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Bandwidth Market: Trade For DS3 Capacity Nets High Price
Dow Jones Energy Service, 07/24/01 USA: Northeast utilities on track to form RTO - PJM chief. Reuters English News Service, 07/24/01 EnergyBusinessWatch Releases Two-Part Interview With FERC Chairman Curt Hebert PR Newswire, 07/24/01 Natural Gas Project Decision Due Soon-Venezuelan Official Dow Jones Energy Service, 07/24/01 USA: Black Hills signs deal for 273-MW Nevada power plant. Reuters English News Service, 07/24/01 German Energy Blue Chips E.On, RWE Return To Form Dow Jones International News, 07/24/01 Black Hills To Buy Nev. Power Complex From Enron Dow Jones News Service, 07/24/01 INDIA: U.S. looks "beyond sanctions" at ties with India. Reuters English News Service, 07/24/01 Allegheny Energy to split up Hagerstown utility to create company for power generation; Permission for IPO sought; Remaining company to distribute energy to retail customers The Baltimore Sun, 07/24/01 FERC Should Oversee All Utilities, Lawmaker Says (Update1) Bloomberg, 07/24/01 Energy Generators Fall With Gas, Electricity Prices (Update1) Bloomberg, 07/24/01 Black Hills to Purchase Generation Complex From Enron (Update1) Bloomberg, 07/24/01 Dan Walters: Blame game over California's energy crisis will continue for years Sacramento Bee, 07/24/01 Bandwidth Market: Trade For DS3 Capacity Nets High Price 07/24/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- A direct trade done Tuesday for DS3 bandwidth between Seattle and Vancouver, B.C., brought one of the highest prices ever recorded in the market. The deal, priced at two cents a DS0 mile a month, will start as soon as the circuit can be provisioned, said a trader. Direct trades are done by the counterparties themselves without an intermediary like a broker. Another direct deal was done for DS3 bandwidth between Seattle and Los Angeles for a three-month contract that also will start as soon as the circuit is provisioned. The price was $0.0075/DS0 mile/month. One other trade was done Tuesday for DS3 bandwidth in calendar year 2002 between New York and Dallas through Enron Corp. pooling points at $0.0015/DS0 mile/month. Pooling points are network interconnection sites where title to bandwidth is transferred. They are also used to monitor quality of service. -By Michael Riekeand Erwin Seba, Dow Jones Newswires, 713-547-9207, 713-547-9214; michael.rieke@wsj.com, erwin.seba@dowjones. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Northeast utilities on track to form RTO - PJM chief. 07/24/2001 Reuters English News Service (C) Reuters Limited 2001. WASHINGTON, July 24 (Reuters) - With the help of a federal mediator, Northeast electricity transmission grid operators are on track to combine their assets under a common roof, Phillip Harris, chairman of the PJM Interconnection, told reporters on Tuesday. "I think that's do-able," Harris said, referring to the Federal Energy Regulatory Commission's July 11 rule ordering the New York Independent System Operator, PJM, PJM West and New England Independent System Operator to form a single regional transmission organization (RTO). All the entities convened Monday in a closed-door hearing before FERC Administrative Law Judge Peter Young to begin 45 days of negotiations to hammer out the formation of the single Northeast RTO. "We can't solve all of the issues, but we can come up with a plan" during that time, Harris said. RTOs are not likely to be discussed at the FERC commissioners' meeting on Wednesday, Harris said. No RTO issues are on the agenda for the final FERC meeting before commissioners take a month-long break, an agency spokeswoman said. The focus of the Wednesday meeting will be refunds for California and other Western states that claim power wholesalers overcharged them during the past year. RTOs have become a priority for FERC, which is looking for ways to make the nation's patchwork transmission grid more seamless to overcome bottlenecks in moving power between regions. FERC recently proposed combining transmission operators into four RTOs to be formed in the Northeast, Southeast, Midwest and West. "Whether the magic number is four or 10 is somewhat problematic," Harris said. FERC has praised the PJM system - which serves much of Pennsylvania, New Jersey and Maryland - as a model for nationwide RTO building. The agency has also turned down New York ISO and Northeast ISO requests to maintain their status as free-standing independent system operators. PJM has what it takes to make a nationwide model, Harris said. "The technology is there to make it happen," he said. PJM Interconnection uses a complex computer model and locational marginal pricing to calculate prices based on supply, demand and congestion at each node on the grid. PJM could apply its model to a larger RTO, Harris said, because "it's hard to find something bigger than what we're doing." PJM operates about 8,000 miles of transmission lines in Pennsylvania, New Jersey and Maryland, Washington D.C., and part of Delaware. It also coordinates the flow of about 60,000 megawatts of generation across those wires. Last week, residential electricity provider NewPower Holdings Inc. complained to FERC about the installed capacity charges in the PJM system. The company said the PJM charges were "unjust and unreasonable" and discriminated against new market players. NewPower told FERC it was unfair that companies owning generation plants in the region do not have to pay the installed capacity charge, but NewPower and others that don't own generating plants must pay high capacity rates. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. EnergyBusinessWatch Releases Two-Part Interview With FERC Chairman Curt Hebert 07/24/2001 PR Newswire (Copyright © 2001, PR Newswire) WASHINGTON, July 24 /PRNewswire/ -- FERC Chairman Curt Hebert, in one of his most wide-ranging interviews since he was named to head the agency six months ago, told EnergyBusinessWatch in a two part series while California may still see some blackouts in August the state now appears to have passed a danger point. "We're not too worried about credit here, but we were certainly getting the blame when the prices were high," Hebert said. "The fact that prices are down and they have been down since the very hour the mitigation plan went into effect shows the forward thinking, the ability to get things under control of this commission and the hard working staff." Hebert sat down with EBW Executive Editor Howard Buskirk July 20 to talk about his six months as chairman, what he views as his legacy so far and his plans for the future. High on his list is a FERC that is now more responsive to markets. "A couple years back at FERC, even though they were talking about markets, they were very much in their infancy in trying to understand how they work," he said. "I would say that FERC now has certainly moved beyond its adolescence and trying to act more like an adult ... Hopefully that means that there's less regulation in the future." Hebert also warned that the commission must make certain it does not turn off Wall Street, since the financial community will need to be behind commission initiatives to get the right investments. "You can't do anything in this business without the confidence of Wall Street," Hebert told EBW. "If anyone thinks we can turn this industry around and we can have adequate supply and we can have adequate deliverability without the confidence of Wall Street they are absolutely wrong. They haven't done their homework and they don't understand history." Hebert also touched in the most detail yet on the controversial article in "The New York Times" in which Hebert suggested that Enron Chairman Kenneth Lay had approached him to in effect offer a quid-pro-quo, Enron's support if he changed his views on electricity deregulation. For the complete interviews and the rest of the energy industry's most exciting new news service please see http://www.energybusinesswatch.com . For more information, call EBW subscriber services at 202-625-8328. MAKE YOUR OPINION COUNT - Click Here http://tbutton.prnewswire.com/prn/11690X25362155 /CONTACT: EnergyBusinessWatch subscriber services, 202-625-8328/ 14:03 EDT Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Natural Gas Project Decision Due Soon-Venezuelan Official 07/24/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- Venezuela should announce a decision in the next few days on developers for natural gas projects in the country, Ignacio Arcaya, ambassador of Venezuela to the United States, told a press briefing Tuesday morning. The natural gas project was one of the topics Arcaya addressed during the briefing. U.S. companies including Enron Corp. (ENE) and Exxon Mobil Corp. (XON) are competing for pieces of the project. Venezuela has the largest gas reserves outside of the Middle East, he said. The country would like to tap those reserves for exports as well as for use internally. To do so, Venezuela needs to develop gas infrastructure as well as gas production. The country needs to expand its gas pipeline system and build facilities for liquefied natural gas exports. He also hopes that another Venezuelan energy export - orimulsion - will find buyers in the Untied States. A natural bitumen, orimulsion is a patented fuel designed for use in electric power generation. Florida power generators failed to get approval to use the fuel after a test program in the late 1980s and early 1990s. Another study of the fuel, conducted by the U.S. Environmental Protection Agency, won't be negative or positive for orimulsion, Arcaya said. He hopes that study will lead to orimulsion consumption in the U.S. A number of companies are interested in joint ventures to import the fuel into the United States. A study out of Tampa, Fla., says that orimulsion is less polluting than coal and could be used to generate 20% of that city's power, he said. The ambassador said he didn't know anything about reports of an emergency meeting of the Organization of Petroleum Exporting Countries to discuss production cuts. OPEC sources have reported that the cartel is discussing holding a meeting Aug. 6 or Aug. 14 to discuss cuts in response to lower crude oil prices. Venezuela doesn't want high oil prices because that hurts consumers, but low oil prices hurt producers, he said. The country now exports 60% of its crude oil production and 40% of its refined products output, Arcaya said. The plan is to reverse those figures. Part of that plan will include investments to increase output of refined products from Venezuelan refineries, he said. The increased output will meet U.S. environmental specifications for refined products. He reiterated Venezuela's plans to increase output of refined products at Citgo's Lake Charles, La., refinery by 100,000 barrels a day. He didn't know when that added output would be available. Citgo is owned by Petroleos de Venezuela SA, the Venezuelan state oil company. There continues to be much discussion in Venezuela about cutting back ownership of Citgo, Arcaya said. "But the figures show that Citgo is an excellent investment," he added. While in Houston, the ambassador will meet with official from several energy companies including Exxon Mobil, Texaco Inc. (TX) and Chevron Corp. (CHV). He will also meet with officials from Kellogg Brown & Root, a unit of oil services company Halliburton Co. (HAL) -By Michael Rieke, Dow Jones Newswires; 713-547-9207; michael.rieke@dowjones.