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Enron Mail |
FERC Eyes Rule To Tighten Affiliate-Dealing Regulations
Dow Jones International News, 09/10/01 INDIA: Enron, Indian utility step up war of words. Reuters English News Service, 09/10/01 Enron to Detail 3rd-Qtr Broadband Financial Results (Update1) Bloomberg, 09/10/01 Avici Systems to Fire 14% of Workforce to Cut Costs (Update3) Bloomberg, 09/10/01 FERC Eyes Rule To Tighten Affiliate-Dealing Regulations By Bryan Lee 09/10/2001 Dow Jones International News (Copyright © 2001, Dow Jones & Company, Inc.) OF DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- Federal energy regulators are scheduled to act Wednesday on new rules affecting natural gas pipeline and electric utility affiliate dealings. Sources say the U.S. Federal Energy Regulatory Commission plans to propose rules tightening up regulations prohibiting pipelines and utilities from providing market-sensitive information to their marketing affiliates. FERC rules allow monopoly pipeline and utility companies to sell natural gas and electricity at market rates providing they adopt codes of conduct that prevent the passing of information that provides a competitive advantage to their marketing affiliates. The changes under consideration stem from the commission's investigation of El Paso Natural Gas Co.'s (EPG) controversial contract with a marketing affiliate for pipeline capacity into California, according to sources. The affiliate transaction has been blamed for California's dramatic runup in natural gas prices over the past year, which contributed to the state's unprecedentedly high electricity costs last year. The proposed code-of-conduct changes also reflect the sweeping convergence between the natural gas and power sectors in the years since FERC deregulated the pipeline industry in the 1980s. FERC's rules prohibit pipelines from sharing market-sensitive information with their gas-marketing affiliates. But the rules don't address the pipeline's power marketing affiliates. The commission is looking to expand the code-of-conduct rules to address all marketing affiliates, sources said. These sources say the template for the pending change can be found in the conditions FERC imposed in a 1999 order authorizing the acquisition of Pittsburgh-based Consolidated Natural Gas by Dominion Resources (D). The commission approved the electricity-natural gas convergence merger, contingent on Dominion agreeing to adopt codes of conduct applying equally to its gas and power marketing affiliates. Those conditions didn't stop Dominion from agreeing Monday to purchase Louis Dreyfus Natural Gas Corp. (LD) for $2.3 billion. FERC's planned rule changes would apply to other electric utilities with pipeline investments, such as CMS Energy (CMS), Duke Energy (DUK) and American Electric Power Co. (AEP). It is unclear how the changes would affect joint operating agreements, such as the one between Entergy Corp. (ETR) and privately held Koch Industries. The largest impact will be for large pipeline companies with extensive power marketing operations and investments in power plants. For example, El Paso, Williams Cos. (WMB) and Enron Corp. (ENE), represent about 70% of the interstate pipeline industry and are among the nation's top power marketers and merchant power plant developers. As of last week, the commission was still debating the scope of the order, with some on the regulatory panel pushing for even stronger rules than the precedent established in the Dominion order. "It could very well rattle the sabre about whether transmission providers ought to have affiliates at all that do business on their own transmission systems," said a FERC source. -By Bryan Lee, Dow Jones Newswires; 202-862-6647; Bryan.Lee@dowjones.com Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIA: Enron, Indian utility step up war of words. By Himangshu Watts 09/10/2001 Reuters English News Service (C) Reuters Limited 2001. NEW DELHI, Sept 10 (Reuters) - U.S. energy giant Enron Corp and an Indian utility, locked in a payments battle, stepped up their war of words on Monday. The Dabhol Power Co (DPC), 65-percent owned by Enron, said in a statement late on Monday the Maharashtra State Electricity Board (MSEB) was being "illogical" in saying high-priced power from the project caused heavy losses to the utility. Enron has accused MSEB of defaulting on payments for power, but the utility says the outstanding amount could be adjusted against payments due from Dabhol as DPC had not abided by some of its commitments in the contract. The $2.9-billion plant, India's largest direct foreign investment, has been idling since May, when MSEB, its sole buyer, stopped taking power saying it was too costly. DPC said its power was not expensive if the plant's capacity was properly utilised, and that it did not cause a heavy loss to the utility, but MSEB Chairman Vinay Bansal said Dabhol's power made the utility lose 13.4 billion rupees last year. Bansal told reporters on the sidelines of an awards ceremony that the utility suffered the loss because DPC charged a high tariff of eight rupees per kilo-watt hour, which is more than three times costlier than power from other sources. DPC said its average tariff between May 1999 and May 2001 was 5.64 rupees while the Plant Load Factor (PLF) was 52 percent. Had the PLF been been 90 percent, DPC's tariff would then have been only 4.13 rupees, it said. "The MSEB chairman is also a member of DPC's board...and is very well aware of DPC's tariff," DPC said. It said it found it surprising that he had opted to "present DPC's tariff completely out of context." POWER SHORTAGE DPC said MSEB faced a shortage of more than 1000 MW of power and could have used electricity from the 740 MW Dabhol project, which has been idling since May, when MSEB, its sole buyer, stopped taking power saying its was too expensive. Running the plant at 90 percent PLF would have reduced the cost of Dabhol's power, Enron said in the statement. "...it is clear the MSEB is well