in + volume to that + of unregulated energy companies. + Anne Smith, the Gas Co.'s vice president of customer service and + marketing, said + the utility will not release figures for this year's incentive + program until + they are filed with the PUC in June. + ""I don't want to interrupt that process,"" Smith said, noting that the + PUC + ultimately will determine the company's award. ""I think they need to + focus on + what [the Gas Co.] has done for the ratepayers. It has been immense."" + Although the typical monthly gas bill has risen to $80 from $50 a + year ago, Gas + Co. customers tend to have lower rates than those of other California + utilities. + + The company's gas procurement cost in February was 66 cents per + therm, or 100 + cubic feet. That's more than twice last year's cost but only about + half what + sister company SDG&E paid for its 740,000 customers in February. It's + also much + lower than the $1.09 per therm PG&E pays. + ""We were as upset about the overall [gas price] increase as anyone + else,"" + Harrigan said. ""I would rather see the prices of a year ago, even + though we + managed to do a little better in the [recent] environment."" + When it comes to keeping down costs, regulators say, the Gas Co. has + advantages + over other utilities in the marketplace. For one, the company has so + much + pipeline capacity at major gas basins that it purchases a relatively + small + portion of its needs--about 10% to 15%--at the California border, + where prices + in December briefly rose to the equivalent of $6 per therm, or 20 + times those a + year earlier. + This presents opportunities. + ""At the beginning of the month, they forecast a certain amount of gas + they have + to buy,"" said Pocta of the Office of Ratepayer Advocates. ""If they go + out and + buy and do not need to use as much because the weather is more + moderate than + expected, they can either inject the gas into storage or they can + make sales at + the border."" + With gas price run-ups like those seen in the last year, Pocta said, + ""there is a + question: Should that benefit be shared, or flow entirely to + ratepayers?"" + Customers, he pointed out, may be entitled to additional benefits + because they + pay for the interstate and intrastate pipeline capacity and the gas + storage that + give the company the flexibility to make advantageous deals. + ""By the same token, we want [the Gas Co.] . . . to go into the market + and + generate cost savings that can be passed on to the customers,"" he + added. ""We + want them to have incentives. The question is how to balance them."" + Under deregulation, the Gas Co. adopted the nontraditional role of + marketer, + according to a PUC Energy Division report in January. The company + makes gas + sales at various locations. It engages in exchanges. It makes futures + transactions to help stabilize costs. + ""They look for ways to lower the gas cost,"" said Richard Myers, + program + supervisor at the Energy Division. ""Before they were lots more + risk-averse. Now + they feel they can take risks and make money for shareholders, and it + is a + benefit for ratepayers at the same time."" + The incentive programs are tailored to individual utilities, so it is + difficult + to compare them. Records show that the shared savings at SDG&E, a + much smaller + utility, declined steadily from $9.2 million in the 1996-97 cycle to + $560,000 in + 1999-2000. + Spokesman Ed Van Herik said the falloff largely represents a drop in + gas + purchases, especially as the company sold off its own gas-fired + electricity-generating plants. He said the company does not yet know + how much + savings have accrued in the last year. + In an annual report to the PUC in February, PG&E said it had no + savings under + the incentive program and thus it is not entitled to any award for + the 1999-2000 + cycle. + The Utility Reform Network, a San Francisco-based consumer advocacy + group, said + it will closely watch the PUC's evaluation of the incentive program + at the Gas + Co. + ""We want to make sure, given the dramatic changes in the gas market + and prices, + ratepayers are not left out of the [additional] benefits,"" TURN + attorney Marcel + Hawiger said. ""We'll look to see whether the mechanism should be + changed."" + Severin Borenstein, director of the Energy Institute at UC Berkeley, + said the + program should be changed to provide more incentive for utilities to + enter + long-term contracts that would smooth out volatility in the market. + ""Unfortunately, under the system,"" he said, ""the only incentive is to + beat the + [spot] market."" + + + Use this file to download and print all the articles in this section + (See attached file: Dow Jones + Interactive-california-03233001-selected.doc) + + + + IMPLICATIONS FOR OTHER MARKETS + + (For easier printing of all the articles in this section use the file + at the end of the section) + + + + New York: New York at the crossroads + Wednesday, March 21, 2001 + + + Energy Insight + + + + (Embedded image moved to file: pic24389.pcx) + + + + By Dave Todd + + + + dtodd@ftenergy.com + + + + U.S. Energy Secretary Spencer Abraham declared this week that the Big + Apple is on the verge of being bitten hard by power cuts and rising + energy prices. + + + Delivering the keynote address at the U.S. Chamber of Commerce's + national energy summit in Washington Monday, Abraham said, + ""California is not the only state facing a mismatch between supply + and demand,"" what with ""electricity shortages predicted for New York + City and Long Island this summer"" and low capacity margins + threatening electricity reliability elsewhere across the country. But + how likely is it that New Yorkers will face blackouts of the sort + confronting Californians? + + + Not very, says energy trade specialist Edward Krapels, managing + director of Boston-based METIS Trading Advisors. Krapels, a + consultant helping major Northeastern utilities, such as Consolidated + Edison, design market-hedging programs, adamantly decried what he + said are facile comparisons between conditions in New York and + California, there being ""more differences than there are + similarities"" between those two industrial cornerstones of the + country's economy in respect to energy security management. + + + ""First of all, New York has a more varied portfolio of energy + generation sources than California,"" he said. California has hydro, + nuclear and gas, but when it lost a lot of hydro, the state needed + gas to pick up the slack, and the ""capacity just wasn't there."" In + New York's case, the state has oil and coal still in the mix and its + overall dependence on gas is much lower than California's, Krapels + added. + + + New York avoids making same mistakes + + + Portfolio diversity is one pillar of any effective plan to help New + York avoid the same errors made in redesigning California's + marketplace. New York's Independent System Operator (ISO), in a new + report warning that the state is at an ""energy crossroads"" in terms + of its capacity adequacy in the immediate future, argues that a + concerted effort is required to arrest declining in-state generation + capacity reserve margins, and a strategy must be put in place, + whether or not new generation comes on-line, in accordance with + current anticipated scenarios. + + + A measure of New York's essential difficulty is that, between 1995 + and 2000, statewide demand for electricity grew 2,700 MW, while + generating capacity expanded by only 1,060 MW. With no major new + generating plants in downstate New York fully approved, the gap is + expected to continue to widen. To avoid ""a replication of + California's market meltdown"" the New York ISO calculates the state's + daily generating capacity needs to grow by 8,600 MW by 2005, with + more than half of that located in New York City and on Long Island. + Expressing concern this may be too big a burden for the current + bureaucratic process to bear, the ISO wants to see a state-appointed + ombudsman named to help would-be merchant power plant investors plow + through red tape. + + + ""Increasing New York's generating capacity will also lessen the + state's escalating and risky reliance on out-of-state sources of + electricity,"" the ISO added. ""Since 1999, New York State has been + unable to cover its reserve requirements from in-state sources."" + + + Not everyone agrees with that analysis, insofar as it argues for + circling the wagons inward. Some analysts believe the ultimate + solution lies not in tying in more inwardly dedicated power, but in + expanding the marketplace by breaking down inter-jurisdictional + barriers. In any case, New York energy regulatory authorities and + those responsible elsewhere in the U.S. Northeast, such as PJM + (Pennsylvania-New Jersey-Maryland) Interconnection and the New + England Power Pool, are in vastly better shape in terms of + ""cross-border"" cooperation than California and its neighbors in that + efforts are being made among various authorities toward developing an + integrated regional electricity market. In California, by contrast, + the state's focus?for example, in the case of new gas-fired power + plant development?has been to ensure dedicated supply to the + California market alone, rather than on a regional marketplace. + + + + + (Embedded image moved to file: pic05075.pcx) + + The New York ISO's new broad-based analysis of market-restructuring + needs argues that the relatively stronger health of its reformed + environment is ""due in large part to the ability of New York's + utilities to enter into long-term power contracts."" + + + What needs to be done most, it says, is to move aggressively to build + some of the more than 29,000 MW of ""proposed new generation in the + siting pipeline."" + + + In the meantime, the 30,200 MW of electricity New Yorkers used on a + peak day last summer shouldn't be eclipsed on too many days this + coming summer (given early long-range weather forecasts). Demand, + however, is expected to increase at an annual average rate of up to + 1.4%. + + + So while New York City, the rest of the state and adjacent parts + might breathe easy this year, it could be a brief rest from the fray. + Meanwhile, a 4% shortfall is still being planned for this summer that + is not yet provided for, as authorities hurriedly seek to arrange new + generation plants around Manhattan, on Long Island and even on barges + offshore. + + + One way or another, whether it is the weather or the politics of + siting new energy facilities, it's going to be a hot time in the + city. + + + Long-term solutions hit brick wall + + + Meanwhile, attempts at longer-term solutions continue to run into + trouble. Last week, Connecticut state regulators came out against a + proposal to run a new underwater cable under Long Island Sound that + Hydro-Quebec subsidiary TransEnergie U.S. Ltd. wants to build to pump + more juice into Long Island Power Authority's load pocket. Despite + strong promises from TransEnergie to be diligent in avoiding damage + to oyster beds in