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. USA: Black Hills signs deal for 273-MW Nevada power plant. 07/24/2001 Reuters English News Service (C) Reuters Limited 2001. RAPID CITY, S.D., July 24 (Reuters) - Black Hills Energy Capital Inc., the independent power unit of Black Hills Corp. , said Tuesday it signed a deal to buy a 273-megawatt power plant near Las Vegas, Nevada, from an Enron Corp. unit. The agreement, whose financial terms were not released, is expected to close in the third quarter of 2001, Rapid City, South Dakota-based Black Hills Energy said in a statement. Enron North America, a wholly-owned subsidiary of Houston-based Enron, is adding 222 megawatts (MW) of natural gas-fired capacity to a 51-MW plant. Total output from the power plant will be enough to light about 273,000 homes. The planned 222 MW of new capacity is expected to be phased in commercial operation in the third quarter of 2002, Black Hills said. Nearly all of the power from the 51-MW plant is under contract through 2024. The 222 MW have been sold under a 15-year contract, which requires the buyer to provide fuel for the power plant. Black Hills said the deal, along with other power plants it has in operation and under construction, would get the company to its goal of 1,000 megawatts of independent power by 2003. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. German Energy Blue Chips E.On, RWE Return To Form By Stephan Kueffner Of DOW JONES NEWSWIRES 07/24/2001 Dow Jones International News (Copyright © 2001, Dow Jones & Company, Inc.) FRANKFURT -(Dow Jones)- It used to be the only reason to buy shares in utility companies was bad news in the tech market. However, a series of key deals and an improving bottom line in core operations have helped Germany's two blue-chip utility giants, E.On AG (EON) and RWE AG (G.RWE), make investors take note - though analysts are divided about which is the best investment. Both companies have made quick strides since Germany's electricity market was deregulated in 1998 to focus on core operations and improve investor relations. The key deals in core markets include RWE's takeover of Thames Water last year, giving it a strong position in the high-margin water business, and E.On's takeover bid for Powergen Plc (PWG) earlier this year and last week's asset swap with British Petroleum (BP) that will give it close to 30% of Ruhrgas AG (G.RUH). They've also defended their home markets and their key power businesses are improving - as demonstrated by rising electricity prices. But it's taken the market time to take note. Investors were worried by tumbling electricity prices and lured to shares in tech companies. "Despite their age, for the market, (E.On and RWE) are new faces," said a utility analyst in Madrid. So who's ahead? Through its takeover of Thames Water, RWE leads E.On in expanding into the water business, "a business offering higher margins that's set to be a key industry of the 21st Century," he added. It has also proven it can cut the fat out of operations. When it released preliminary earnings figures in early July, RWE said its cost-cutting program brought EUR1 billion of savings over the past 12 months. It wants to reduce costs by an additional EUR1.55 billion per year through 2004. Though it released earnings data promptly after the end of its fiscal year, some were disappointed that except for sales, RWE failed to release operating and net profit figures beyond giving percentages to the general market, though it provided more detailed information to analysts at subsequent meetings. "We think RWE shows greater signs than E.On...of wanting to take the necessary steps to reveal the value of (shares) to the stock market," a Schroder Salomon Smith Barney report from July 11 said. E.On, however, will have a stronger position in the U.S. - where market consolidation lags well behind Europe - if it gets regulatory clearance for its takeover of Powergen Plc (PWG), analysts said. Above all, its deal to secure almost 30% of Germany's main gas importer and distributor Ruhrgas AG (G.RUH) by swapping Veba Oel for BP's 25.5% Ruhrgas stake could have major strategic implications for E.On as a player in European gas, they added. Full control of Ruhrgas would make E.On "the number two player in gas in Europe and the number one by far in Germany," said Matthias Heck at Sal. Oppenheim. In the short term, there will be no benefit to E.On's bottom line through getting a third of Ruhrgas, but some analysts said full control of Ruhrgas might not be far away - telecommunications group Vodafone