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---------------------- Forwarded by Robert Badeer/HOU/ECT on 08/17/2000 10:28
AM --------------------------- Carla Hoffman 08/16/2000 09:09 AM To: Tim Belden/HOU/ECT@ECT, Robert Badeer/HOU/ECT@ECT, Jeff Richter/HOU/ECT@ECT, Phillip Platter/HOU/ECT@ECT, Mike Swerzbin/HOU/ECT@ECT, Diana Scholtes/HOU/ECT@ECT, Sean Crandall/PDX/ECT@ECT, Matt Motley/PDX/ECT@ECT, Mark Guzman/PDX/ECT@ECT, Tom Alonso/PDX/ECT@ECT, Mark Fischer/PDX/ECT@ECT cc: Subject: DJ Calif Generators: `We Welcome Probe Into Power Market' - DJ Ca lif ISO Urges FERC To Reject Pwr Producers' Complaint ---------------------- Forwarded by Carla Hoffman/PDX/ECT on 08/16/2000 09:16 AM --------------------------- Enron Capital & Trade Resources Corp. From: "Pergher, Gunther" <Gunther.Pergher@dowjones.com< 08/16/2000 06:11 AM To: "Golden, Mark" <Mark.Golden@dowjones.com< cc: (bcc: Carla Hoffman/PDX/ECT) Subject: DJ Calif Generators: `We Welcome Probe Into Power Market' - DJ Ca lif ISO Urges FERC To Reject Pwr Producers' Complaint 12:15 GMT 16 August 2000 =DJ Calif Generators: `We Welcome Probe Into Power Market' (This article was originally published Tuesday) By Jason Leopold OF DOW JONES NEWSWIRES LOS ANGELES (Dow Jones)--When California Attorney General Bill Lockyer completes his investigation into possible "collusion" in the wholesale electricity market by generators, energy companies say he will probably find the same thing Geraldo Rivera found in Al Capone's safe: nothing. Still, those companies that own generation in the state say they welcome the probe into the power market by Attorney General Bill Lockyer. "We have done nothing wrong at all," said Tom Williams, spokesman for Duke Energy North America (DUK). "Our plants have been running all summer long. Prices are high throughout the west. We wouldn't invest $1.7 billion in new generation and then try and rig the market." For the past two months, utilities, lawmakers and other market participants have made allegations that generators are manipulating the market and are largely responsible for the price spikes. Locker's office said an investigation is still pending. State regulators are also conducting their own investigation, the findings of which will be submitted to the governor and the Federal Energy Regulatory Commission by the end of the year. Allegations Said Unsubstantiated There isn't a shred of evidence to support allegations, said Severing Borenstein, director of the University of California, Berkley's, Energy Institute. "There are no antitrust laws that state you can't charge a premium price for power," Borenstein said. "Manipulation is a bad word. That's used in the commodities market to find a loophole and take advantage of the rules. "I would say this is exercising market power. ... If you want to charge high prices you can. These are guys who play against each other every day. There is no sort of collusion that would interest the justice department ... ." The reason for the inquiry ordered By Gov. Gray Davis, he said, is as a consequence of San Diego consumers being the first in the nation to pay market-based rates for electricity. The high wholesale costs paid by utility San Diego Gas & Electric, a unit of Sempra Energy (SRE), were passed on to ratepayers and resulted in utility bills more than doubling. Gov. Davis ordered the inquiry and asked federal regulators to conduct their own investigation as well. Dynegy (DYN) President Steve Bergstrom also says that an investigation "will turn up nothing." So why conduct one? "This is a very politically charged issue," Bergstrom said. "When something goes wrong you have to find someone to point the finger at." A source in the governor's office said Davis is aware that Attorney General Lockyer's investigation may turn up nothing, but Gov. Davis "has a responsibility to his constituents." Supply vs. Demand What the investigation will turn up is evidence that there is a shortage of power in the state and not enough power plants being built to meet increasing demand, said Terry Winter, chairman and chief executive officer of the California Independent System Operator. Winter said he doesn't believe that there is anything wrong with the way generators sell their power and 98% of the time the market works well. "Is it market abuse to bid at the price cap ($250 per megawatt-hour) knowing that you're 1,000 MW short? I have trouble identifying that as market power abuse," Winter said. Despite some proposed regulatory changes, such as bid caps on wholesale energy prices and a rate freeze for SDG&E customers, Duke Energy, Dynegy, Southern Co. (SO) and Reliant (RLI) all still plan to invest in generation in the state. That's a different stance than the companies took a month ago when the ISO reduced the wholesale price cap in the real-time market to $250/MWh. "At the end of the day the market is