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Power Politics: Energy Crisis Offers Clues to the Workings Of Bush=20
Administration --- Cheney Does Heavy Lifting And Bush Rides Agenda; Taste f= or=20 Horse-Trading --- `A Lot of Pain in the West' The Wall Street Journal, 02/16/2001 Generators: No Plans To Build Peaking-Power Plants In Calif Dow Jones, 02/16/2001 Developments in California's Electricity Crisis Associated Press Newswires, 02/16/2001 Bush Pushes Energy Plan in Mexico Trade: President Wants to Cut Hemispheric= =20 Barriers for Oil, Gas and Electricity But it May Be a Hard Sell South of th= e=20 Border Los Angeles Times, 02/16/2001 Enron Corp. to Increase Investment in Argentina, Cronista Says Bloomberg News, 02/16/2001 Petrobras, Repsol Plan $300-Mln Bolivian Pipeline, Valor Says Bloomberg News, 02/16/2001=20 Governor of Buenos Aires Shoots for the Presidency, the People's Discontent= =20 His Ammunition The Wall Street Journal, 02/16/2001 `Terms of Reference of Godbole Panel Must Include DPC Review' The Times of India, 02/16/2001 Indian Trade Unions Urge Government to Take Over Enron Project Asia Pulse, 02/16/2001 India: Enough is Enough for Enron Corp? Business Line (The Hindu), 02/16/2001 MSEB Tightening Screws on Power Thefts, Defaulters The Times of India, 02/16/2001 India State Pays Bills to Enron, But Electricity Crunch Persists=20 International Herald Tribune, 02/16/2001 Universal Signs Video-on-Demand Deal=20 The Industry Standard, 02/16/2001 California Questions Dominate Industry Conference Reuters, 02/15/2001 Judge in Court Challenge to Gov. Gray Davis Steps Down=20 Associated Press, 02/15/2001=20 Calpine Says California Must Address Debt to Traders=20 Bloomberg News, 02/15/2001 Enron Saga Spills Over Into Cyberspace Hindustan Times, 02/15/2001 Williams' EnergyNewsLive.com Features Top Energy Newsmakers=20 PR Newswire, 02/15/2001=20 Electric Deregulation Trial Run Begins Associated Press Newswires, 02/15/2001 ---------------------------------------------------------------------------= --- ----------------------------------------------- Power Politics: Energy Crisis Offers Clues to the Workings Of Bush=20 Administration --- Cheney Does Heavy Lifting And Bush Rides Agenda; Taste f= or=20 Horse-Trading --- `A Lot of Pain in the West' By Jeanne Cummings Staff Reporter of The Wall Street Journal 02/16/2001 The Wall Street Journal=20 A1 (Copyright © 2001, Dow Jones & Company, Inc.)=20 WASHINGTON -- George W. Bush had barely celebrated his belated presidential= =20 victory when he was hit by the energy crisis in the West.=20 In a series of telephone calls to Mr. Bush's Texas ranch before Christmas,= =20 Utah Gov. Michael Leavitt spent hours raising the alarm with the=20 president-elect's top aides. A supply squeeze had sent utility bills soarin= g=20 not just in California but in neighboring states as well, with the prospect= =20 of bigger spikes in the months ahead. How Mr. Bush went on to handle the crisis, the first big challenge of his= =20 presidency, offers some early clues to how his White House will function. H= e=20 has leaned heavily on Vice President Dick Cheney to handle the details. Tha= t=20 allowed Mr. Bush to stick doggedly to his chosen public message -- and=20 shielded the president from some difficult policy choices. Even Mr. Leavitt= =20 never insisted on speaking directly to the new president, who was busy nami= ng=20 his cabinet.=20 Mr. Bush bent his free-market, limited-government principles to accommodate= a=20 crisis, but so far by only a little: He offered a single two-week extension= =20 of Mr. Clinton's executive order directing suppliers to sell power to nearl= y=20 bankrupt California utilities. While turning to national issues, Mr. Bush= =20 remained open to a state-level problem, offering his former gubernatorial= =20 colleagues a sensitive ear.=20 And he worked hard to use unexpected events to help buttress his arguments= =20 for his policy agenda. Just as he has used the economic slowdown to garner= =20 support for his tax-cut agenda, he hopes to use the Western energy crisis t= o=20 win political support in Congress for his controversial agenda of expanding= =20 exploration into environmentally sensitive areas in Alaska and the Rocky=20 Mountains.=20 Such exploration might not yield energy for years, or yield much power at= =20 all, especially of the sort California needs. But it's a pet project of a= =20 White House where the president and vice president are both veterans of the= =20 oil industry. Winning the necessary support for exploration is part of the= =20 challenge of drafting a comprehensive energy bill, which a team of top aide= s,=20 led by Mr. Cheney, is working to produce within 45 to 60 days.=20 The energy problem has shadowed Mr. Bush throughout the first month of his= =20 presidency. It commanded his private attention every day of his first week = in=20 office, even as he was publicly unveiling education-reform proposals. More= =20 recently, he has received regular briefings from Mr. Cheney, who is=20 consulting key members of Congress and energy experts. The matter will move= =20 front and center today when the president makes his first foreign visit, to= =20 Mexico, where he is expected to discuss expanded natural-gas exploration an= d=20 trade with Mexican President Vicente Fox Quesada. At the same time, Mr.=20 Cheney will be back in Washington convening the first working meeting of th= e=20 various cabinet secretaries whose departments will be affected by a nationa= l=20 energy bill.=20 Some top Republicans believe the energy crisis could cast an even larger=20 cloud over Mr. Bush's first year than the softening economy -- especially i= f=20 the continuing supply squeeze leaves Western consumers facing new price=20 increases this summer, as widely predicted. "We recognize that this is a=20 challenge we will be faced with at least through the summer. We're obviousl= y=20 monitoring it very closely," says Energy Secretary Spencer Abraham.=20 The problem has its roots in California's 1996 energy-deregulation bill,=20 signed by former GOP Gov. Pete Wilson. As part of the negotiations over the= =20 bill, the state's utilities agreed to buy power on short-term contracts,=20 making them vulnerable to wholesale-price swings. The law also capped=20 consumer bills, which meant rising fuel costs couldn't be passed along to t= he=20 users.=20 The situation became critical last year when natural-gas prices spiked upwa= rd=20 at the same time that hot summer weather and a booming economy increased=20 usage and low rainfall depleted the region's hydroelectric power. Californi= a=20 soon began gobbling up any available power in the Western region's electric= =20 grid, which drove wholesale rates sky-high and wound up increasing the=20 utility bills of consumers in neighboring states. Idaho residents, for=20 instance, saw their bills rise by 25%, while California users still benefit= ed=20 from retail-price caps.=20 So Gov. Leavitt wasn't the only Western governor trying to get the new=20 president to focus on the issue. Wyoming Gov. Jim Geringer raised it on Jan= .=20 9, when he and Mr. Bush were standing together in the pasture parking lot o= f=20 the Bush ranch, awaiting the arrival of other Republican governors invited = to=20 a Bush-sponsored barbecue. The issue was also discussed later among all the= =20 governors, but only in broad terms, participants say.=20 Three days later, Clinton administration officials convened the first meeti= ng=20 of all the parties involved in the California crisis. To provide a voice fo= r=20 Mr. Bush's team, Clinton aides invited the president-elect's friend and=20 fellow Texan Kenneth Lay, head of Houston-based Enron Corp. As the largest= =20 trader of gas and electricity in North America, Enron has profited from the= =20 energy crisis. During the 2000 campaign, Mr. Lay donated more than $300,000= =20 to the GOP, according to the Center for Responsive Politics.