Long Island Sound, the proposal failed to convince + authorities, who were persuaded the pipeline project could lead to + diversion of electricity from Connecticut. + + + In similar fashion, private companies wanting to build 10 small + independent power plants and temporary generators offshore New York + City are running into intense opposition from environmental groups + and citizen orga +nizations?some of whom have taken their cases to the + state assembly in Albany. + + + The David vs. Goliath nature of such controversies has further + alerted energy companies to the difficulties of addressing complex + energy supply issues that may ultimately devolve to people not + wanting things in their backyard, regardless of what the alternative + might mean to their fellow citizens or the greater public good. + + + But suddenly, in New York, California's troubles?while still distant + in their intensity? may not be so far away. By some estimates, this + summer's bills for Consolidated Edison customers could be up as much + as one third or more over last year's charges. + + + Letting the time slip when it comes to building new infrastructure + isn't going to make the pain go away. + + + + NEW YORK: NY-ISO REPORT SAYS STATE NEEDS 4,000 - 5,000 MW OF NEW + GENERATION SOON TO AVOID SEVERE SHORTAGES; NY-ISO ALSO ASKS FERC TO + EXTEND BID CAP AND TEMPORARY EMERGENCY PROCEDURES + 03/21/2001 + Foster Electric Report + 2 + (c) Copyright 2001, Foster Associates, Inc. + + Raising the specter of an East Coast version of the California + crisis, the New + York Independent System Operator, Inc. (NY-ISO) is warning of serious + electricity shortages, air quality deterioration and stunted economic + growth + without immediate approval of between 4,000-5,000 MW of new + generating capacity + in the state. Of this amount, 2,000-3,000 MW is needed to serve New + York City. + Another 8,600 MW of new capacity will have to be built by 2005, the + NY-ISO said + in a recent report, Power Alert: New York's Energy Crossroads. + ""New York is heading towards a very serious situation unless it acts + immediately + to get new supply sited within its borders,"" said NY-ISO president + William + Museler in a statement accompanying the report. ""This report is + essentially a + caution light at New York's energy crossroads."" + + Sources in the New York Public Service Commission have downplayed the + NY-ISO's + warning, asserting that a process for bringing on new generation is + well + underway, with more than 85 projects in the approval pipeline. + In a related development, the NY-ISO asked FERC to approve a proposed + tariff + amendment (ER01-1517) extending existing bids caps in some of its + markets until + 10/31/02, and a separate and related amendment (ER01-1489) extending + the + NY-ISO's so-called temporary extraordinary procedures (TEP) that + allow the ISO + to make price adjustments and take other corrective actions if it + finds evidence + of market power abuse. + The NY-ISO Report --The NY-ISO likened the situation in New York to + that faced + by California, where a relentless increase in demand has not been met + with an + equal increase in supply. The NY-ISO said that between 1995 and 2000, + statewide + demand for electricity rose by 2,700 MW, while generating capacity + increased by + only 1,060 MW. With no major new generating plants in downstate New + York fully + approved for construction at this time and generation demand in the + state + expected to grow around 1.3 percent annually for the next several + years, the + NY-ISO said this gap will continue to widen. + The inevitable result of this trend is large rate increases for New + York's power + consumers. The NY-ISO's modeling suggests that ""by 2005, statewide + prices are + likely to be more than 20-25 percent lower in the case in which new + plants are + built than in the case where they are not."" In New York City, ""the + price to + consumers of electric power could be reduced by as much as 28 percent + when + compared to the case of no new supply or load management programs."" + Besides large rate increases, the NY-ISO asserted that a failure to + site and + build new plants in New York will threaten power reliability in the + state and + lead to increasing reliance on out-of-state resources. The report + said that if + no new in-state generation comes on line in the next five years, the + state's + generation reserve margins will shrink from the current 14.9 percent + above peak + demand ""to a dangerously low 8.4 percent by 2005."" Pointing to + California's + situation, the report added that increased reliance on power imports + ""can + subject electrical suppliers and customers in New York to + transmission + restrictions and political and economic considerations beyond the + control or + influence of responsible New York State entities."" + To avoid these harsh consequences, the NY-ISO said New York's new + siting law, + known as the Article X process, needs to be modified. Since the law + was passed + 18 months ago, the report noted that only two plants have been + approved (both + upstate) and neither has yet been built. The problem, according to + the NY-ISO, + is that the siting process ""requires the cooperation of multiple + state + agencies."" To expedite the process, the report suggested the ""clear + designation + of a lead agency and the adoption of an `ombudsman program' to + expedite and + coordinate the work of the agencies responsible for the Article X + process must + be made."" The NY-ISO added that an expedited approval process would + improve the + environment because older, more polluting power plants would be + replaced by + cleaner gas-fired units. + On a more positive note, the NY-ISO reported that New York's + restructured power + market ""is far healthier than that in California, due in large part + to the + ability of New York `s utilities to enter long-term power contracts. + The basic + structure of the New York market will also reduce unwarranted price + spikes and + other market disruptions through mitigation programs which + automatically correct + price spikes due to market power abuses."" + ""Nevertheless, California `s experience raises a caution flag for all + New + Yorkers,"" the report continued. ""The deregulated market in New York + cannot + achieve lower costs through competition without an increase in + generating + capacity similar in magnitude to the recommendations of this report, + along with + simultaneous efforts to institute greater conservation, better load + management + and alternative energy supply initiatives. Additionally, closer + integration with + regional suppliers of power is both inevitable and beneficial."" + The report also recommended (1) accelerating conservation, real-time + metering + and price-sensitive load programs; and (2) upgrading the state's and + the + Northeast's transmission infrastructure. + The Proposed Tariff Amendments -- New York's Article X siting process + and + continuing tight supplies were also cited in the NY-ISO's request to + extend from + 4/30/01 until 10/31/02 its $1,000/MWh bid caps. FERC first approved + the + 1,000/MWh bid caps in July 2000 (see REPORT No.197, pg.6), and + subsequently + extended them. + The NY-ISO's board ""is sensitive to the Commission's concerns about + undue + intervention in energy markets,"" the filing related. ""Nevertheless, + the NY-ISO + is submitting this request because it believes that delays in New + York state's + `Article X' process for licensing and siting new generating capacity + is + inhibiting supply from increasing to match continued demand growth. . + . . + Moreover, although the NY-ISO proposes to implement several + demand-side measures + this summer, it is not yet clear whether they will make demand + sufficiently + price-responsive to avoid periods of high prices that would not occur + if there + were an efficient demand-side response."" + Thus, the NY-ISO insisted that the requested extension is needed to + provide more + time for the development of additional generation and to gauge the + effectiveness + of the NY-ISO's proposed demand-side response mechanisms ""in order to + avoid + exposing consumers to price spikes that are not a product of the + interplay of + competitive market forces."" + Other problems cited in the NY-ISO's filing which keep New York's + power market + from being fully competitive include continuing capacity and + operating + constraints at the state's Central-East interface, and questions over + adequate + gas supply. + ""The NY-ISO remains acutely aware that taking steps to deal with + price + abnormalities can have undesirable consequences,"" the filing + continued. + ""Nevertheless, the NY-ISO believes that the $1,000/MWh cap that has + been used in + the PJM's markets since inception does not appear to have had an + adverse impact + there. . . . The permanent bid caps in PJM, and the interim bid caps + in ISO New + England (proposed for extension through the end of 2001) also make + continuation + of the NY-ISO's bid caps more important in order to maintain + uniformity across + the Northeastern markets. The NY-ISO also continues to believe that + suppliers + will not be materially harmed by the continuation of bid caps, which + are likely + to come into effect very rarely and are set at levels that prevent + only + artificially high run-ups in prices."" + The NY-ISO's request to extend its TEP procedures (which also were + previously + extended) through 10/31/02 cited similar problems with New York's + power markets, + but claimed that the NY-ISO ""has made great strides"" toward + eliminating market + design and software flaws. ""The TEPs were, and remain, an + indispensable tool for + responding to and correcting market flaws and other instances where + the markets + are not operating as the NY-ISO and the Commission intended,"" the + filing + insisted. + + + MASSACHUSETTS: Attorney general says summer poses electricity + concerns + By JOHN McELHENNY + Associated Press Writer + 03/19/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + BOSTON (AP) - The state's top consumer advocate warned that + Massachusetts may + see ""California-type"" electricity blackouts this summer when + temperatures rise + and residents turn on air conditioners and fans. + ""It would be a mistake to feel this is a cold weather problem,"" said + Attorney + General Thomas Reilly in an interview with The Associated Press. ""Our + major + problem will come this summer."" + + State deregulation of the electric industry has been among the + factors blamed + for local power outages in California, and on Monday, California for + the first + time suffered rolling blackouts across the entire state. + Massachusetts relaxed regulations on its own electric industry in + 1998 to + attract more companies to stir competition. But that hasn't happened + yet, + largely because the current high cost of oil and gas make it + expensive to + produce electricity. + ""The promise of deregulation was that there was going to be + competition,"" said + Reilly, a