in a position to draw power at 90 percent PLF...thus resulting in a most competitive current tariff of 4.40 rupees pwer kilo-Watt hour." Bansal admitted that MSEB faced a shortage but said a higher PLF would not have made much of a difference to its losses. "It would be marginally lower, but not very much. You see we bought at eight rupees a unit. Supposing even if it was five rupees a unit, instead of 13-billion loss, it would be a 10 billion," he said. DPC said Dabhol's power was sold not only to subsidised agricultural users, but also to industrial and commercial customers, who paid a high price for electricity. "This results in a much average higher revenue realisation for MSEB, and is therefore illogical to suggest the MSEB bears a loss of 13.4 billion rupees on DPC power," the statement said. It said the tariff could be reduced to 3.80 rupees pwer kilo-Watt hour if state and federal levies on naphtha were reduced. Enron has announced its intention to sell its 65-percent stake in the Dabhol Power Co following the dispute over payments of power from the 740-MW first phase of the project which was built last year. The 1,444 MW second phase of the project was 97-percent complete when construction was abandoned due to the dispute. Apart from Enron, which holds 65 percent in DPC, U.S. Conglomerate, General Electric and construction firm Bechtel each own 10 percent. MSEB owns the remaining 15 percent. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron to Detail 3rd-Qtr Broadband Financial Results (Update1) 2001-09-10 16:18 (New York) Enron to Detail 3rd-Qtr Broadband Financial Results (Update1) (Adds closing share price.) Houston, Sept. 10 (Bloomberg) -- Enron Corp., the top energy trader, will break out financial data on its ailing Enron Broadband Services unit in the third quarter, though the unit is now part of its Wholesale Services division, a spokeswoman said. ``At this time, we are planning to have the broadband numbers visible,'' spokeswoman Karen Denne said. In the past, Wholesale Services numbers have been reported as a block, with little detail about specific businesses' performances. Power Finance & Risk, an energy publication, reported that analysts were worried Enron wouldn't detail results of the broadband business after moving it to the wholesale services division. The broadband unit had a loss before interest, minority interests and taxes of $102 million last quarter, compared with an $8 million loss a year earlier. Sales plunged 89 percent. Denne wouldn't say whether financial information for Wholesale Services' other businesses would be released. They include Enron Americas, Enron Global Markets, Enron Industrial Markets, Enron Europe, Enron Networks, Enron Engineering and Operational Services and Enron Principal Investments. The division generates most of Enron's revenue growth. ``We're very focused on the fact that investors want more visibility, and we're working on that,'' Denne said. Shares of Houston-based Enron rose $1.19 to $32.76. Avici Systems to Fire 14% of Workforce to Cut Costs (Update3) 2001-09-10 16:15 (New York) Avici Systems to Fire 14% of Workforce to Cut Costs (Update3) (Updates with closing share price.) North Billerica, Massachusetts, Sept. 10 (Bloomberg) -- Avici Systems Inc., a maker of equipment to direct Internet traffic, said it will cut costs by firing 55 of its 400 employees, or 14 percent of its workforce. Avici shares fell 79 cents, or 28 percent, to $1.99 after the company said it expects a third-quarter loss almost double analysts' estimates. The stock has fallen 98 percent in the past year. The firings today come as Avici's biggest customers, Qwest Communications International Inc., AT&T Corp. and Enron Corp., cut jobs and equipment budgets. The three companies make up more than three-fourths of Avici's revenue, said Sam Wilson, an analyst with Merrill Lynch & Co. Inc. Qwest said today it will eliminate 4,000 jobs and reduce its 2002 capital spending to $5.5 billion from earlier forecasts of $7.5 billion. ``I would not say that we lost any customers over the quarter,'' said Pete Chadwick, vice president of marketing for Avici. ``They are seeing a little bit less growth and they are just being more cautious because they are obviously focused on capital conservation.'' Last month, Avici retreated from statements that Enron and Williams Communications Group Inc. will buy $45 million of its products by mid-2002. Avici is the No. 3 maker of high-speed data- traffic routers behind Cisco Systems Inc. and Juniper Networks Inc. Third-Quarter Sales Avici said it had fewer and smaller orders than it anticipated and expects to report third-quarter revenue of $9 million to $10 million, less than the $22.5 million to $23.5 million it previously forecast. Sales in the second quarter of 2000 were $4.36 million. The North Billerica, Massachusetts-based company said it expects to have a third-quarter loss of 40 cents to 42 cents a share excluding one-time charges. It was expected to lose 23 cents a share, the average estimate of six analysts polled by Thomson Financial/First Call. The company said it will take one-time charges in the third quarter of $15 million to $18 million for excess inventory, asset utilization, severance and ``facility-related'' costs. Avici is planning to be profitable in 2003, barring any worsening in the market, Chadwick said. ``It's really difficult in this environment to predict that with any certainty.'' Demand for Internet protocol services, which allow computers to talk to each other, is expected to continue, ``so customers will have to start deploying equipment in response to that,'' Chadwick said. Avici makes routers, which enable carriers to build networks to handle the Internet traffic coming through the protocol. (Avici will hold a conference call and Web cast at 4:30 p.m. EST. to participate via telephone, dial 877-260-8896 in the U.S., 612- 338-1652 outside the U.S. To hear the Webcast, go to http://www.avici.com)
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