=20 A second meeting was held four days later and the rough outlines of a=20 solution began to emerge, but time had run out on the Clinton team. The onl= y=20 question left was how to handle an executive order to keep the lights on in= =20 California.=20 On the Wednesday before Inauguration Day, Gene Sperling, Mr. Clinton's top= =20 economic adviser, and his Bush counterpart, Lawrence Lindsey, sat down for = a=20 final discussion in a second-floor office at the White House. They agreed t= o=20 one last Clinton order that would reach, by three days, into the Bush term.= =20 The goal was to give the Bush team some breathing room.=20 The next day, Mr. Bush and his top advisers settled into the Blair House in= =20 Washington to put the finishing touches on his inaugural speech. But their= =20 work was at times interrupted by discussions about the energy crisis. That= =20 night, Mr. Lindsey arrived and briefed the president on his meeting with Mr= .=20 Sperling.=20 On Inauguration Day, Mr. Bush received a congratulatory call from Californi= a=20 Gov. Gray Davis, who had stayed in Sacramento because of the crisis. In tha= t=20 call, Davis aides say, the Democratic governor made his first direct pitch = to=20 Mr. Bush for an extension of the Clinton executive order forcing energy sal= es=20 to California utilities. While the two men diverge politically, they had=20 worked together on issues affecting border states. Last June, Mr. Bush was= =20 one of three U.S. governors who joined six Mexican governors at a dinner=20 hosted by Mr. Davis in Sacramento's Crocker Art Museum. Their shared=20 experiences as state leaders made Mr. Bush sympathetic to Mr. Davis's reque= st=20 for extra time to get a recovery bill through the state legislature.=20 On Sunday night, Mr. Abraham, the new energy secretary, called Mr. Davis to= =20 hear another pitch, and the two men spoke again on Monday, the first offici= al=20 working day of the Bush administration. While Mr. Davis was sounding out Mr= .=20 Abraham, Mr. Lindsey met with Mr. Bush in the Oval Office and recommended= =20 that he grant the extension. The strongest argument in favor of issuing the= =20 order, Mr. Lindsey says, was Mr. Bush's belief that the federal government= =20 should help states solve their own problems. Later that day, while Mr. Bush= =20 was highlighting education reform, Mr. Lindsey, Mr. Abraham, Commerce=20 Secretary Donald Evans, Treasury Secretary Paul O'Neill, and Christine Todd= =20 Whitman, director of the Environmental Protection Agency, began sorting out= =20 the administration's short-term and long-term responses to the crisis.=20 On Tuesday, Mr. Bush discussed energy with his economic policy team, which= =20 included Messrs. Cheney and Lindsey, Chief of Staff Andrew Card, Deputy Chi= ef=20 of Staff Josh Bolten, and top aides Karen Hughes and Karl Rove. Mr. Bush to= ok=20 a seat in front of the Oval Office fireplace while his aides settled in on= =20 small couches. The energy crisis had to be managed on two fronts, Mr. Bush= =20 told the group. Short-term, they had to do what they could for California.= =20 But an equally important objective needed to be development of a=20 comprehensive policy for the country because of the broad economic=20 implications of the crisis, he said.=20 They weighed setting up a cabinet-level task force, an idea that Messrs. Bu= sh=20 and Cheney appeared to have already discussed privately. The two men often= =20 confer each morning, before or after the regularly scheduled=20 national-security briefing. They also chat throughout the day as they come= =20 and go from meetings. As the group hammered out the details of which agenci= es=20 needed to be represented on the task force, it was not lost on anyone that= =20 the energy crisis in the West may also be an opportunity to build support a= nd=20 a sense of urgency for their national energy agenda.=20 Mr. Bush tested the political waters the next day in the Cabinet Room durin= g=20 a meeting with bipartisan leaders from Capitol Hill, according to Nevada=20 Democrat Sen. Harry Reid. This time, it was the president who raised the=20 subject, and Western lawmakers jumped at the call for stronger leadership a= nd=20 action on the issue. The conversation didn't go into specifics though,=20 because "we would have gotten into an argument" over Mr. Bush's support for= =20 drilling in Arctic National Wildlife Reserve, recalls Mr. Reid, an ardent= =20 opponent of that proposal and a staunch supporter of expansion of renewable= =20 energy.=20 On Friday, the White House was teeming with educators, lawmakers, governors= =20 and citizens who had come to witness the transition to a new administration= .=20 After a public event hosted by Mr. Bush to highlight education, four=20 governors -- Messrs. Leavitt and Geringer, Arizona's Jane Dee Hull, and=20 Idaho's Dirk Kempthorne -- slipped into Mr. Cheney's tiny West Wing office = to=20 talk about energy. The room smelled of fresh paint, and the glasses were so= =20 new that they lacked the presidential seal. For nearly an hour, Mr. Cheney= =20 probed the governors about how the crisis was affecting their states and=20 constituents. None of the governors brought the issue up with Mr. Bush.=20 The governors decision to seek out Mr. Cheney rather than intrude on Mr.=20 Bush's choreographed agenda created an awkward moment the following Monday= =20 when Mr. Bush announced the creation of the Cheney-led energy policy group.= =20 "Can't think of a better man to run it than the vice president," Mr. Bush= =20 said. "We're very aware in this administration that this situation in=20 California is beginning to affect neighboring states. Western governors cam= e=20 to see the vice president," he said, and then rushed to add -- "and they ca= me=20 to see me, as well."=20 Since that announcement, Mr. Cheney has taken over the job of creating an= =20 energy-policy bill and Mr. Bush receives regular updates from Mr. Lindsey,= =20 including a session held last night just before the president's trip to=20 Mexico. But the potential political and economic ramifications of the energ= y=20 crunch on the new administration are as layered as the problem itself. And = as=20 consumers face the full cost of the crisis, pressure will become enormous o= n=20 Mr. Bush to wade deeper into it.=20 Administration officials worry that high energy costs could prompt consumer= s=20 to cut household budgets and persuade factories to begin layoffs. The "soft= =20 landing" that the Bush administration is counting on could become a hard on= e=20 and threaten the government surpluses Mr. Bush must have to sustain his tax= =20 cut and other domestic initiatives. As Mr. Bush himself warned when he=20 unveiled his national energy policy during a September campaign stop in=20 Saginaw, Mich.: "Our nation has had three recessions in the last generation= ,=20 and each one was tied to an energy shock."=20 The Western energy crisis also will continue to test the balance between Mr= .=20 Bush's commitment to open markets and his sympathy for the plight of a fell= ow=20 governor. The decision to extend the Clinton forced-sales order was "a very= =20 difficult call," Mr. Lindsey says, in part because the help provided to=20 California came at the expense of the utility customers in other Western=20 states, several of which are governed by Mr. Bush's close Republican=20 colleagues. "This was not a costless extension," Mr. Lindsey says. "There's= a=20 lot of pain in the West for having done the two-week extension."=20 But the supply crunch that drove up wholesale costs this winter may only ge= t=20 worse as temperatures warm in the West and residents from California to New= =20 Mexico turn on their air conditioners. Republican officeholders, wary of th= e=20 sort of political backlash that helped cost one California Congressman his= =20 seat last November, are pressing for further federal intervention. Alaska= =20 Sen. Frank H. Murkowski, the powerful chairman of the Senate Energy and=20 National Resources Committee, says a market-based cap on wholesale prices m= ay=20 be needed for a transitional period.