Democrat. ""That competition in the wholesale market is not + happening."" + + Hot summer weather drives up electricity use as residents turn on air + conditioners and fans, and Reilly said a few particularly hot days + could strain + the grid that provides the region's power. + A spokeswoman for the region's power grid said electricity use is + expected to + rise 1.5 to 2 percent this year, but the region should have enough + power because + of six new power plants that have begun generating electricity in the + past 18 + months. + ""The situation is unlike California because we have new generation + coming on + line that is outpacing demand,"" said Ellen Foley, spokeswoman for ISO + New + England Inc., which manages the grid of 330 generators connected by + 8,000 miles + of high voltage transmission lines. + Still, a particularly hot day and an unforeseen power generation + breakdown could + prompt ISO to ask residents to conserve electricity, a situation that + arose once + last summer, Foley said. + In order to avoid any power outages and protect consumers, Reilly + repeated calls + for electric companies to build more power lines and to offer more + options for + new customers who have signed up since deregulation. Those customers + typically + pay more than long-term customers. + Electric transmission companies should also be allowed to enter into + two-year + contracts with suppliers, instead of the six-month contracts many + have now, to + avoid short-term price spikes for consumers, Reilly said. + The Attorney General's Office acts as an advocate for consumers. + Michael Monahan, a spokesman for NSTAR, which provides electricity to + more than + 1 million customers, is upgrading some of its power lines and last + year built a + new line to Cape Cod, but currently has no lines under construction. + ""I wholeheartedly concur with the attorney general that it's + something we have + to focus on,"" Monahan said, but he added, ""The indications I see are + that we + have an ample supply of electricity."" + California's statewide outages were ordered on Monday after a + transformer fire, + high demand and a lack of electricity imports pushed power reserves + to near + zero. + California partially deregulated its electric industry in 1996, two + years before + Massachusetts. + --- + On the Net: + Attorney General's Office: http://www.ago.state.ma.us + NSTAR: http://www.nstaronline.com + ISO New England Inc.: http://www.iso-ne.com + + + NEVADA: Discussion of bill stopping power plant sales to continue + Wednesday + By JOHN WILKERSON + Associated Press Writer + 03/19/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + CARSON CITY, Nev. (AP) - Lawmakers hit more delays Monday in trying + to pass a + measure that pulls the plug on the sale of Nevada power plants to + avoid + California-style energy problems. + ""The goal of this bill is only stopping the divestiture of power + plants and + making sure it's constitutional,"" said Senate Commerce and Labor + Chairman + Randolph Townsend, R-Reno. ""And that's not as easy as it sounds."" + + Townsend's comment just before his committee began working on SB253 + was + prophetic - witnesses kept bringing up the need for more flexibility + in the + measure. + Translation: Don't kill all deals by stopping Reno-based Sierra + Pacific Power + and Las Vegas-based Nevada Power from selling their Nevada power + plants until + June 2003 - and possibly until 2006. + Pete Ernaut, a lobbyist for Reliant Energy which has been trying to + buy a power + plant, said unforeseen market changes could make a plant sale before + 2003 a deal + that would be in the public's interest. + ""If you put a two-year moratorium on these plants, all these deals + are going to + go away,"" he said. ""When the cow leaves the barn, it's difficult to + catch."" + Townsend had hoped to wrap up committee work on SB253 on Monday. Now + it's up for + review again Wednesday in the Commerce and Labor Committee. + Reliant isn't the only company trying to keep power plant purchases + alive. + Earlier this month, executives of Pinnacle West Energy told the + committee that + it's in the public's interest to allow Sierra Pacific Resources to + sell its + Harry Allen power plant. + The Harry Allen plant produces about 72 megawatts out of the 2,900 + megawatts of + energy that Nevada utilities generate. Pinnacle has plans to expand + that to 700 + megawatts by 2004. + Other provisions not strictly related to the plant divestitures, such + as ways in + which Sierra Pacific and Nevada Power can recover the cost of undoing + the sales + contracts, don't have to be included in SB253, Townsend said. + Townsend said the other concerns dealing with the energy crisis and + utility + deregulation can be handled in later bills - but the power plant sale + issue must + be handled now. + Nevada's PUC and the Federal Energy Regulatory Commission had + directed Sierra + Pacific and Nevada Power to sell the plants as a condition of the + companies' + merger in 1999 under the parent company Sierra Pacific Resources. + Critics of the plant sales say the plants generate about half the +state's + electricity - and if they're sold, the unregulated new owners could + sell the + power to other states and put Nevada into the energy dilemma + California faces of + shrinking supply and rising prices. + The Southern Nevada Water Authority has presented an analysis stating + that rate + payers will save from $1.7 billion to $3.5 billion by July 2001 if + the power + plant sales are stopped. + Nevada's Consumer Advocate's Office previously had projected a + conservative + estimate of $915 million in savings. + + + MAINE: Panel of experts would review impact of energy deregulation + By GLENN ADAMS + Associated Press Writer + 03/19/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + AUGUSTA, Maine (AP) - In the wake of rolling blackouts in California + and rate + spikes in their home state, Maine's top legislators proposed a study + Monday into + the effects of deregulation of the energy industry. + ""Deregulation of electricity is a new idea and we still have a lot to + learn,"" + Senate President Michael Michaud said as he called for the analysis. + + A panel of industry insiders, elected officials and consumers would + study issues + such as what standard rate consumers can expect and the likelihood of + energy + shortfalls over the next three years, and whether Maine consumers are + vulnerable + to anti-competitive activities. + In addition, the Blue Ribbon Commission would look into whether + changes in + Maine's deregulation law are needed to encourage more generating + capacity, + improve conservation and spur competition. + The study is being proposed as consumers remain mindful of a power + crisis in + California that resulted from high wholesale energy costs, a consumer + rate cap + and too few power plants in that deregulated state. + Maine's deregulation law is designed to avoid such pitfalls, said + Rep. William + Savage, D-Buxton, House chairman of the Legislature's Utilities + Committee. + Maine's law does not cap consumer prices, as California's does, and + the state + has more than enough generating facilities to meet the state's energy + needs, + Savage said. + Since Maine's deregulation law took effect in March 2000, Bangor + Hydro-Electric + Co. rates have increased 19 percent. The Public Utilities Commission + approved a + residential standard rate increase as recently as last month. + Federal energy regulators are reviewing their decision to allow steep + fee + increases for utilities and power wholesalers that fail to arrange + enough + capacity to meet customers' peak load. Gov. Angus King and all four + members of + Maine's congressional delegation oppose the hike. + The PUC has approved standard rate increases for energy delivered by + Central + Maine Power Co. to medium-sized and large industrial users. + On the other hand, some towns and school districts are saving money + on energy + through deals they can get in the deregulated market. + In the meantime, legislation has been introduced in response to some + of the + changes that have occurred in Maine's deregulated energy industry. + One would use some of the money from the sale of power-generating + assets to + offset an increase in rates paid by large industrial users, said Sen. + Norman + Ferguson, R-Hanover, Senate chairman of the Utilities Committee. + Supporters of the utility study that was proposed Monday said they + are not + looking to make changes in Maine's deregulation law, but if it needs + fixing it + could be done during next year's session. + The lawmakers' primary interest is to find out how trends in a new + environment + designed to encourage competition will affect consumers, and to try + to identify + what consumers can expect in the few years ahead. + House Speaker Michael Saxl, D-Portland, said the Legislature ""has a + fundamental + public policy interest in making sure rate-payers and businesses are + protected + against exorbitant rate hikes."" + Michaud, D-East Millinocket, said he's interested in finding out how + future + changes in electric prices and availability might affect businesses + and + consumers in northern Maine. + ""The economy in my part of the state is the most vulnerable, and I + want to make + certain we are leaving no stone unturned in our effort to prevent any + shocks to + the economy in northern, western and eastern Maine,"" Michaud added. + The commission would include House and Senate members from each + party, a utility + executive, and representatives of energy producers, providers, a + large + commercial consumer and individual consumers. + + + OREGON: State Senate moves to combat energy crisis + 03/16/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + SALEM, Ore. (AP) - In an attempt to avoid a California-like energy + crisis, the + Oregon Senate approved a bill Friday that would quicken the process + of siting + power plants that use gas and renewable resources. + ""It's important for Oregon. It makes sure that energy will be + available to + everyone,"" said Sen. Lee Beyer, D-Springfield. + + The measure, SB843, would shorten the siting process for power plants + that use + gas and renewable resources, like wind, from a year and a half to a + matter of + months. + The speeded-up process would be in effect for two years. + ""If we can act now, we can actually start to solve power supply + problems by this + summer,"" said Sen. Jason Atkinson, R-Jacksonville + California's strict regulations on the construction of new power + plants has + contributed to its current shortage and legislators took note. Beyer + said though + California was definitely a wake-up call, the measure is a reaction + to the + larger power picture in the Northwest. + With low rainfall, hydroelectric generators will have trouble meeting + demand, + Beyer said. Gas-fired and wind plants could come online as soon as + this fall and + would provide relief. + ""We are not in a position to sit back and do nothing about the energy + crisis the + Northwest and