short power and you got to get people to build new generation," said Dynegy's Bergstrom. "We got a big investment in California. We're not walking away from that." -By Jason Leopold, Dow Jones Newswires; 323-658-3874; jason.leopold@dowjones.com Copyright © 2000, Dow Jones & Company Inc 12:15 GMT 16 August 2000 DJ Calif ISO Urges FERC To Reject Pwr Producers' Complaint (This article was originally published Tuesday) WASHINGTON (Dow Jones)--California's power grid administrator Monday urged federal regulators to reject a complaint from power producers seeking compensation in the event out-of-state power transactions are curtailed during an extreme power grid emergency. The independent system operator told the Federal Energy Regulatory Commission that the power producers seek compensation in the event of a "situation that never has occurred any time since the ISO began operations, and if it were to occur in the future, would do so rarely." The ISO noted that its tariff governing access to the state's grid already allows for compensation in the event of curtailed exports, and decried the power producers' complaint as "a collateral attack" on a previous FERC order rejecting claims that the tariff failed to provide adequate compensation. Curtailing scheduled power transactions and exports would be a last resort measure taken only after other options have been exhausted, the ISO said. The power producers should adjust their contracts to factor in the risk of interruption in the event of a state-wide grid emergency, the ISO said. The ISO's objections were echoed by the state's electricity distribution utilities and California regulators. They complained that the power producers are merely trying to get out from under the price controls the ISO has imposed in an effort to rein in skyrocketing power prices this summer. The generators "knew when they purchased California power plants and when they entered into their export contracts that the ISO could alter their schedules in an emergency. For them to ask the commission to make it even more expensive, and hence, more difficult, for the ISO to maintain grid reliability in California is irresponsible," said Southern California Edison, a unit of Edison International (EIX). "The complaint is a sham," declared the California Public Utilities Commission. "The true intent of the complaint ... is to avoid the ISO price caps by making sales to affiliates or cooperating entities located out of state, and sell the power back to the ISO at uncapped prices reflecting the generators' market power," the PUC said, calling for FERC to summarily reject the complaint. "The complaint is factually unsupported, legally unfounded, complains of conduct consistent with the ISO's authority under pertinent FERC decisions, and seeks to avoid the price cap," the PUC said. But power marketers and other power producers voiced support for the complaint, filed Aug. 3 by Reliant Power Generation Inc. (REI), Dynegy Power Marketing Inc. (DYN) and Southern Energy California (SO). "By subjecting curtailed energy transactions to its maximum purchase price of $250, and simply ignoring the financial impact on sellers, the Cal ISO would be overtly discriminating against export transactions and market participants who schedule energy for export," said the Electric Power Supply Association, the national trade group representing competitive power producers. "It is critical that power producers ... know with certainty that the curtailment of scheduled energy exports by Cal ISO will be compensated," said Morgan Stanley Capital Group Inc. "Now that the ISO Governing Board has lowered purchase price caps to $250, it is significantly more likely that the curtailment of exports will occur more frequently. Less energy will be imported into California and more energy will leave California in search of higher prices," said Williams Energy Marketing & Trading Co. in support of the complaint's call for actual damages and lost opportunity costs. At least one power purchaser voiced support for the producers' position as well. "It seems a very basic point that if the Cal ISO must divert the transactions of others to meet its own loads, that is should pay the full costs of doing so," said the Northern California Power Agency. -By Bryan Lee, Dow Jones Newswires; 202-862-6647; bryan.lee@dowjones.com Copyright © 2000, Dow Jones & Company Inc G_nther A. Pergher Senior Analyst Dow Jones & Company Inc. Tel. 609.520.7067 Fax. 609.452.3531 The information transmitted is intended only for the person or entity to which it is addressed and may contain confidential and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. If you received this in error, please contact the sender and delete the material from any computer. <<Gunther Pergher (E-mail).vcf<< - Gunther Pergher (E-mail).vcf
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