=20 But Mr. Bush is flatly rejecting the idea of price caps. "A short-term dela= y=20 of a needed solution," he says. The idea is also anathema to Mr. Cheney,=20 whose first White House tour during the Ford administration was dominated b= y=20 an energy crisis made more complex by President Nixon's policy of price=20 controls. Nasdaq Chairman Frank Zarb, who served as Mr. Ford's energy czar= =20 and worked with Mr. Cheney and other aides while crafting an energy policy,= =20 says the price controls were "just a dumb idea." In a recent interview, Mr.= =20 Lindsey said even a temporary cap on natural gas or electricity is not=20 something he'd recommend. "Anyone who looks at the history of price caps=20 would have to suspect one that was so-called temporary," he says.=20 But adhering to free-market principles could yet become a drag on Mr. Bush'= s=20 popularity, warns former U.S. Sen. Bennett Johnston, a Democrat Mr. Bush on= ce=20 considered for energy secretary. If the administration takes no action and= =20 prices remain high, he says, "people will start trying to find somebody to= =20 blame."=20 ---=20 John Fialka contributed to this article. Generators: No Plans To Build Peaking-Pwr Plants In Calif 02/16/2001 Dow Jones Energy Service=20 (Copyright © 2001, Dow Jones & Company, Inc.)=20 (This article was originally published Thursday)=20 By Jessica Berthold=20 OF DOW JONES NEWSWIRES=20 LOS ANGELES -(Dow Jones)- Major electricity suppliers with experience=20 building power plants in California said Thursday they have no plans to=20 construct new peaking units in the state for operation by summer 2001. Their position raises questions about whether Gov. Gray Davis will be able = to=20 get 5,000 megawatts of new power on California's grid by July, a target he= =20 announced last week.=20 Davis' plan offers incentives to generators, but it also leaves key issues= =20 unsettled, creating uncertainty in the market. And time is short. If the ne= w=20 plants are to come on line, construction will have to begin by mid-March.= =20 "We're not going to be able to have any peakers this summer," said Mark=20 Palmer, spokesman for Enron Corp (ENE). "It's not possible physically, and= =20 there's no market that would allow plants to be profitable."=20 Davis' plan calls for 5,000 megawatts of additional generation to come on= =20 line in the state by July 2001. Roughly half of that power will come from= =20 large plants now under construction and from easing environmental=20 restrictions, thus allowing plants currently off line to run as long as=20 operators buy emission credits.=20 The other half will come from peaking generation units - typically small=20 units designed to run only during periods of high demand. The state=20 Independent System Operator has contracts for construction of 1,279 MW wort= h=20 of peakers. The governor hopes to get 1,000 MW more through an emergency=20 order cutting the permit process from four months to 21 days.=20 But generators say cutting permit time is not enough of an incentive for=20 generators to build in the state.=20 "While the governor's announcement about streamlining the approval process= =20 appears attractive on the face of it, there are still problems of=20 creditworthiness and regulatory uncertainty," said Richard Wheatley,=20 spokesman for Reliant Energy (REI). "We have to allocate our equipment for= =20 projects which will have the greatest potential to succeed. We don't have a= ny=20 projects that could be on the ground in California this summer."=20 Generators Fear They Won't Recover Investment=20 Generators say they are wary of investing more capital, in part because the= =20 state Department of Resources would likely be signing the contracts for the= =20 1,000 MW of emergency power, and they've been burned once already by the DW= R.=20 Generators thought the DWR was covering the state's entire "net short"=20 electricity needs in recent weeks. But last week, the agency said it has no= t=20 been paying for power it deemed unreasonably priced. That means the bills g= ot=20 passed to the state's two investor-owned utilities, which haven't paid thei= r=20 power bills in weeks due to cash and credit problems.=20 Another problem, say generators, is that they don't know what rate of retur= n=20 they can expect from the peakers. The governor's order says the peaker powe= r=20 must be sold only to the DWR and at a "reasonable rate" - but that rate has= =20 not been defined.=20 "Exactly how the state determines reasonableness is the key question," said= =20 Tom Williams, spokesman for Duke Energy (DUK).=20 Williams added that Duke wouldn't build peakers for the summer, because the= =20 company "already has enough risk in that market right now."=20 If the state could guarantee a workable market for power this summer,=20 generators would rush to build in the state, because they'd know they could= =20 recover their costs, said Enron's Palmer. But with the state's history of= =20 price caps, generators simply see to much uncertainty, he added.=20 A Mirant Corp. (MIR) spokeswoman said the company had not announced any pla= ns=20 to build new peakers. Calpine Corp. (CPN) said it was still considering its= =20 options, but planned to concentrate this summer on larger generation projec= ts=20 already under way in California.=20 ISO Peaker Program Also In Jeopardy=20 The ISO peaker program, which has 1,279 MW of projects due on line by summe= r=20 and currently in various stages of completion, is also in jeopardy due to= =20 generators' concerns they won't be paid enough to cover their investment,= =20 said an ISO spokesman who helps manage the peaker program.=20 "Credit concerns are a real issue among generators at this point," said Bob= =20 Theaker, ISO manager of reliability contracts. "The way our tariff authoriz= es=20 us to pay generators, we would levy an uplift on people who serve load=20 through the ISO grid - in essence, it comes down to the utilities."=20 Theaker said the governor is still looking into ways that generators would = be=20 paid for their peaker contracts, given that the utilities are unable to pay= .=20 "A lot of projects are in suspended animation right now as people wait to s= ee=20 how they will get paid,"=20 Theaker said. "We don't know how far (the governor's) discussions have=20 progressed, but it's got to be resolved soon because the development and=20 building of these projects requires a 3-4 month lead time."=20 Theaker added that mid-March would be the latest that construction could=20 begin or resume if the state expected to see any power from peakers by June= =20 15.=20 -By Jessica Berthold; Dow Jones Newswires; 323-658-3872;=20 jessica.berthold@dowjones.com Developments in California's electricity crisis By The Associated Press 02/16/2001 Associated Press Newswires=20 Copyright 2001. The Associated Press. All Rights Reserved.=20 A look at developments in California's electricity crisis:=20 THURSDAY: - California power regulators extend a Stage 3 alert for the 31st straight= =20 day, scrambling to find enough power to avert rolling blackouts.=20 - Gov. Gray Davis says he is convinced the state acquisition of Southern=20 California Edison and Pacific Gas and Electric Co.'s transmission systems= =20 would make the utilities financially viable again. He gives Democratic=20 legislative leaders his utility debt-relief plan, but swears them to secrec= y=20 and declines to release details himself.=20 - The California Energy Commission's plant siting committee recommends that= =20 the commission license a 500-megawatt plant in western Kern County. The=20 Western Midway Sunset Cogeneration Project would be located near Derby Acre= s=20 and be the fifth power plant approved for the county since April 1999. It= =20 would produce enough electricity for about a half-million households.