the country are experiencing,"" said Senate Minority + Leader Kate + Brown, D-Portland. + Conservationists, however, caution that lawmakers should be careful + not to rush + to provide power at the expense of environmental standards. + + + + WISCONSIN: Two utilities to add 975 megawatts in plan to avoid + energy crisis + By The Associated Press + 03/22/2001 + Associated Press Newswires + Copyright 2001. The Associated Press. All Rights Reserved. + + Plans of two state utilities to add 975 megawatts to Wisconsin's + electric power + grid as a way of avoiding an energy crisis similar to California's + were + questioned Thursday by a consumer advocate who said too many power + plants may be + in the works. + ""Certainly nobody wants to see blackouts like you have in California + but there + is the danger Wisconsin could be overbuilding,"" said Steve Hiniker, + executive + director of the Citizens' Utility Board, which represents consumer + interests in + utility rate cases. He noted that plant construction costs ultimately + are born + by the utility customers. + + Alliant Energy Corp. announced its proposal Wednesday - in a filing + with the + state Public Service Commission - to spend $1 billion to build one + coal and two + gas-fired power plants. + Alliant has proposed building a 500 megawatt coal-fired plant and a + 100 megawatt + natural-gas fired plant by 2006. It also wants to build a 200 + megawatt natural + gas-fired facility in 2011. Wisconsin has not built a coal-fired + plant in more + than two decades. + Alliant has not determined the plants' locations. + Also, Madison Gas & Electric, the state's smallest investor-owned + utility, said + Wednesday that it had signed deals to buy 175 megawatts of power from + three + generating plants in Wisconsin and Illinois. + ""Three out of the four past summers, we've had public appeals for + conservation + due to shortages somewhere in the state. We need to take steps to + avoid that, + and the California situation makes that even more clear,"" said + Alliant spokesman + Chris Schoenherr. ""Getting more iron in the ground will give us more + flexibility + in the state to be able to react."" + Alliant acknowledged the new plants will probably mean rate + increases, but it + was too early to say how much rates would go up. + California's problems, which this week resulted in the first + deliberate + blackouts since World War II, stemmed from underestimating the + state's power + needs, forcing utilities to sell their power plants but not allowing + them to + secure long-term supply contracts, and freezing rates, among other + things. + But Wisconsin's situation is far different. + The state has moved slower than California toward deregulation, and + there has + been no desire here to speed up the process in recent years as power + reliability + became a problem. + The PSC estimates that Wisconsin will need an additional 3,000 + megawatts of + power over the next decade. + Hiniker said Wisconsin needs to coordinate its planning to avoid + overbuilding. + The costs of new power plants are passed on to ratepayers, meaning + electric + bills will increase as new generation is added. In addition, + coal-generated + power plants are a major source of air pollution in the state. + ""We don't have the advance planning that has kept Wisconsin from + overbuilding in + the past,"" said Hiniker. ""This is something the PSC should be doing."" + MG&E's deals are: + -A 10-year contract to buy 75 megawatts from Calpine Energy Services + starting in + May 2004. The power will come from the natural gas-fired plant Rock + River Energy + Center, near Beloit. + Calpine Energy Services is a unit of San Jose, Calif.-based Calpine + Energy Corp. + The plant is being built by Northbrook, Ill.-based SkyGen Energy LLC, + which + Calpine bought last year from SkyGen President Michael Polsky and + Wisvest Corp., + a unit of Wisconsin Energy Corp. + -A 10-year contract to buy 50 megawatts of power from the Rainy River + Energy + Corp. starting in May 2002. The power is coming from a natural + gas-fired plant + near Joliet, Ill. owned by LS Power Co. Rainy River is a unit of + Duluth-based + Minnesota Power Inc. + -A five-year contract to buy 50 megawatts from an El Paso Merchant + Energy plant + near Cordova, Ill., in western Illinois. + The owner of the natural gas facility is the Cordova Energy Center + Co., which is + a unit of Iowa-based MidAmerican Energy Holdings. + Alliant also offered support in the Wednesday filing for a $7 billion + plan of + Milwaukee-based Wisconsin Energy, which includes five new power + plants in Oak + Creek and Pleasant Prairie. + -- + On the Net: + CUB: http://www.wiscub.org/ + Alliant Energy: http://www.alliant-energy.com + Wisconsin Public Service Commission: http://www.psc.state.wi.us + Wisconsin Energy: http://www.wisenergy.com/ + Madison Gas & Electric: http://www.mge.com + + + + Use this file to download and print all the articles in this section + (See attached file: Dow Jones + Interactive-california-03233001-implications.doc) + + + + If you wish to be removed from the distribution list for this update + please contact Pru Sheppard - DC. + + + + + All recipients of this message have been Bcc'd as part of industry + best practice for broadcast emails. + + + + + + + ++-------------------------------------------------------------+ +| This message may contain confidential and/or privileged | +| information. If you are not the addressee or authorized to | +| receive this for the addressee, you must not use, copy, | +| disclose or take any action based on this message or any | +| information herein. If you have received this message in | +| error, please advise the sender immediately by reply e-mail | +| and delete this message. Thank you for your cooperation. | ++-------------------------------------------------------------+ + - Dow Jones Interactive-california-03233001-selected.doc + - pic24389.pcx + - pic05075.pcx + - Dow Jones Interactive-california-03233001-implications.doc",Tuesday,2001,March,19,1 +215,INTERNAL,thank you,"fyi +----- Forwarded by Steven J Kean/NA/Enron on 03/26/2001 10:23 AM ----- + + Kim Frumkin@EES + 03/26/2001 09:30 AM + + To: Steven J Kean/NA/Enron@Enron + cc: + Subject: thank you + +Steve, + +Thank you for participating, once again, in the video for deal central. The +videos are created, housed and maintained in Beth Tilney's area. +I mentioned to Beth that Corporate may have an interest in sharing/utilizing +the EES video equipment and expertise. Robert Pearson (our in-house film +expert) has a masters in video programming, taping, etc. And the good +news....within the next few weeks, the editing equipment will be fully up and +running. +Once installed and operational, all in-house produced videos will have the +look and feel of those created by outside vendors. + +Please feel free to contact Beth (ext. 3.5022) if you have an interest in +exploring this concept. + +And thank you again for your participation. + +Best-Kim ",Monday,2001,March,2,1 +216,REGULATION,HELP!!!,"Linda - I haven't heard of these guys. Do you know them? +---------------------- Forwarded by Steven J Kean/NA/Enron on 05/15/2001 +06:47 PM --------------------------- + + Enron Capital & Trade Resources Corp. + + From: Sherri Sera 05/15/2001 04:19 PM + + +To: Steven J Kean/NA/Enron@Enron, Mark Palmer/Corp/Enron@ENRON +cc: + +Subject: HELP!!! + +Steve and Mark, a good friend of mine works for Mr. Grimes at Stewart & +Stevenson. They have been offered this opportunity by the China Assoc. for +Social and Economic Development for a commitment of $74,000. Since Mr. Lay +has been a past recipient (according to their attached letter), they are +wondering if this is legit. Can you provide any insight? Thanks for your +help. SRS +---------------------- Forwarded by Sherri Sera/Corp/Enron on 05/15/2001 +04:12 PM --------------------------- + + +Doyleene Harris on 05/15/2001 03:32:30 PM +To: ""'sherri.sera@enron.com'"" +cc: + +Subject: HELP!!! + + + + +Hi Sherri, + +We would be most appreciative if you can help us out on this one! + +Our President and CEO, Mike Grimes, received the letter (copy attached/please +open) from the China Association for Social and Economic Development.? In +this letter, Mr. Wu mentions that Dr. Kenneth Lay was a past recipient. + +Well, you just called - so I won't complete this email! + +Love you - + +Doyleene + + +-----Original Message----- +From: Judy Johnson +Sent: Tuesday, May 15, 2001 2:58 PM +To: Doyleene Harris +Subject: + +? + + <<~MAP0000.jpg>> + - ~MAP0000.jpg + + +",Tuesday,2001,May,11,3 +228,INFLUENCE,http://www.stanford.edu/~wolak/," + + -----Original Message----- +From: Kaminski, Vince J +Sent: Friday, August 03, 2001 12:46 PM +To: Kaminski, Vince J +Subject: + +http://www.stanford.edu/~wolak/",Friday,2001,August,10,1 +231,INTERNAL,RE: Rice,"Nelson, + +I don't see any problems with #1. For number 2, mention that the paper was written when you were a studentt +at Rice. + +Vince + + -----Original Message----- +From: Neale, Nelson +Sent: Wednesday, June 20, 2001 8:46 AM +To: Kaminski, Vince J +Cc: Shanbhogue, Vasant +Subject: Rice + +Vince, + +A couple of brief issues: + +1) I have been asked to deliver a lecture(s) to a Rice environmental engineering class in the fall. Most of the preparatory work for the class is already complete, so I don't foresee any large time commitment for this endeavor. If there is a problem, let me know. + +2) A manuscript based on my dissertation work was recently accepted for publication by ASCE Journal of Environmental Engineering. I would like to use my Enron address and contact information on the work, but am unsure of company policies. I can certainly default to the Rice information if there is a problem. + +Nelson + + ",Wednesday,2001,June,7,1 +232,INFLUENCE,,"Vince, + + I agree with you that it's a lesson people need to learn +over and over again. I can't tell you how many politicians +I met over the past year who really don't like markets and +certainly don't understand how or why they work. These +aren't just the minor leaguers in Sacramento, but the big +league players in Washington. + + I also agree that the academic community can play ""an important +role in shaping public opinion and in explaining the logic of +deregulation process."" I'd like to think that is in large +part what I have been trying to do. + +Frank",Monday,2001,September,21,0 +240,INTERNAL,Re: Confidential - Rob Stewart,"Shanna, +I'm supportive of the raise to $150k. I think he is doing a good job and has +a lot of value. He didn't fair well during the ranking due to lack of big $ +or closure but maybe this will send him a good message. + +Thanks, +m",Wednesday,2001,January,0,0 +264,INFLUENCE,Possible Enron Visit to Tulane Univ. Late March or April,"----- Forwarded by Steven J Kean/NA/Enron on 03/15/2001 10:25 AM ----- + + Rene Chapoton + 03/11/2001 11:47 PM + + To: SKean@Enron.com + cc: + Subject: Possible Enron Visit to Tulane Univ. Late March or April + + +Mr. Kean, + +I've attached a document outlining a proposal for an associate in Enron's +Capital & Risk Management Services division to come and speak in several +graduate and undergraduate classes this semester. Times and dates are +extremely +negotiable. I will make all necessary arrangements to ensure a pleasant visit. + +Thank you for your time and have a great day. I look forward to hearing from +you. + +Sincerely, + +Rene Chapoton +RChapot@Tulane.edu +(504)251-7363 + +Additional questions: + +Dean Peggy Babin +PBabin@Tulane.edu +(504)865-5412 +Associate Dean +Freeman School External Operations + +Prof. Sheri Tice +STice@Tulane.edu +(504)865-5469 + + + + + + - Enron Tentative Schedule.doc",Thursday,2001,March,2,1 +272,INTERNAL,RE: Moving foward at a good clip,"Call at 5:00 today (3:00 your time), if you can. + + -----Original Message----- +From: Kevin Scott @ENRON [mailto:IMCEANOTES-Kevin+20Scott+20+3Ckevinscott+40onlinemailbox+2Enet+3E+40ENRON@ENRON.com] +Sent: Friday, July 20, 2001 12:59 PM +To: Steve Kean +Cc: Skilling, Jeff +Subject: Moving foward at a good clip + + +Steve + +Good news. As you indicated would happen, Kalen Pieper called me mid-week. We had a very good conversation about EES and Dave Delainey's leadership. She explored my views about doing business with government. Shortly thereafter, Dave's office called to invite me to Houston on Thursday July 26. + +Kay Chapman explained that Dave's schedule would keep him out of pocket until August 16. In order to move forward, Janet Dietrich will be meeting with me when I go to Houston next Thursday. (I must confess that after all the great things I have heard about the man, I do look forward to meeting Dave himself.) + +Is there a time next week that I can speak with you by phone to fine-tune my thinking / preparation for Thursday's meeting with Janet? + +Thank you for your all of your help. I am pleased and appreciative that things are moving forward at a good clip. + +Kevin +___________________________________ +Contact Information +E-mail +kevinscott@onlinemailbox.net +Phone +(213) 926-2626 +Fax +(707) 516-0019 +Traditional Mail +PO Box 21074 ?Los Angeles, CA 90021 +___________________________________ + ",Monday,2001,July,9,1 +341,INTERNAL,EES,"Please set up some time with Linda. +---------------------- Forwarded by Steven J Kean/NA/Enron on 05/17/2001 +11:39 AM --------------------------- + + +Norm Spalding@ENRON_DEVELOPMENT +05/16/2001 02:26 PM +To: Steven J Kean/NA/Enron@Enron +cc: Linda Uselman/HOU/EES@EES + +Subject: EES + +Steve, I'm not sure if you remember me, but I was the gentleman that talked +to you at the Floor Meeting on April 18th for ETS personnel. + +If you remember, I mentioned that some of our engineering people had +transferred to EES last year and that now they all want back due to the mass +confusion in that organization such as billings being done on Excel +spreadsheets, no one being allowed to talk to other groups, etc. etc. + +Today, one of these employees, Linda Uselman, paid me a visit to inform me of +her resignation from EES. I mentioned to Linda about my discussion with you +and she said she would very much like to share with you what is going on in +EES. + +Linda was one of our best employees. While we hated to see her go to EES, we +thought this was for the good of Enron. Now we see that everyone lost on +this deal. + +Thanks, Norm +",Thursday,2001,May,4,1 +342,trip reports,In Washington DC with Mr. Lay," + +Fly up and back on company plane",Monday,1997,June,1,0 +361,CALIFORNIA CRISIS,FW: Risk 2001 Australia,"Frank, + + +FYI + +Vince + + -----Original Message----- +From: ""philip annesley"" @ENRON [mailto:IMCEANOTES-+22philip+20annesley+22+20+3Cpannesley+40riskwaters+2Ecom+3E+40ENRON@ENRON.com] +Sent: Thursday, May 31, 2001 9:12 PM +To: Kaminski, Vince J +Subject: RE: Risk 2001 Australia + +Thanks Vince - I'll give him a try. + +-----Original Message----- +From: Vince.J.Kaminski@enron.com [mailto:Vince.J.Kaminski@enron.com] +Sent: Thursday, May 31, 2001 10:03 PM +To: pannesley@riskwaters.com +Subject: RE: Risk 2001 Australia + + +Philip, + +Please, try Frank Wolak from Stanford University. + +He is the best expert on California right now. + +Vince + + + -----Original Message----- + From: ""philip annesley"" @ENRON + +[mailto:IMCEANOTES-+22philip+20annesley+22+20+3Cpannesley+40riskwaters+2Ecom ++3E+40ENRON@ENRON.com] + + + Sent: Wednesday, May 30, 2001 7:50 PM + To: Kaminski, Vince J + Subject: RE: Risk 2001 Australia + + Vince + + Thanks for coming back to me on this anyway. Would you be able to + suggest + anyone else - either in Australia, Europe or US who would be good to get + to + discuss the California crisis? + + kind regards. + + Philip + + -----Original Message----- + From: Vince.J.Kaminski@enron.com [mailto:Vince.J.Kaminski@enron.com] + Sent: Thursday, May 31, 2001 12:00 AM + To: pannesley@riskwaters.com + Cc: Vkaminski@aol.com + Subject: RE: Risk 2001 Australia + + + Philip, + + I have to decline the invitation with regrets. + I have too many commitments right now. + + Vince Kaminski + + -----Original Message----- + From: ""philip annesley"" @ENRON + + +[mailto:IMCEANOTES-+22philip+20annesley+22+20+3Cpannesley+40riskwaters+2Ecom + +3E+40ENRON@ENRON.com] + + + Sent: Monday, May 28, 2001 3:27 AM + To: vkamins@enron.com + Subject: Risk 2001 Australia + + Dear Vince + + Just a quick message to follow up on the email that I sent you + recently + inviting you to speak at our forthcoming congress, Risk 2001 + Australia, + which is taking place in Sydney on 20 & 21 August 2001. Have you had + an + opportunity to consider the invitation yet? We are aiming to have the + programme printed next week, so I would really need to know as soon + as + possible if you would be available to speak at this year's congress. + + I am working from our Hong Kong office for this week only (Tel: +852 + 2545 + 2710), and I can be contacted by phone there or by email. + + Kind regards. + + Philip + + + + Philip Annesley + Conference Producer + Risk Waters Group + + +44 20 7484 9866 + +44 20 7484 9800 + + www.risk-conferences.com/risk2001aus + + + + + +",Friday,2001,June,6,5 +366,INFLUENCE,RE: P+ pricing/hedging,"Zimin, + +I shall be in California on Thu. + +Vince + + -----Original Message----- +From: Lu, Zimin +Sent: Tuesday, June 19, 2001 1:43 PM +To: Issler, Paulo; Lee, Bob; White, Bill; Schroeder Jr., Don +Cc: Crenshaw, Shirley; Kaminski, Vince J +Subject: P+ pricing/hedging + + +A meeting is scheduled with Bill White and Don Schroeder at 4:00pm at 19C2. +Bill and Don would like to talk about P+ pricing / hedging issues and NYMEX +calendar spread option model that Pavel built before his departure. + +Please review the P+ model and the doc prepared by Stinson. Let us talk on +Thursday. + +Zimin + + +Shirley, + +Could you secure the meeting room from 4-5pm on Thursday ? +And mark that on Vince's calender if possible. Thanks. + + + << File: Adjust Vol2 test.xls >> + + + + -----Original Message----- +From: Gibner, Stinson +Sent: Wednesday, June 06, 2001 5:34 PM +To: Lu, Zimin; Kaminski, Vince J +Subject: + + << File: PPlus.doc >> This is an early draft document and should be revised, but does explain the spread option structure. + +--Stinson",Tuesday,2001,June,15,2 +372,CALIFORNIA CRISIS,Re: California Power Issues Database,"Add Mona Petrochko, peggy mahoney and Rob Bradley + + + + +Gavin Dillingham@ENRON_DEVELOPMENT +08/25/2000 04:55 PM +To: joe Hartsoe@ENRON, Sandra McCubbin@EES, Susan Mara@EES, Paul Kaufman@ECT, +Karen Denne@ENRON, Jeff Dasovich@EES, Mark Palmer@ENRON, James D Steffes@EES, +Richard Shapiro@EES, Elizabeth Linnell@EES, Jeannie Mandelker@ECT, Steven J +Kean/NA/Enron@Enron, Mark A Schroeder@ENRON, Peter Styles@ECT +cc: + +Subject: California Power Issues Database + +We have developed an intranet site/database for information tracking purposes +for the California Power Issue. The intranet site will be placed on the +home.enron.com webpage by Tuesday morning for all Enron employees to access. +However, today, this comprehensive database is available to you for your +California Power Issue needs. + +The database has been populated with the latest information that I have +received concerning this topic and has been broken down in three categories: +California Power Issues, National Power Issues and Secured Documents. It has +then been broken down further into subcategories. + +The secured documents sections will only be accessible to those that are +receiving this e-mail. Please let me know if you believe others should have +access to this information. The secured document section contains all the +information that I have received that Luntz Consulting has helped us develop, +i.e. principals, statements, speeches and facts, as well as, talking points +and other statements developed internally. These documents can be easily +switched to open access to all Enron employees if you believe that these +documents should not be restricted. + +To access the intranet site you must be logged on to the network and then go +to this link: http://nahou-lndev02d.corp.enron.com/GovtAffa.nsf (It is best +if you copy this link and paste it in your internet Explorer or Netscape +browser.) + +Once you are at this site you will be able to access all articles and +information that I have collected/received concerning the California Power +Issue. You can navigate the site by using the links on the left hand side of +the screen. While navigating this site, keep in mind that the actual +interface will be changed before we go live on Tuesday morning. + +To access the secured documents, click on secured documents and type in your +user name, which is the same as if you are logging onto the network, and then +type in your password, which is the same as if you are logging onto the +network. However, if you have difficulties entering this site, you will need +to change your Lotus internet password. Which is very simple to do and which +you will need to do regardless if you decide to use this site or not, it is +all part of the current computer migration. To change your internet password, +go to this link and then hit the edit person key. Go to the last field that +says internet password and type in whatever password you would like, +preferably your current network login password. (In the internet password +section you will see a bunch of numbers and letters, delete those and enter +your new network password.) + +There are still some bugs that will be worked out by Tuesday, but I thought +since this is such a fast moving issue it was best to get this tool out so it +could be used when needed. If you have any questions, please call me at +713-853-4382. + +Thanks, + +Gavin + + +",Monday,2000,August,0,0 +374,talking points,RE: Marketing Plan & Meetings,"Sandeep, + +This looks great. I would talk to all the heads of structuring desks, including +the right persons (Zimin, Krishna, Vasant) in the conversations. +Also, please talk to Andrea Reed and ask who are good targets in the EIM +organization. + +We can talk about other targets when I get back. + +Vince + + -----Original Message----- +From: Kohli, Sandeep +Sent: Tuesday, June 26, 2001 2:43 PM +To: Kaminski, Vince J +Subject: Marketing Plan & Meetings + +Vince, + +Just a short note to update you since you are not here for the Tuesday meeting. + +I had sent a mail to Chris Calger on Friday copying you too. I will be following up with a phone call. +I have fixed a meeting with Bill Rust (Mgr. East Desk), and Tom Dutta (Mgr. Generation Investments) for Friday. I will be presenting our skill set to him; would like to include Martin and Lance. +Am working with Krishna on the EES contract, and he will talk to you about a meeting date +Am working on a request from LNG group on their Nigeria LNG contract (meeting at 10.30). Will like to include Paulo; have already talked with Zemin. +Would like to talk to you about which people to target as regards the Marketing Plan. + +Regards, +Sandeep.",Tuesday,2001,June,8,1 +375,INTERNAL,RE: o:\Research access list,"Sandeep, + +This is the list of the groups that have access to Research directory. +Martin compiled this list. + +Please, review it and let's talk about the recommendations regarding +changes and restrictions we have to make. + +Vince + + + + -----Original Message----- +From: Lin, Martin +Sent: Wednesday, June 06, 2001 9:27 PM +To: Kaminski, Vince J +Subject: o:\Research access list + +Please find attached an Excel workbook listing different access groups for Research. I have marked some users for keeping and deleting. I'm not sure how you wish to proceed. You can edit the list as you see fit. Perhaps we can contact those who have particular groups (e.g. Weather) for updates on their list. + +I am generally of the opinion that the lists should be as short as possible. A directory that Lance and I share with the power group was deleted yesterday but nobody knows who did that. I hope after this audit is done, we are much less at risk of something that like happening again. + +Thanks, +Martin + + << File: Data Research.xls >> ",Tuesday,2001,June,11,1 +386,INFLUENCE,Thursday Meeting on Winter Gas Prices,"calendar +---------------------- Forwarded by Steven J Kean/NA/Enron on 09/13/2000 +08:07 AM --------------------------- + + +Rob Bradley +09/12/2000 11:01 AM +To: Kenneth Lay/Corp/Enron@ENRON +cc: Alhamd Alkhayat/NA/Enron@ENRON, Shelley Corman/ET&S/Enron@ENRON, Stinson +Gibner/HOU/ECT@ECT, Gil Muhl/Corp/Enron@ENRON (bcc: Steven J Kean/NA/Enron) + +Subject: Thursday Meeting on Winter Gas Prices + +Ken: + +I have invited the following individuals to join us at the 3 pm Thursday +meeting to review the draft of your Columbus speech on the natural gas +situation. + +Hamd Alhkayat--Hamd has replaced Andrew Miles in the rotation and will be +helping me with your presentations as well as being the lead with Jeff's +speeches. + +Shelley Corman--Shelley has been developing messages for the current and +anticipated gas situation and pipeline safety for the gas pipeline group. +(The safety issue could come up in your Q&A.) + +Stinson Gibner--Stinson is with the research group that has generated some of +the more complex slides in your draft dealing with volatility and historic +futures pricing. + +Gil Muhl--Gil markets gas products to customers and is speaking at an AGA +conference on the gas supply and price situation the day before your talk. +His group is focusing on new products to help end-users with winter +volatility. I have asked Gil to send you his presentation as well for the +meeting. + +Back to your presentation (the draft slides of which I am delivering to you +today), Dan Yergin thought it would be appropriate for you to give an +overview of the situation as the ""teacher"" or ""professor."" Some questions +that you could address would include: + +Where has the industry come from, and what lessons have we learned? + +How is the business different today? + +What public policy conclusions are implicit in this history? + +I think our comparative advantage over the specialists who will be presenting +before and after your keynote is that you have ""been there"" in the evolution +of the natural gas market, and Enron is at the forefront of helping customers +deal with price and supply uncertainty. There is also a good opportunity to +stress the need for new industry ""best practices"" (more hedging) and the +right public policies to deal with this issue (from ""do no harm"" to expanding +incentives in the market). + +- Rob + + + +",Wednesday,2000,September,1,1 +396,INTERNAL,RE: UBS deal,"Marilyn + +Yes, please call Shirley (3-5290) to setup a meeting. + +Vince + + -----Original Message----- +From: Baker, Marilyn N +Sent: Monday, June 18, 2001 4:29 PM +To: Kaminski, Vince J +Subject: RE: UBS deal + +Vince: Are you available to talk about it tomorrow (Tuesday)? Marilyn + + -----Original Message----- +From: Kaminski, Vince J +Sent: Friday, June 15, 2001 11:09 AM +To: Baker, Marilyn N +Cc: Lu, Zimin +Subject: UBS deal + +Marilyn, + +Krishna sent to me the information about the structure proposed by UBS . + +I shall review it during the weekend and we can talk about it on Monday. + +Vince +",Monday,2001,June,14,2 +397,INTERNAL,RE: Test Message,"Mike, + +Thanks for your message. The meeting on Tuesday at 7 is confirmed. + +Vince + + -----Original Message----- +From: Mike Boughton @ENRON [mailto:IMCEANOTES-Mike+20Boughton+20+3Cboughton+40maui+2Enet+3E+40ENRON@ENRON.com] +Sent: Tuesday, June 26, 2001 7:41 PM +To: vkamins@enron.com; vkaminski@aol.com +Cc: David.Rowe@risk.sungard.com +Subject: Test Message + +Hello Vince, + +It was good to talk with you yesterday. David Rowe and I will be happy to +meet with you for breakfast at 7:00 on Tuesday. I will call on Monday to +set the location. + +The URL for our commodity option calculator demonstration is + + http://perun.otci.net/Utility + +Note that several of the data sets, which we obtain daily from NYMEX, are +incomplete. NG, HO, CN, NT and CL have enough data to indicate performance. +The others are either missing altogether or the series is too short to be +useful. + +If you want to see the currency demonstration, it is at + + http://perun.otci.net/BC + +and includes some technical material describing work we did in creating the +site. + +With best regards, + +Mike Boughton + Options Technology Company, Inc. + P.O. Box 1275 + Wailuku, Maui, Hawaii 96793 + Telephone 808.575.9592 Fax 808.575.9331 + http://www.otci.net",Wednesday,2001,June,3,1 +420,REGULATION,"RE: Western Wholesale Activities - Gas & Power Conf. Call + Privileged & Confidential Communication Attorney-Client Communication and + Attorney Work Product Privileges Asserted","Ray's in the air today and he asked me to forward the agenda for tomorrow's call + +PLEASE MARK YOUR CALENDAR +Date: Every Thursday +Time: 7:30 am Pacific, 9:30 am Central, and 10:30 am Eastern time + Number: 1-888-271-0949 + Host Code: 661877 (for Ray only) + Participant Code: 936022 (for everyone else) + +The table of the on-going FERC issues and proceedings is available to all team members on the O drive. Please feel free to revise/add to/ update this table as appropriate. + +Proposed agenda for tomorrow (Thursday) : + +GAS +Any Items? + +ELECTRICITY +Report on the 24-25 Sept meeting on CAISO ""operational"" issues +FERC's new RTO iniatives: + RTO West and DSTAR married; + California to ""heal its wounds"" but be audited nonetheless + RTO Week in DC coming up +ICAP in the West? +Information req's NOPR +CA and PAC NW refund proceeding status + +Please feel free to communicate any additional agenda items to the group .",Wednesday,2001,September,15,0 +426,REGULATION,"RE: Western Wholesale Activities - Gas & Power Conf. Call + Privileged & Confidential Communication Attorney-Client Communication and + Attorney Work Product Privileges Asserted","Attached are: + +1. Draft comments to CAISO re: CAISO's Draft Proposal to give temporary +waivers to long startup time units. Comments are due to CAISO this Friday. +2. CAISO's draft waiver proposal (for reference) +3. Outline of comments to FERC re: CAISO's implemtation filing of July 10. +Hopefully these comments will be filed with a group of marketers and is due +August 9 +4. CAISO's July 10 filing (for reference) + + + + + + -----Original Message----- +From: Alvarez, Ray +[mailto:IMCEAEX-_O=ENRON_OU=NA_CN=RECIPIENTS_CN=NOTESADDR_CN=EBE4476B-2D94882A +-86256A14-75FF3B@ENRON.com] +Sent: Wednesday, July 25, 2001 1:43 PM +To: Walton, Steve; Mara, Susan; Comnes, Alan; Lawner, Leslie; Cantrell, +Rebecca W.; Fulton, Donna; Dasovich, Jeff; Nicolay, Christi; Steffes, James +D.; jalexander@gibbs-bruns.com; Allen, Phillip K.; Noske, Linda J.; Perrino, +Dave; Black, Don; Frank, Robert; Miller, Stephanie; Tycholiz, Barry; Novosel, +Sarah; Thome, Jennifer +Subject: Re: Western Wholesale Activities - Gas & Power Conf. Call Privileged +& Confidential Communication Attorney-Client Communication and Attorney Work +Product Privileges Asserted + +PLEASE MARK YOUR CALENDAR +Date: Every Thursday +Time: 7:30 am Pacific, 9:30 am Central, and 10:30 am Eastern time + Number: 1-888-271-0949 + Host Code: 661877 (for Ray only) + Participant Code: 936022 (for everyone else) + +The table of the on-going FERC issues and proceedings is available to all +team members on the O drive. Please feel free to revise/add to/ update this +table as appropriate. + +Proposed agenda for tomorrow: + +Refund order discussed at today's Commission meeting; CA refund issues; PacNW +refund issues +NOPR on information and filing requirements discussed at today's Commission +meeting +Answer to motions of CA parties +ISO tariff filing response +Upcoming meeting in Portland + +Please feel free to communicate any additional agenda items to the group. + + +",Wednesday,2001,July,9,1 +432,meeting minutes,Re: Ken Lay/ Jeff Skilling visits,"I spoke with Jeff and he is not going to be available for the speech on the +26th. Do we pass or is there an alternative? Can we get done what we need +to get done with Ken's visit the following week? + + + + +Nicholas O'Day +08/31/2000 06:01 AM +To: Steven J Kean/NA/Enron@Enron, Rosalee Fleming/Corp/Enron@ENRON +cc: John Ambler/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Mark +Schroeder/LON/ECT@ECT, Joseph P Hirl/AP/ENRON@ENRON, Mika Watanabe/AP/Enron, +Takashi Kimura/AP/Enron@Enron + +Subject: Ken Lay/ Jeff Skilling visits + +Ken Lay Visit. Following discussions with the Prime Minister's office and a +quick check with venues 31 October is firming up as the preferred date for a +meeting with the Prime Minister and an office opening by the PM. + +Jeff Skilling Visit. The Nikkei and the Tokyo University have now made the +decision to invite Mr Skilling to give the key note address at the symposium +on 26 November in Tokyo. As mentioned, the symposium is the most prestigious +conference on IT in Japan. + +While the conference itself receives significant media attention, the +President of Nikkei has offered to interview Mr Skilling. This honour is +usually reserved for Heads of State. The interview will be featured on the +front page of the Nikkei and picked up by other major media services. + +kind regards + + + + +Nicholas O'Day +08/29/2000 07:43 PM +To: Steven J Kean/HOU/EES@EES, Rosalee Fleming/Corp/Enron@ENRON +cc: John Ambler/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Mark +Schroeder/LON/ECT@ECT, Joseph P Hirl/AP/ENRON@ENRON, Mika Watanabe/AP/Enron, +Takashi Kimura/AP/Enron + +Subject: Re: Ken Lay meeting with Japanese Prime Minister + +Ken Lay Visit. Balancing the need to push out the arrangement of high level +meetings as far as possible with the desire to have a meeting with Prime +Minister Mori prior to the US Presidential election, the week commencing 30 +October would be the optimum time for a visit by Mr Lay. PM Mori is generally +available in that week. We will get a preferred time from the PM's chief +secretary first thing tomorrow morning Tokyo time. + +Jeff Skilling Visit. The boards of Nikkei and Tokyo University Institute of +Advanced Studies have yet to make a decision on the key note speaker for the +one day invitation only seminar to be held on 26 October. As mentioned, the +boards will choose between the chairman of Cisco and Jeff Skilling. The +conference is focused on the IT revolution and an invitation only event for +approximately 600 of Japan's corporate leaders. + +The speaking panel and topics for discussion will be developed around the key +note speaker. If Mr Skilling were to give the key note speech, it is likely +that key senior Government Ministers would be asked to present at the +seminar. + +Following the Prime Minister's commitment at the Okinawa summit of +US$15billion expenditure in the region on IT infrastructure and education, +Japan's focus on e-commerce is almost reaching fever pitch. There will be +significant interest in the conference from senior levels of Government and +the business community. Further, as you would expect with the involvement of +the Nikkei, there is typically significant media coverage associated with the +key note speaker's presentation. + +kind regards + + + +",Thursday,2000,August,5,0 +442,trip reports,"Jeff Skilling testifying at Murkowski workshop -- Workshop will + run from 9:30 a.m. to 12:00, in room 216 of the Hart Senate Office + Building."," + +Came back with Skilling on company plane.",Thursday,1997,March,1,0 +448,INFLUENCE,Re: Beta Gamma Sigma,"Thanks for the invite. I would suggest Jean Ryall - who heads our Texas +government/regulatory affairs team. She is certainly more familiar with the +details (of which there will be many more after this legislative session and +the conclusion of the pilot program). She is also a very good speaker (and +can probably relate a few war stories to spice things up). + + +From: Susan Skarness/ENRON@enronXgate on 05/04/2001 11:20 AM +To: Steven J Kean/NA/Enron@Enron +cc: Maureen McVicker/NA/Enron@Enron + +Subject: Beta Gamma Sigma + +Steve, + +I am a member of Beta Gamma Sigma (BGS), the honor society for business +programs accredited by AASCB - The International Association for Management +Education. If you are not familiar with BGS, a member must be in the upper +5% of their class as a junior and the upper 10% as a senior and in graduate +school to be nominated for induction into the society. + +In an effort to provide additional programs and benefits to alumni members, +alumni chapters are being developed around the country. There are currently +nine alumni chapters around the U.S. with a new one being formed in the +Houston area. I am serving on a steering committee for the development of +this Houston Area Alumni Chapter. Our primary reasons for starting a Houston +Area Chapter include networking, professional affiliations, outreach to +students, resources, learning opportunities, and providing scholarships. + +Our initial outreach to Beta Gamma Sigma members will be through a +reception/dinner to be held in October 2001. We are currently looking at +either October 16 or 18. All 6,200 Houston area members will be invited to +participate, however, we expect attendance to be closer to 75-100 people. +The ages, experiences, and business affiliation of the members will be very +diverse, but all will have the common thread of business excellence. + +The details of this event are still being finalized; however, at our last +meeting the discussion encompassed possible speakers and topics. +Overwhelmingly the team decided on Electricity Deregulation in Texas, and +since I work at Enron, I was asked to assist in locating a dynamic speaker. +Cliff Baxter suggested that you would be an ideal speaker on this topic. Are +you available and willing to address this group in October? + +If I can provide any additional information, please let me know. + +Thank you for your consideration, Steve. + + + + +",Monday,2001,May,3,0 +474,REGULATION,"FW: Western Wholesale Activities - Gas & Power Conf. Call + Privileged & Confidential Communication Attorney-Client Communication and + Attorney Work Product Privileges Asserted"," + + -----Original Message----- +From: Alvarez, Ray [mailto:IMCEAEX-_O=ENRON_OU=NA_CN=RECIPIENTS_CN=NOTESADDR_CN=EBE4476B-2D94882A-86256A14-75FF3B@ENRON.com] +Sent: Wednesday, July 25, 2001 1:43 PM +To: Walton, Steve; Mara, Susan; Comnes, Alan; Lawner, Leslie; Cantrell, Rebecca W.; Fulton, Donna; Dasovich, Jeff; Nicolay, Christi; Steffes, James D.; jalexander@gibbs-bruns.com ; Allen, Phillip K.; Noske, Linda J.; Perrino, Dave; Black, Don; Frank, Robert; Miller, Stephanie; Tycholiz, Barry; Novosel, Sarah; Thome, Jennifer +Subject: Re: Western Wholesale Activities - Gas & Power Conf. Call Privileged & Confidential Communication Attorney-Client Communication and Attorney Work Product Privileges Asserted + +PLEASE MARK YOUR CALENDAR +Date: Every Thursday +Time: 7:30 am Pacific, 9:30 am Central, and 10:30 am Eastern time + Number: 1-888-271-0949 + Host Code: 661877 (for Ray only) + Participant Code: 936022 (for everyone else) + +The table of the on-going FERC issues and proceedings is available to all team members on the O drive. Please feel free to revise/add to/ update this table as appropriate. + +Proposed agenda for tomorrow: + +Refund order discussed at today's Commission meeting; CA refund issues; PacNW refund issues +NOPR on information and filing requirements discussed at today's Commission meeting +Answer to motions of CA parties +ISO tariff filing response +Upcoming meeting in Portland + +Please feel free to communicate any additional agenda items to the group. + + +",Wednesday,2001,July,13,1 +478,REGULATION,Commission Meetings,"I will attend. +---------------------- Forwarded by Steven J Kean/HOU/EES on 09/10/99 01:05 +PM --------------------------- + + +Bernadette Hawkins@ENRON +09/10/99 11:50 AM +To: Steven J Kean/HOU/EES@EES, Richard Shapiro/HOU/EES@EES +cc: Joe Hartsoe/Corp/Enron@Enron, Sarah Novosel/Corp/Enron@Enron, Maureen +McVicker/HOU/EES@EES, Ginger Dernehl/HOU/EES@EES +Subject: Commission Meetings + + Joe Hartsoe and Jeff Skilling are scheduled to meet with FERC Commissioners +Bailey, Massey, Hoecker and Breathitt on September 22 in the afternoon. If +you would like to attend or have suggestions on others who should attend, +please call Joe Hartsoe at (202) 466-9150 or Sarah Novosel at (202) 466-9160 +as soon as possible to let them know. We will also need the bio of anyone +planning on attending these meetings. + +Thanx +",Friday,1999,September,6,1 +479,INTERNAL,"Re: FERC course on for Thurs, July 26, 1-4 p.m.","Great news. With respect to the Commissoners, I think it makes sense to go back through Ellen and ask if she could set up meetings with a few commissioners ater the staff briefing. + + + + +""wgramm"" on 07/17/2001 03:23:19 PM +Please respond to + +To: ""Jerry Ellig"" , ""Steve Kean"" + +cc: ""Susan Dudley"" + +Subject: FERC course on for Thurs, July 26, 1-4 p.m. + +Susan got it done -- it'll be Thursday, July 26, 1-4 p.m. at FERC (a room on +the 3rd floor?). Susan has talked with Bill Albrecht. He'll probably be +coming in on Wed. p.m. Steve, any ideas about a Commissioner strategy? +(invite them to attend, if the FERC folks agree; ask the FERC folks to do +the inviting; ask the FERC folks to help set up meetings afterwards or a +follow on if they like what we do and think it useful for Commissioners; try +to do a walkaround -- that is, offer to have Jerry, Bill, Susan visit +commissioners individually Friday a.m. after the course or Thursday a.m. +before the course?) Wendy + +Wendy Gramm, Regulatory Studies Program +Mercatus Center +George Mason University +703-993-4884 + + + +",Tuesday,2001,July,18,0 +490,INFLUENCE,Re: Enron Advisory Council meeting,"We'll have the usual macroeconomic update from Larry Lindsay and Gavyn +Davies, the domestic political update from Bill Kristol and some +presentations from Gary Hamel and others focussing on Enron NetWorks. + + + + +James M Bannantine@ENRON_DEVELOPMENT +08/10/2000 02:30 PM +To: Steven J Kean@EES +cc: +Subject: Enron Advisory Council meeting + +Steve, + +What is the agenda for this advisory council meeting? + +Jim +---------------------- Forwarded by James M Bannantine/ENRON_DEVELOPMENT on +08/10/2000 01:30 PM --------------------------- + + + + From: Vanessa Groscrand @ ENRON 08/10/2000 10:42 AM + + +To: James M Bannantine/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Cliff +Baxter/HOU/ECT@ECT, Sanjay Bhatnagar/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, +Rick Buy/HOU/ECT@ECT, Richard Causey/Corp/Enron@ENRON, Diomedes +Christodoulou/SA/Enron@Enron, David W Delainey/HOU/ECT@ECT, James +Derrick/Corp/Enron@ENRON, Andrew S Fastow/HOU/ECT@ECT, Peggy_Fowler@pgn.com, +Mark Frevert/NA/Enron@Enron, Ben F Glisan/HOU/ECT@ECT, Kevin Hannon/Enron +Communications@Enron Communications, David +Haug/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Stanley Horton/Corp/Enron@Enron, +Larry L Izzo/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Steven J Kean/HOU/EES@EES, +Mark Koenig/Corp/Enron@ENRON, Kenneth Lay/Corp/Enron@ENRON, Rebecca P +Mark/HOU/AZURIX@AZURIX, Mike McConnell/HOU/ECT@ECT, Rebecca +McDonald/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Jeffrey McMahon/HOU/ECT@ECT, J +Mark Metts/NA/Enron@Enron, Cindy Olson/Corp/Enron@ENRON, Lou L +Pai/HOU/EES@EES, Ken Rice/Enron Communications@Enron Communications, Jeffrey +Sherrick/Corp/Enron@ENRON, John Sherriff/LON/ECT@ECT, Jeff +Skilling/Corp/Enron@ENRON, Joseph W +Sutton/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Greg Whalley/HOU/ECT@ECT, Thomas +E White/HOU/EES@EES +cc: Brenda Garza-Castillo/NA/Enron@Enron, Marcia Manarin/SA/Enron@Enron, +Susan Skarness/HOU/ECT@ECT, Stacy +Guidroz/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Beena +Pradhan/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Karen K Heathman/HOU/ECT@ECT, +Sharron Westbrook/Corp/Enron@ENRON, Kay Chapman/HOU/ECT@ECT, Molly +Bobrow/NA/Enron@Enron, Rosane Fabozzi/SA/Enron@Enron, Stephanie +Harris/Corp/Enron@ENRON, Bridget Maronge/HOU/ECT@ECT, Mary_trosper@pgn.com, +Nicki Daw/NA/Enron@Enron, Inez Dauterive/HOU/ECT@ECT, Carol Ann Brown/Enron +Communications@Enron Communications, Elaine +Rodriguez/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Nancy Young/Enron +Communications@Enron Communications, Cindy Stark/Corp/Enron@ENRON, Mary E +Garza/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Maureen