=20 - The state Public Utilities Commission extends an order to help PG&E suppl= y=20 its customers with natural gas. The PUC votes unanimously to let the utilit= y=20 use its revenue to pay off natural gas bills first for at least 90 more day= s.=20 - Eight "renewable energy" suppliers, including wind-, solar-and geothermal= =20 electricity generators, among others, form a creditors committee to decide= =20 how to deal with Edison's failure to pay about $210 million in bills from= =20 them since November.=20 - Electricity wholesalers and state power grid officials disagree on the=20 meaning of a key Federal Energy Regulatory Commission ruling.=20 FERC says the ISO can't waive a requirement that PG&E and Edison be=20 creditworthy. Suppliers say that backs up their argument that the state,=20 already buying a third of the power the strapped utilities' customers use,= =20 must take responsibility for last-minute power buys the Independent System= =20 Operator makes to fill gaps in Edison's and PG&E's supplies. The ISO conten= ds=20 the ruling backs up their argument that they can keep billing Edison and PG= &E=20 for the emergency power they buy from the wholesalers, regardless of the=20 utilities' ability to pay for it.=20 - The chairman of the House energy panel says California's power problems= =20 should not signal the demise of electricity deregulation. Rep. Billy Tauzin= ,=20 R-La., holding a hearing on deregulation, says problems similar to=20 California's could develop in other states if competition in the electricit= y=20 markets is handled unwisely.=20 - Assemblyman John Dutra, D-Fremont, proposes legislation that would make o= il=20 refineries, pipelines and fuel production plants among the last hit if ther= e=20 are rolling blackouts.=20 - A hearing on a lawsuit by Duke Energy against Davis is delayed after U.S.= =20 District Judge Matthew Byrne in Los Angeles recuses himself, saying he owns= =20 500 shares of Edison International stock and is a friend of John Bryson, he= ad=20 of Southern California Edison's parent company.=20 Duke is challenging Davis' authority to seize long-term energy contracts=20 owned by Edison and PG&E. Davis commandeered the contracts rather than see= =20 them sold by the California Power Exchange to pay utility debts.=20 - In another federal court case in Los Angeles, a group of energy wholesale= rs=20 and the exchange agree to delay their legal battle while federal regulators= =20 consider the underlying issues. The exchange has tried to charge power=20 generators to cover payments owed to it by Edison and PG&E. Enron, Avista a= nd=20 other generators oppose the so-called charge backs. The exchange argues it= =20 had no choice after Davis commandeered the utilities' contracts, which had= =20 served as collateral for their debts.=20 - PG&E's stock closes at $12.84 per share, up .34 cents. The stock of Ediso= n=20 International, the utility's parent, rises .06 cents a share to close at=20 $12.31.=20 - Talks continue on an attempt by AES Corp. owner of a Huntington Beach pow= er=20 plant that has agreed to pay $17 million to settle air pollution claims, to= =20 crank up two dormant generators to feed the state's ailing power grid. The= =20 proposed retrofitting is the subject of a workshop in Sacramento to discuss= =20 how AES would account for its environmental impacts. The move requires stat= e=20 permission; consumer groups and local leaders oppose it.=20 WHAT'S NEXT:=20 - U.S. District Judge Frank Damrell Jr. holds a hearing Friday in Sacrament= o=20 on the ISO's attempt to continue requiring three major wholesalers to sell = it=20 power. He is weighing whether to replace his temporary restraining order=20 against the three companies with a preliminary injunction, the next step=20 before a permanent injunction.=20 - The governor plans Friday afternoon to announce his proposal to help Edis= on=20 and PG&E pay off their debts.=20 - A judge in Los Angeles holds a hearing Friday on Duke Energy's challenge = of=20 Davis' authority to seize long-term electricity contracts owned by Edison a= nd=20 PG&E.=20 - State power regulators anticipate a Stage 3 power alert will remain in=20 effect at least through Friday.=20 - A federal judge in Los Angeles holds a hearing Tuesday on energy=20 wholesalers' challenge of the state Power Exchange's attempt to make them= =20 cover payments owed it by Edison and PG&E.=20 - An order from Davis requiring businesses to substantially reduce outdoor= =20 lighting after business hours takes effect in mid-March. Businesses that fa= il=20 to comply face a potential fine of $1,000 a day.=20 THE PROBLEM:=20 - High wholesale power costs, high demand, transmission glitches and a tigh= t=20 supply worsened by scarce hydroelectric power in the Northwest and=20 maintenance at aging California power plants are all factors in California'= s=20 power crisis.=20 Much of the problem is blamed on the state's deregulation of the power=20 industry. The state Public Utilities Commission ordered Edison and PG&E to= =20 sell their power plants and buy wholesale electricity. Meanwhile, the state= 's=20 1996 utility deregulation law froze the rates the state's investor-owned=20 utilities could charge their customers.=20 Edison and PG&E say they've lost nearly $13 billion since June to high=20 wholesale prices they are barred from passing onto ratepayers, and are clos= e=20 to bankruptcy. Electricity and natural gas suppliers, alarmed by the two=20 companies' poor credit ratings, are refusing to sell to them, leading the= =20 state to start buying power for the utilities' nearly 9 million residential= =20 and business customers. Business; Financial Desk Bush Pushes Energy Plan in Mexico Trade: President wants to cut hemispheric= =20 barriers for oil, gas and electricity. But it may be a hard sell south of t= he=20 border EVELYN IRITANI TIMES STAFF WRITER 02/16/2001 Los Angeles Times=20 Home Edition C-1 Copyright 2001 / The Times Mirror Company=20 When President Bush meets today in Mexico with President Vicente Fox, he wi= ll=20 deliver the same message he did to Canadian Prime Minister Jean Chretien la= st=20 week in Washington: Let's share energy.=20 Bush wants a "hemispheric energy policy" that, although only vaguely define= d=20 so far, would foster the seamless flow of oil, natural gas and electricity= =20 among the three nations and reduce barriers that limit foreign access to=20 energy resources. It is a goal that Chretien embraces but that presents Fox with big practica= l=20 and constitutional problems.=20 And the White House initiative faces opposition from other quarters as a=20 result of California's power debacle, which is now drawing blame for soarin= g=20 energy prices in Canada and Mexico, as well as the United States. It has=20 sparked a global reassessment of energy deregulation and could turn America= 's=20 energy industry into the latest target for anti-globalization forces.=20 "The energy companies could easily become a poster industry for the message= =20 that, if globalization means a market economy, then that's bad news," said= =20 Gary Hufbauer, a trade analyst at the Institute for International Economics= =20 in Washington.=20 As the world's biggest single consumer of energy, the U.S. has a point of= =20 view that to some outsiders--especially in energy-producing countries such = as=20 Mexico and Canada--is purely one of self-interest. Critics liken the U.S.-l= ed=20 deregulation effort to economic imperialism disguised as free trade, where= =20 the U.S. forces other countries to open their energy markets to powerful=20 American firms that then siphon off the energy for SUV-driving,=20 electricity-gobbling Americans.=20 "We now have a continental energy market largely run by American corporatio= ns=20 that is based on a model of increased consumption and the premise that we'l= l=20 never run out [of energy]," said Maude Barlow, chairwoman of the Ottawa-bas= ed=20 Council of Canadians, that country's largest public-interest group.=20 In his first few weeks in office, Bush has used California's electricity=20 shortage as ammunition to promote the need for a long-term energy policy=20 centered on greater development of oil and natural gas. One element would= =20 have oil, gas and electricity flow more freely within North America.=20 So far, the former Texas oilman's plans for a continental energy market hav= e=20 been long on rhetoric and short on details. U.S.-Canada trade in energy is= =20 already largely unfettered, with Canada sending $27.6 billion in energy=20 products south in 1999. And U.S. energy firms are major players in Canada.= =20 "We are in the business of selling them oil and gas and electricity,"=20 Chretien said after meeting with Bush.=20 But as its own energy reserves dwindle and its appetite grows, the United= =20 States has a lot to gain from reducing barriers everywhere to trade in oil,= =20 gas and electric power, an economic enterprise valued at between $600 billi= on=20 and $1 trillion worldwide.=20 That is why Washington over the years has sought to open up energy markets= =20 through pacts such as the North American Free Trade Agreement and the World= =20 Trade Organization.=20 Previously, energy services such as oil production and electricity=20 transmission were not part of trade agreements because those areas were=20 largely controlled by government-owned monopolies. But today, at least 100= =20 countries are in some stage of energy deregulation or privatization,=20 according to Robert Michaels, a deregulation expert at Cal State Fullerton.= =20 Deregulation advocates argue that tearing down these barriers will foster= =20 investment in infrastructure in energy-rich but undeveloped countries,=20 speeding the construction of power systems. They point out that nearly 2=20 billion people around the world don't even have access to electricity or=20 other forms of commercial energy.=20 But the California experience has changed attitudes everywhere. Energy=20 analyst Lawrence Makovich of Cambridge Energy Research Associates in=20 Cambridge, Mass., has been traveling the globe urging anxious governments n= ot=20 to turn their backs on energy deregulation because of California's failed= =20 deregulation scheme.=20 "We are at a very critical point here," Makovich said. "Are we going to=20 continue and fix this market and get things right, or retreat back toward= =20 government control and regulation?"=20 Trade agreements such as the WTO establish rules on how markets should be= =20 liberalized and the proper role of government. A U.S. proposal to add energ= y=20 services to the WTO trade pact, for example, would require countries to do= =20 away with excessive tariffs on drilling equipment and prohibit preferential= =20 treatment for domestic firms in bidding for oil concessions or getting acce= ss=20 to electrical grids.=20 "There are reasons why historically these [energy markets] were set up as= =20 integrated monopolies, because they knew security of supply was essential t= o=20 any modern economy," said Ellen Gould, an economist in Vancouver, Canada, w= ho=20 served on the board of BC Hydro, British Columbia's publicly owned utility.= =20 "You can't have the lights go out. [But] you can't introduce market forces= =20 unless you're prepared to see a little blood."=20 Political and economic tensions over energy in the NAFTA region, especially= =20 in Canada, illustrate the obstacles facing the Bush initiative.=20 Under NAFTA, Canada agreed to reduce government intervention and ensure a= =20 more stable flow of energy across the border in exchange for increased acce= ss=20 to the much larger U.S. market. That included a pledge not to give Canadian= =20 customers preferential treatment by charging them less than foreigners and = to=20 maintain exports at a certain level, even if Canada was experiencing a=20 shortfall or price surges at home.=20 Since then, Canada's exports to the United States have jumped dramatically.= =20 Canada's share of the U.S. natural gas market has tripled to 15%.=20 Throughout California's energy crisis, Canadian producers and governments i= n=20 resource-rich provinces have enjoyed a windfall because of the resulting=20 price run-ups.=20 But in Alberta, which in January became the first Canadian province to=20 deregulate electricity, a sharp spike in gas and electricity prices has=20 triggered a consumer and business backlash. Energy has become a hot issue i= n=20 an upcoming provincial election, and the government has provided hundreds o= f=20 millions of dollars in energy rebates to unhappy customers. Even the=20 province's largest manufacturers have pronounced electricity deregulation a= =20 mistake.=20 Steven Shrybman, a trade attorney in Ottawa, believes Canada signed onto a= =20 pact that undermined its sovereignty while allowing the United States, by= =20 getting more oil and gas from Canada, to reduce its dependence on oil from= =20 the Middle East and lessen the likelihood of going to war to keep its cars= =20 and heaters fueled.=20 From the American point of view, Shrybman says, "I regard these provisions = of=20 NAFTA as an alternative to the Iraq war."=20 In Mexico, the constitution requires that natural resources remain under=20 domestic control. The country was exempted from most of NAFTA's energy=20 market-opening provisions. That has made foreign firms wary of investing in= =20 Mexico's energy sector.=20 "You can't have any foreign ownership, and yet they want investment and=20 joint-venture partners," said Enron's Hillings. "There's an awful lot of ga= s=20 right around the Texas-Mexico border that's never been developed."=20 Meanwhile, Mexico can't even meet its own burgeoning demand for gasoline or= =20 electricity. By some estimates, Mexico needs to invest $30 billion in energ= y,=20 including natural gas to feed new power plants, money that Fox has said wil= l=20 have to come from outside investors. U.S. energy firms are already building= =20 power plants in Baja California and other parts of Mexico, but nearly all t= he=20 output is needed in Mexico itself.=20 Sergio Rivas, an economist at Primer Enfoque, an energy consulting firm in= =20 Mexico City, predicted that Fox will have trouble persuading Mexicans=20 suffering brownouts themselves that they should provide energy to their=20 wealthier northern neighbors.=20 "People would ask, 'How is it possible we are thinking to supply electricit= y=20 to the United States when we don't have enough for our own consumption?' "= =20 Rivas said.=20 "In the political sense, this issue is very, very complicated."=20 (BEGIN TEXT OF INFOBOX / INFOGRAPHIC)=20 Oil, Gas and Power=20 Energy imports from Canada and Mexico soared in the 1990s, but President Bu= sh=20 wants more. GRAPHIC: Oil, Gas and Power, Los Angeles Times;=20 Enron Corp. to Increase Investment in Argentina, Cronista Says Bloomberg News, 2/16/1 8:18 (New York) Buenos Aires, Feb. 16 (Bloomberg) -- Azurix Corp., a unit of the world's=20 largest energy trader Enron Corp., will boost investment in an Argentine=20 water concession by 50 percent this year under an accord that ends months o= f=20 wrangling, the daily Cronista reported. Azurix will spend an additional $44 million this year to improve drinking= =20 water services under its concession to deliver potable water and other=20 services to Buenos Aires province, the paper said. The agreement brings to a close a conflict in which Buenos Aires Governor= =20 Carlos Ruckauf threatened to revoke Azurix's contract by convening a specia= l=20 legislative sessions after residents complained of poor service. Houston-based Azurix has invested $94 million of the $439 million it promis= ed=20 to win a 30-year water concession with Argentina's most populous province.