McVicker/HOU/EES@EES, +Joannie Williamson/Corp/Enron@ENRON, Rosalee Fleming/Corp/Enron@ENRON, Marsha +Lindsey/HOU/AZURIX@AZURIX, Cathy Phillips/HOU/ECT@ECT, Loretta +Brelsford/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Sue Ford/HOU/ECT@ECT, Dolores +Fisher/NA/Enron@Enron, Karen Owens/HOU/EES@EES, Dorothy Dalton/Enron +Communications@Enron Communications, Jewel Meeks/Enron Communications@Enron +Communications, Christina Grow/Corp/Enron@ENRON, Lauren Urquhart/LON/ECT@ECT, +Sherri Sera/Corp/Enron@ENRON, Katherine Brown/Corp/Enron@ENRON, Pam +Benson/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Jana Mills/HOU/ECT@ECT, Liz M +Taylor/HOU/ECT@ECT, Judy G Smith/HOU/EES@EES, Bobbie Power/Corp/Enron@ENRON + +Subject: Enron Advisory Council meeting + +The Enron Advisory Council meeting is scheduled on September 7-8, 2000. The +dinner meeting will begin on Thursday, September 7 at 6:00 p.m. at the Four +Seasons Hotel in the Austin Room. On Friday, September 8 the meeting is +scheduled from 7:30 a.m. to 3:00 p.m. in the 50th Floor Boardroom. + +Please let me know if you plan to attend. + +Vanessa Groscrand + + + + +",Monday,2000,August,2,1 diff --git a/giskard-ml-worker/test/test_metamorphic_direction.py b/giskard-ml-worker/test/test_metamorphic_direction.py index cc2cbca149..8faed1c6ea 100644 --- a/giskard-ml-worker/test/test_metamorphic_direction.py +++ b/giskard-ml-worker/test/test_metamorphic_direction.py @@ -105,15 +105,17 @@ def test_metamorphic_decreasing_exception(german_credit_test_data, german_credit ) -def test_metamorphic_increasing_exception(german_credit_test_data, german_credit_model): - with pytest.raises(Exception): - tests = GiskardTestFunctions() - perturbation = { - "duration_in_month": lambda x: x.duration_in_month - x.duration_in_month * 0.5} - results = tests.metamorphic.test_metamorphic_increasing( - df=german_credit_test_data, - model=german_credit_model, - classification_label='random_value', - perturbation_dict=perturbation, - threshold=0.5 - ) +def test_metamorphic_increasing_enron(enron_data, enron_model): + import nlpaug.augmenter.word as naw # uncomment for text perturbation + aug = naw.SpellingAug(dict_path=None, name='Spelling_Aug', aug_min=1, aug_max=10, aug_p=0.3, stopwords=None, + tokenizer=None, reverse_tokenizer=None, include_reverse=True, stopwords_regex=None, verbose=0) # uncomment for text perturbation + tests = GiskardTestFunctions() + perturbation = { + "Content": lambda x: aug.augment(x["Content"])} + results = tests.metamorphic.test_metamorphic_increasing( + df=enron_data, + model=enron_model, + classification_label='INFLUENCE', + perturbation_dict=perturbation, + threshold=0.5 + ) diff --git a/giskard-server/src/main/resources/aitest/code_test_templates/metamorphic.yml b/giskard-server/src/main/resources/aitest/code_test_templates/metamorphic.yml index 04df64fed7..282cf6acac 100644 --- a/giskard-server/src/main/resources/aitest/code_test_templates/metamorphic.yml +++ b/giskard-server/src/main/resources/aitest/code_test_templates/metamorphic.yml @@ -45,15 +45,27 @@ items: output_df: Dataframe of rows where the prediction changes due to perturbation """ - # import nlpaug.augmenter.word as naw # uncomment for text perturbation - # aug = naw.SpellingAug(dict_path='./spelling_en.txt') # uncomment for text perturbation + import nlpaug.augmenter.word as naw + + aug = naw.SpellingAug(dict_path=None, + name='Spelling_Aug', + aug_min=1, + aug_max=10, + aug_p=0.3, + stopwords=None, + tokenizer=None, + reverse_tokenizer=None, + include_reverse=True, + stopwords_regex=None, + verbose=0) # You can choose all_perturbation to perturb categorical, text and numerical feature at the same time all_perturbation = { - "{{NUMERIC FEATURE NAME}}": lambda x: x["{{NUMERIC FEATURE NAME}}"] * 2, - "{{CATEGORICAL FEATURE NAME}}": lambda x: x["{{CATEGORICAL FEATURE NAME}}"].apply(lambda value: "{{CATEGORY 1}}" if value == "{{CATEGORY 2}}" else value), - "{{TEXTUAL FEATURE NAME}}": lambda x: x["{{TEXTUAL FEATURE NAME}}"].apply(lambda value: aug.augment(value)) - } + "{{NUMERIC FEATURE NAME}}": lambda x: x["{{NUMERIC FEATURE NAME}}"] * 2, + "{{CATEGORICAL FEATURE NAME}}": lambda x: "{{CATEGORY 1}}" if + x["{{CATEGORICAL FEATURE NAME}}"] == "{{CATEGORY 2}}" else x["{{CATEGORICAL FEATURE NAME}}"] , + "{{TEXTUAL FEATURE NAME}}": lambda x: aug.augment(x["{{TEXTUAL FEATURE NAME}}"]) + } # Or you can choose one feature at a time eg. Numerical feature perturbation = { @@ -113,14 +125,25 @@ items: output_df: Dataframe of rows where the prediction changes due to perturbation """ - #import nlpaug.augmenter.word as naw # uncomment for text perturbation - #aug = naw.SpellingAug(dict_path='./spelling_en.txt') # uncomment for text perturbation + import nlpaug.augmenter.word as naw + + aug = naw.SpellingAug(dict_path=None, + name='Spelling_Aug', + aug_min=1, + aug_max=10, + aug_p=0.3, + stopwords=None, + tokenizer=None, + reverse_tokenizer=None, + include_reverse=True, + stopwords_regex=None, + verbose=0) # You can choose all_perturbation to perturb categorical, text and numerical feature at the same time all_perturbation = {"{{NUMERIC FEATURE NAME}}": lambda x: x["{{NUMERIC FEATURE NAME}}"] * 2, - "{{CATEGORICAL FEATURE NAME}}": lambda x: x["{{CATEGORICAL FEATURE NAME}}"].apply( - lambda value: "{{CATEGORY 1}}" if value == "{{CATEGORY 2}}" else value), - "{{TEXTUAL FEATURE NAME}}": lambda x: x["{{TEXTUAL FEATURE NAME}}"].apply(lambda value: aug.augment(value))} + "{{CATEGORICAL FEATURE NAME}}": lambda x: "{{CATEGORY 1}}" if + x["{{CATEGORICAL FEATURE NAME}}"] == "{{CATEGORY 2}}" else x["{{CATEGORICAL FEATURE NAME}}"] , + "{{TEXTUAL FEATURE NAME}}": lambda x: aug.augment(x["{{TEXTUAL FEATURE NAME}}"])} # Or you can choose one feature at a time eg. Numerical feature perturbation = { @@ -180,14 +203,25 @@ items: Dataframe containing the rows whose probability doesn't increase after perturbation """ - #import nlpaug.augmenter.word as naw # uncomment for text perturbation - #aug = naw.SpellingAug(dict_path='./spelling_en.txt') # uncomment for text perturbation + import nlpaug.augmenter.word as naw + + aug = naw.SpellingAug(dict_path=None, + name='Spelling_Aug', + aug_min=1, + aug_max=10, + aug_p=0.3, + stopwords=None, + tokenizer=None, + reverse_tokenizer=None, + include_reverse=True, + stopwords_regex=None, + verbose=0) # You can choose all_perturbation to perturb categorical, text and numerical feature at the same time all_perturbation = {"{{NUMERIC FEATURE NAME}}": lambda x: x["{{NUMERIC FEATURE NAME}}"] * 2, - "{{CATEGORICAL FEATURE NAME}}": lambda x: x["{{CATEGORICAL FEATURE NAME}}"].apply( - lambda value: "{{CATEGORY 1}}" if value == "{{CATEGORY 2}}" else value), - "{{TEXTUAL FEATURE NAME}}": lambda x: x["{{TEXTUAL FEATURE NAME}}"].apply(lambda value: aug.augment(value))} + "{{CATEGORICAL FEATURE NAME}}": lambda x: "{{CATEGORY 1}}" if + x["{{CATEGORICAL FEATURE NAME}}"] == "{{CATEGORY 2}}" else x["{{CATEGORICAL FEATURE NAME}}"] , + "{{TEXTUAL FEATURE NAME}}": lambda x: aug.augment(x["{{TEXTUAL FEATURE NAME}}"])} # Or you can choose one feature at a time eg. Numerical feature perturbation = { @@ -243,14 +277,25 @@ items: Dataframe containing the rows whose probability doesn't increase after perturbation """ - #import nlpaug.augmenter.word as naw # uncomment for text perturbation - #aug = naw.SpellingAug(dict_path='./spelling_en.txt') # uncomment for text perturbation + import nlpaug.augmenter.word as naw + + aug = naw.SpellingAug(dict_path=None, + name='Spelling_Aug', + aug_min=1, + aug_max=10, + aug_p=0.3, + stopwords=None, + tokenizer=None, + reverse_tokenizer=None, + include_reverse=True, + stopwords_regex=None, + verbose=0) # You can choose all_perturbation to perturb categorical, text and numerical feature at the same time all_perturbation = {"{{NUMERIC FEATURE NAME}}": lambda x: x["{{NUMERIC FEATURE NAME}}"] * 2, - "{{CATEGORICAL FEATURE NAME}}": lambda x: x["{{CATEGORICAL FEATURE NAME}}"].apply( - lambda value: "{{CATEGORY 1}}" if value == "{{CATEGORY 2}}" else value), - "{{TEXTUAL FEATURE NAME}}": lambda x: x["{{TEXTUAL FEATURE NAME}}"].apply(lambda value: aug.augment(value))} + "{{CATEGORICAL FEATURE NAME}}": lambda x: "{{CATEGORY 1}}" if + x["{{CATEGORICAL FEATURE NAME}}"] == "{{CATEGORY 2}}" else x["{{CATEGORICAL FEATURE NAME}}"] , + "{{TEXTUAL FEATURE NAME}}": lambda x: aug.augment(x["{{TEXTUAL FEATURE NAME}}"])} # Or you can choose one feature at a time eg. Numerical feature perturbation = { @@ -309,14 +354,25 @@ items: Dataframe containing the rows whose probability doesn't decrease after perturbation """ - #import nlpaug.augmenter.word as naw # uncomment for text perturbation - #aug = naw.SpellingAug(dict_path='./spelling_en.txt') # uncomment for text perturbation + import nlpaug.augmenter.word as naw + + aug = naw.SpellingAug(dict_path=None, + name='Spelling_Aug', + aug_min=1, + aug_max=10, + aug_p=0.3, + stopwords=None, + tokenizer=None, + reverse_tokenizer=None, + include_reverse=True, + stopwords_regex=None, + verbose=0) # You can choose all_perturbation to perturb categorical, text and numerical feature at the same time all_perturbation = {"{{NUMERIC FEATURE NAME}}": lambda x: x["{{NUMERIC FEATURE NAME}}"] * 2, - "{{CATEGORICAL FEATURE NAME}}": lambda x: x["{{CATEGORICAL FEATURE NAME}}"].apply( - lambda value: "{{CATEGORY 1}}" if value == "{{CATEGORY 2}}" else value), - "{{TEXTUAL FEATURE NAME}}": lambda x: x["{{TEXTUAL FEATURE NAME}}"].apply(lambda value: aug.augment(value))} + "{{CATEGORICAL FEATURE NAME}}": lambda x: "{{CATEGORY 1}}" if + x["{{CATEGORICAL FEATURE NAME}}"] == "{{CATEGORY 2}}" else x["{{CATEGORICAL FEATURE NAME}}"] , + "{{TEXTUAL FEATURE NAME}}": lambda x: aug.augment(x["{{TEXTUAL FEATURE NAME}}"])} # Or you can choose one feature at a time eg. Numerical feature perturbation = { @@ -372,14 +428,25 @@ items: Dataframe containing the rows whose probability doesn't decrease after perturbation """ - #import nlpaug.augmenter.word as naw # uncomment for text perturbation - #aug = naw.SpellingAug(dict_path='./spelling_en.txt') # uncomment for text perturbation + import nlpaug.augmenter.word as naw + + aug = naw.SpellingAug(dict_path=None, + name='Spelling_Aug', + aug_min=1, + aug_max=10, + aug_p=0.3, + stopwords=None, + tokenizer=None, + reverse_tokenizer=None, + include_reverse=True, + stopwords_regex=None, + verbose=0) # You can choose all_perturbation to perturb categorical, text and numerical feature at the same time all_perturbation = {"{{NUMERIC FEATURE NAME}}": lambda x: x["{{NUMERIC FEATURE NAME}}"] * 2, - "{{CATEGORICAL FEATURE NAME}}": lambda x: x["{{CATEGORICAL FEATURE NAME}}"].apply( - lambda value: "{{CATEGORY 1}}" if value == "{{CATEGORY 2}}" else value), - "{{TEXTUAL FEATURE NAME}}": lambda x: x["{{TEXTUAL FEATURE NAME}}"].apply(lambda value: aug.augment(value))} + "{{CATEGORICAL FEATURE NAME}}": lambda x: "{{CATEGORY 1}}" if + x["{{CATEGORICAL FEATURE NAME}}"] == "{{CATEGORY 2}}" else x["{{CATEGORICAL FEATURE NAME}}"] , + "{{TEXTUAL FEATURE NAME}}": lambda x: aug.augment(x["{{TEXTUAL FEATURE NAME}}"])} # Or you can choose one feature at a time eg. Numerical feature perturbation = {