= =20 Residents of Bahia Blanca, a port and petrochemical center, complained in M= ay=20 of foul smelling water. (El Cronista, 2/16, p. 11) {ELCR <GO<} --John Lyons in Buenos Aires (5411) 4321-7738 or ajones5@bloomberg.net=20 through the New York newsroom at (212) 318-2300/lm Petrobras, Repsol Plan $300-Mln Bolivian Pipeline, Valor Says Bloomberg News, 2/16/1 7:59 (New York) Rio de Janeiro, Feb. 16 (Bloomberg) -- Petroleo Brasileiro SA, the=20 state-control oil company, and Repsol YPF SA plan to build a $300 million= =20 Bolivian pipeline to transport natural gas, avoiding a pipeline in which=20 competitor Enron Corp. has a stake, Valor newspaper reported. Petrobras, Repsol-controlled Petrolera Andina SA and France's TotalFinaElf = SA=20 plan to build the 420-kilometer (260 miles) pipeline to link gas reserves a= t=20 Bolivia's San Antonio and San Alberto fields to the $2 billion,=20 Petrobras-controlled GasBol pipeline that carries the gas to Brazil's most= =20 industrialized regions. Construction will take about 20 months, Valor said. The 24 million cubic meters a day pipeline will allow the companies to avoi= d=20 paying high tolls to Houston-based Enron, which shares with Bolivia's=20 government control of a competing pipeline, known as Yabog, the daily said. Petrobras, which only recently lost its monopoly rights to supply Brazil wi= th=20 gas, is battling Enron and companies such as U.K.-based BG Plc for gas supp= ly=20 contracts in Brazil, hoping its recently constructed 30 million cubic meter= a=20 day GasBol pipeline will allow it to undermine competitors. Brazil's petrol= eum regulator ANP recently dealt Petrobras a blow, allowing Enron and BG to=20 transport gas through GasBol while Petrobras fails to use its full capacity= . <Valor B3 2/16 http://www.valoronline.com.br<; --Joshua Schneyer in Rio de Janeiro (5521) 516-1552 through the Sao Paulo= =20 newsroom (5511) 3048-4530/bh =20 International Governor of Buenos Aires Shoots for the Presidency, the People's Discontent= =20 His Ammunition By Pamela Druckerman Staff Reporter of The Wall Street Journal 02/16/2001 The Wall Street Journal A9 (Copyright © 2001, Dow Jones & Company, Inc.) BUENOS AIRES -- While many Argentines were still nursing hangovers on New= =20 Year's Day, Buenos Aires Gov. Carlos Ruckauf was holding a news conference.= =20 His urgent message to the nation: "I'm going to be the next president." Never mind that Argentina's sitting president, Fernando de la Rua, was just= a=20 year into his four-year term. Mr. Ruckauf was once again reveling in his ro= le=20 as the self-appointed spokesman for victims of a painful recession widely= =20 blamed on Mr. de la Rua.=20 Governor of a state comprising more than a third of the country's populatio= n=20 and total output, Mr. Ruckauf has struck a chord with beleaguered Argentine= s=20 by sounding off about surging crime and stubbornly high unemployment. He ha= s=20 also sided with local businesses against foreign competitors and free-trade= =20 deals and with consumers against aspects of the country's sweeping=20 privatization program.=20 The strategy has paid big dividends for the 56-year-old governor. In recent= =20 opinion polls, he ranked twice as popular as Mr. de la Rua and had a higher= =20 positive rating than any other politician on the national scene.=20 But certain positions have increasingly put Mr. Ruckauf at odds with=20 multinational companies operating in Buenos Aires state. Last month, his=20 administration ordered the state legislature to review a $439 million=20 water-distribution contract held by Azurix Corp., which is majority-owned b= y=20 Houston's Enron Corp., following a contract dispute. Mr. Ruckauf crossed=20 swords with Wal-Mart Stores Inc. of Bentonville, Ark., recently, when his= =20 government backed a law that greatly restricts the size of new hypermarkets= ,=20 a move seen as an effort to protect local retailers.=20 Observers tend to view Mr. Ruckauf's more-populist platforms as a vehicle f= or=20 the governor's political ambitions, rather than the product of deeply held= =20 beliefs. Before becoming a firebrand governor, Mr. Ruckauf was a low-profil= e=20 sidekick as vice president to former President Carlos Menem, who was a=20 confirmed believer in free markets. Analysts note that Mr. Ruckauf regularl= y=20 courts foreign investors to buy the state's global bonds and appointed a=20 former Argentine ambassador to the U.S., Diego Guelar, to nurture high-leve= l=20 contacts with U.S. officials. "He's a total pragmatist," says political=20 analyst Rosendo Fraga. In terms of Mr. Ruckauf making major policy changes,= =20 he says, "there's a low probability that he'll do it."=20 Mr. Ruckauf has also drawn the ire of some within his own Peronist party,= =20 which ceded the presidency to Mr. de la Rua's Alliance party in December=20 1999. Party chief Mr. Menem, along with several other Peronist governors, a= re=20 believed to have their eyes on the 2003 presidential race. And many were=20 jarred when Mr. Ruckauf attacked his opponent in the gubernatorial race for= =20 being pro-abortion in an appeal to the party's ultraconservative wing.=20 Abortion is generally outlawed in the largely Catholic country and typicall= y=20 isn't raised as an issue in political campaigns.=20 But the governor's no-holds-barred message is resonating strongly with=20 ordinary Argentines, who quickly soured on their new president when he fail= ed=20 to bring fast economic relief. In almost daily declarations, Mr. Ruckauf ha= s=20 called for a crackdown on youth violence, sweeping tax cuts and increased= =20 funding for small and medium-sized businesses. He has attacked Brazil,=20 Argentina's partner in the regional trade pact Mercosur, for robbing jobs= =20 from Argentina. And he recently led an appeal to the national government fo= r=20 a "social aid package" to accompany the nearly $40 billion financial packag= e=20 led by the International Monetary Fund in December. "I make proposals that= =20 are absolutely clear," Mr. Ruckauf said recently.=20 Opponents say Mr. Ruckauf's popularity surge is just a blip on the screen= =20 that will disappear when the economy bounces back, as it shows some signs o= f=20 doing.=20 So far, though, enthusiasm for Mr. Ruckauf hasn't been mitigated by the fac= t=20 that he hasn't actually managed to cut crime and that unemployment has stuc= k=20 close to 15%. He also hasn't taken the fall for his state's worsening=20 finances: Late last year, Standard & Poor's downgraded the province's forei= gn=20 and local-currency debt. S&P analyst Diana Mondino says current expenses ha= ve=20 increased "dramatically" under Mr. Ruckauf's administration.=20 "Ruckauf's strong image has more to do with his personal attributes than hi= s=20 performance," explains pollster Graciela Romer. According to her surveys on= =20 unemployment and security issues, "People don't think the facts have change= d." `Terms of Reference of Godbole Panel Must Include DPC Review' The Times of India News Service 02/16/2001 The Times of India Copyright (C) 2001 The Times of India; Source: World Reporter (TM) MUMBAI: N.D. Patil, chairperson of the coordination committee of the=20 Democratic Front coalition, has categorically told chief minister Vilasrao= =20 Deshmukh that the terms of reference for the Godbole committee must include= a=20 review of the Dabhol power project.=20 Mr Patil told The Times of India News Service that the terms should also=20 provide for reviewing all clearances given to the project and examining all= =20 the relevant laws and notifications. Mr Patil, a former minister of the Peasants and Workers party and a respect= ed=20 politician, is a staunch opponent of the project. He has demanded the=20 scrapping of phase II of the project saying that it is exploitative and wou= ld=20 imposes a severe burden on the state's finances and the consumers.=20 Mr Patil is of the view that the second phase can be scrapped as the=20 agreement with Enron violates several provisions of the Contracts Act. Some= =20 experts feel that phase II would be so deleterious to the state and the=20 consumers that it would be more acceptable to bear the costs of scrapping i= t.=20 The Godbole committee will make recommendations not only on the Dabhol powe= r=20 project but also on two other major proposed private sector projects of=20 Reliance at Patalganga and Ispat group at Bhadrawati.=20 The Maharashtra state electricity board had signed power purchase agreement= s=20 for both the projects during the Shiv Sena-BJP administration. However, the= =20 MSEB told the government that it would find it difficult to absorb the high= =20 volume of additional power. The Ispat project has a capacity of 1082 MW and= =20 Reliance 447 MW.=20 Besides, if the proposed 500 MW plant of BSES comes up at Saphale near=20 Palghar, it would further create problems w.r.t cost of purchasing power fo= r=20 the MSEB, sources said. Ideally, BSES should be ready to give a cross-subsi= dy=20 to MSEB, sources said. Sources said the BSES was making a lot of profit sin= ce=20 it catered to a large number of affluent consumers in Mumbai. ``While they= =20 take away the cream, we are forced to cater to the rural areas at a low pri= ce=20 and suffer losses,' the sources said. A senior official said the state=20 electricity board should also benefit from Mumbai's affluence.=20 The board has protested to the government against the proposed BSES plant a= t=20 Saphale. BSES must compensate MSEB, the sources said. BSES has submitted=20 another proposal for a 500 MW coal-based unit at Nandgaon near Amravati. ``= It=20 should not even be discussed until BSES meets its obligations by paying=20 stand-by charges for the Dahanu plant,'' the sources said.=20 Meanwhile, MSEB has launched a major drive to disconnect power supply to=20 those defaulting on bills. The daily number of disconnections has gone up= =20 from nearly 12,000 to 20,000, the sources said on Saturday. Staff members w= ho=20 take stern action against defaulters are being rewarded.=20 MSEB chairperson Vinay Bansal has assured honest officials that they will n= ot=20 be penalised in any way in their drive against power thefts and defaulters.= =20 Nearly 150,000 meters are being installed in the next few months as part of= =20 the energy audit exercise. Power thefts will be monitored and guilty=20 employees will be suspended. So far 185 employees have been suspended=20 including one superintending engineer and 12 class I officers.=20 Oil mills in Gondia and Bhandara district of Vidarbha are opposing the=20 introduction of electronic meters as these cannot be tampered with, sources= =20 said. Indian Trade Unions Urge Government to Take Over Enron Project 02/16/2001 Asia Pulse=20 © Copyright 2001 Asia Pulse PTE Ltd.=20 MUMBAI, Feb 16 Asia Pulse - The government of India's Maharashtra state has= =20 been urged by the Trade Unions Joint Action Committee (TUJAC) to take over= =20 phase I of Enron's gas project and cancel phase II, saying that "whatever= =20 compensation" necessary could be made by the government and the people of= =20 Maharashtra.=20 Addressing a rally organised by 30 employees trade unions under the TUJAC= =20 banner yesterday at Shivaji Park in the central Mumbai, the State Governmen= t=20 Employees Confederation leader R G Karnik said, the TUJAC would organise a= =20 protest march on March 15, to protest the proposed changes in the Maharasht= ra=20 labour laws. The TUJAC will go ahead with the march if both the federal and the state=20 governments did not change their decision which goes against the interests = of=20 workers and the people of the state, Karnik claimed.=20 Any kind of revision of phase II is not going to help the people of=20 Maharashtra in the long run, TUJAC leaders said.=20 On the country' economic policies, "The federal government has to adopt a= =20 rethinking on the new economic policies as it has affected the public,=20 economically and mentally," the TUJAC Deputy Convenor, A D Golandas, said.= =20 The employees from the satellite towns of Mumbai Thane, Nashik and Pune=20 participated in large numbers in the rally, the leaders added.=20 (PTI) 16-02 2122 India: Enough is enough for Enron Corp? 02/16/2001 Business Line (The Hindu)=20 Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) -= =20 Asia Intelligence Wire=20 MUMBAI, Feb. 15. IN its quest for higher returns, Enron Corp would sell=20 assets, such as its stake in Dabhol Power Company (DPC), if the price is=20 right, says an article in BusinessWeek, quoting Enron executives.=20 The February 12 story on Enron's activities worldwide, also talked about ho= w=20 Enron had faced a barrage of criticism in many Third World countries. Not only has the Dabhol project been a draining experience, but it is no=20 longer seen as a wise investment, says the article. It quoted the Enron=20 President, Mr. Jeffrey K. Skilling: "We shouldn't be in there building=20 $2-billion power plants. ... Our cost of capital is too high to do that."= =20 A spokesperson for Enron India, however, said the reference in the article = to=20 the selling of its stake did not mean it intended to sell out of DPC=20 altogether.=20 "It is with reference to what we have already announced. We are looking for= =20 someone to buy the additional 15 per cent we have in the company following= =20 the Maharashtra State Electricity Board acquiring only half of the 30 per= =20 cent stake it was to take. We have already appointed Credit Suisse First=20 Boston for the same, we want to revert to the earlier equity stake we had,"= =20 said a spokesperson for Enron India.=20 On Mr Skilling's comment that Enron should not be "in there building=20 $2-billion power plants," Enron India spokesperson said the reference was t= o=20 building new plants in India. "We have no further plans to build more plant= s=20 here."=20 Kripa Raman MSEB tightening screws on power thefts, defaulters The Times of India News Service 02/16/2001 The Times of India=20 Copyright (C) 2001 The Times of India; Source: World Reporter (TM)=20 MUMBAI: The Maharashtra State Electricity Board (MSEB) has started tighteni= ng=20 its grip on defaulters and power theft in the wake of the Enron crisis. The= =20 drive has already borne fruit with revenue collections rising and cases of= =20 power theft in the wane.=20 Making this claim, a top MSEB official said that the government would have = to=20 decide the fate of the DPC project at the political level and not depend on= =20 the Godbole committee for solutions. Speaking to TOINS on the condition of anonymity, he said that over the past= =20 few months MSEB had shown better recovery; the collection in January was Rs= =20 911 crore against Rs 795 crore in December. It is expected to be around Rs= =20 875 crore in February. Also, electricity lines of more than 20,000 defaulte= rs=20 were being disconnected on a daily basis.=20 Generation, too, has shown considerable improvement. Plant load factor (PLF= )=20 of MSEB's generation plants has achieved a peak capacity of 71 per cent,=20 which is a national record, he stated.=20 The main problem was MSEB's tariff structure, he said. The official pointed= =20 out that 1.18 crore of MSEB's 1.30 consumers were subsidised, i.e. nine out= =20 of every ten enjoy receive power at concessional rates. He, however, pointe= d=20 out that despite these shortcomings, MSEB continued to be one of the most= =20 efficiently run SEBs in the country.=20 The official conceded that power thefts continued to be a major cause of th= e=20 losses and also accepted the fact that there existed a nexus between power= =20 pilferers and some MSEB personnel. He revealed that nearly 200 MSEB officer= s=20 had been punished for turning a blind eye on power thefts.=20 The official said the Rajadhyaksha committee, appointed some of years ago b= y=20 the former Shiv Sena-BJP government to review Maharashtra's power situation= ,=20 had strongly recommended metered power supply all over the state. Neither= =20 this recommendation nor other important recommendations have been=20 implemented. Describing agriculturists' demand for power as a=20 `subsidy-induced demand', the official said it had been observed that=20 electric motors were left running even after the required amount of water w= as=20 drawn. This was happening simply because power was cheap, he said. India State Pays Bills to Enron, But Electricity Crunch Persists =20 John Elliott - Special to the International Herald Tribune=20 Friday, February 16, 2001=20 BOMBAY - The Indian state of Maharashtra has paid Enron Corp. $17 million i= n=20 overdue bills from a troubled power project, temporarily easing tensions with the U.S. company. But the payment of the bill came only after Enron intensified the standoff= =20 with the state, calling in the federal government, and it resolves none of= =20 the issues that prompted the dispute. Meanwhile, a severe energy shortage i= n=20 India continues to worsen. The confrontation was prompted by increases last year in the price of power= =20 from the Enron plant, which was begun in 1995 amid a backlash of nationalis= t=20 sentiment against the big outside investor. The state government called in= =20 December for Enron's entire $3 billion, 2,184-megawatt project in Dabhol to= =20 be renegotiated for a second time and stopped paying its bills. That provoked the company last month to demand payment of overdue bills. It= =20 invoked a central government guarantee intended to reassure skittish foreig= n=20 investors. The power minister, Suresh Prabhu, who comes from Maharashtra, stepped in a= nd=20 on Monday the state government paid the $17 million due. "We spoke to the= =20 state government and they have made their payment," Mr. Prabhu said. "Now= =20 both sides need to talk and we need to solve this situation." While the $17 million November payment was finally made, Enron says it is= =20 still owed additional payments from the project. The Enron project is part of a much wider problem. There is a national=20 shortage of power amounting to about 20 percent at peak periods, but=20 virtually bankrupt state electricity distribution boards throughout the=20 country can neither pay their bills nor provide financial guarantees for=20 builders of new power projects. "Given the financial health of the state electricity boards, we shall very= =20 soon reach a state of no return if we do not take corrective measures," Mr.= =20 Prabhu said, adding that new generation, transmission and distribution=20 projects costing more than $200 billion would be needed in the next 10 year= s. Mr. Prabhu has two immediate aims. One is to solve the Enron dispute and=20 salvage what is left of India's reputation as a destination for foreign=20 investment. At the same time, he is pushing the state electricity boards to= =20 revise their finances. For example, 90 percent of the Maharashtra board's= =20 power is sold below cost - some of it is virtually free - and one-third of= =20 its revenues disappear in theft and other distribution losses. Analysts suggest Enron and its bankers might be willing to discuss revising= =20 some of the Dabhol deal if they believed that the board, which is both its= =20 customer and a partner in the project, had sufficient revenues to be able t= o=20 pay its bills on time. For that to happen, the state government would have = to=20 introduce changes that reduce subsidies, implement a tougher rate structure= =20 and strengthen bill collection. The state government, however, is riven wit= h=20 political divisions, and some leftist parties plan state-wide demonstration= s=20 next month where they will call for the project to be scrapped. The problem is urgent because Dabhol's second phase is due to be commission= ed=20 in two stages in July and August, adding at least $40 million a month to th= e=20 bills that Enron sends to the board. Then, in January, liquefied natural ga= s=20 will begin to flow from Abu Dhabi and Oman under contracts that have alread= y=20 been finalized. The state will find it difficult to meet these deadliness on its own. One= =20 solution being discussed is for the state to call off its dispute with Enro= n=20 over the existing phase of the project and pay all outstanding bills. At th= e=20 same time it would demand renegotiation of phase two, with the aim of=20 reducing Enron's rates and off-loading some of the project to the central= =20 government. The project's bankers, which include Citibank, Bank of America, ANZ Grindla= ys=20 and ABN-AMRO, would then come under pressure to reduce financing charges,= =20 possibly by reducing interest payments and rescheduling debt in U.S. dollar= s=20 to Indian rupees. Enron would also be asked to reduce standing charges, whi= ch=20 are imposed irrespective of how much electricity the company produces and= =20 currently cost $20 million a month. Meanwhile Enron, which is refocusing on more developed economies, is=20 reviewing its other projects in India. It has canceled a 50-50 joint ventur= e=20 with Calcutta-based Ispat Industries for a gas-based power project at an=20 Ispat steelworks. A plan to build a telecommunications and Internet backbon= e=20 across Maharashtra, in a joint venture with the state electricity board, is= =20 also being reviewed.=20 Universal signs video-on-demand deal=20 By LAURA RICH=20 The Industry Standard, February 16, 2001 Universal Studios has announced it will distribute new releases and extensi= ve=20 film archives through video-on-demand service Intertainer.=20 Subscribers to the digital cable channel will be able to choose among 300= =20 movies from eight major movie studios at any time. The addition of Universa= l=20 gives Intertainer the broadest selection of major motion pictures among=20 video-on-demand players, which include Blockbuster, CinemaNow and SightSoun= d.=20 Intertainer is rolling out a service in partnership with Enron Broadband.= =20 ``Intertainer is a terrific partner for our ongoing VOD efforts because of= =20 its experience in the category,'' Holly Leff-Pressman of Universal Televisi= on=20 & Networks Group said in a statement.=20 Intertainer is a relatively small competitor from an audience standpoint. T= he=20 company was formed in 1997 and just launched its VOD service last spring. T= he=20 service is currently available in Cincinnati and Willow Grove, Pa., and wil= l=20 be rolled out in seven more cities by the end of summer. Currently, there a= re=20 fewer than 10,000 subscribers to Intertainer.=20 Intertainer's deal with Universal comes as Hollywood mulls the digital futu= re=20 for film. Most studios are digitizing their films and drawing up plans to= =20 deliver their libraries over the Internet to consumers and movie theaters.= =20 Sony's Web-based MovieFly system is gearing up for a spring launch, and=20 Disney also is said to have a VOD system in the works. The rest of the=20 studios are said to be in varying stages of talks with Sony or Disney.=20 Intertainer continues to make strides even though studios have a history of= =20 despising the middleman. Blockbuster has long locked horns with the studios= ,=20 which have complained that the chain was reaping ancillary film revenues th= ey=20 should have controlled.=20 By aligning with Intertainer, the studios are supporting a new middleman by= =20 bolstering it with a larger selection of movies than their own services=20 likely will have. Antitrust concerns prevent the studios from grouping all= =20 their content in a single jointly owned channel. But they also are better o= ff=20 distributing their films to as many out
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