Plc (VOD) and steel giant ThyssenKrupp AG (G.TKP) could be willing to sell their holdings. "Once that occurs, Shell and Exxon Mobil (XOM) are also likely to want to get out as (holding) a minority positions in E.On will be of little interest," an analyst in Frankfurt said. However, he added Germany's Federal Cartel Office would want the gas market to be deregulated more rigorously before it allows that to happen. "Besides the regulatory opposition, there are signs that other market entrants such as Enron Corp. (ENE) will make lower (gas) prices possible," a London-based analyst said. It will also be interesting to see how closely RWE and BASF AG (BF) gas unit Wingas GmbH cooperate in acquiring eastern European gas companies slated for privatization. "That could be the start of something greater," said the Madrid utility analyst. Non-Core Holdings Could Be Problem Looking past their core assets, he also said the market still worries about their diversification into non-core operations - a factor weighing on share prices until the market gets a better idea of what they're really worth. Both groups still have vast corporate holdings to dispose of once Germany's scrapping of windfall taxes on asset sales comes into effect in January. For E.On, the larger of the two, this means selling blue-chip Degussa AG (G.DGX), the world's largest specialty chemicals group, while RWE is looking to sell mid-cap units Hochtief AG (G.HOT), a construction group, and printing machine maker Heidelberger Druckmaschinen AG (G.HDB). Despite the value of their assets, analysts said both Degussa and Hochtief "will need major restructuring before the holdings can hope to sell them," the Madrid analyst said. "For some people, the size of the assets is a blessing, for others, a worry," he added. -By Stephan Kueffner, Dow Jones Newswires; +49 69 29 72 55 00; stephan.kueffner@dowjones.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Black Hills To Buy Nev. Power Complex From Enron 07/24/2001 Dow Jones News Service (Copyright © 2001, Dow Jones & Company, Inc.) RAPID CITY, S.D. -(Dow Jones)- Black Hills Corp.'s (BKH) Black Hills Energy Capital Inc. signed a definitive agreement to purchase a 273 MW natural gas-fired power plant in North Las Vegas, Nev. from Enron North America, unit of Enron Corp. (ENE) for an undisclosed amount. In a press release Tuesday, Black Hills said it expects the deal to close in the third quarter of 2001. An expansion of the present 51 MW co-generation plant is now underway. Construction of a new combined cycle generation facility adjacent to the existing plant will add about 222 MW of capacity to the existing plant site. The new generation is expected to be fully operational by the third quarter of 2002. As part of the transaction, Black Hills also secured long-term contracts for the output of the facility. Nearly all of the capacity and energy produced by the existing 51 MW plant is under contract through 2024, with the remainder being merchant power. The power of the planned 222 MW combined-cycle plant is sold under a 15-year contract. The contract requires the purchaser to provide fuel to the power plant when the plant is dispatched. New York Stock Exchange-listed shares of Black Hills recently traded at $40.38, down $2.32 or 5.4%. -Thomas Gryta; Dow Jones Newswires; 201-938-5400 Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIA: U.S. looks "beyond sanctions" at ties with India. 07/24/2001 Reuters English News Service (C) Reuters Limited 2001. NEW DELHI, July 24 (Reuters) - The United States reassured India on Tuesday that efforts were under way to scrap the economic sanctions it imposed in 1998, but took a swipe at the country's "far from optimal" investment climate. Assistant Secretary of State on South Asian affairs Christina Rocca blended goodwill with criticism in her speech to business leaders in New Delhi on the future of a bilateral relationship which has blossomed despite India's nuclear tests of 1998. She took India to task for protectionist trade policies, its investment climate and its failure to provide an effective system for the protection of intellectual property. But she had good news on the sanctions which Washington imposed on New Delhi after its nuclear tests, saying India had "a role and a responsibility to play in helping secure stable, peaceful conditions in South Asia and beyond". "In this connection, as I hardly need to tell you, a review on our sanctions policy is now under way." "And we will need to work closely with Congress to see how the current situation might be changed. Getting beyond sanctions would do much to deepen the bilateral relationship." A chorus of officials in the Bush administration have said in recent weeks that sanctions should be dropped - at least in the case of India if not Pakistan, which was also hit by sanctions after it responded to India with nuclear tests of its own. At her confirmation hearing in May, Rocca told the Senate that sanctions had, in her opinion, "outlived their usefulness". The sanctions prevent the sale to India and Pakistan of U.S. nuclear energy equipment, rocket motor technology, supercomputers and military equipment. They also restrict certain companies from doing business in the United States. CANDID ASSESSMENT Rocca said the Bush administration was committed to strengthening and intensifying relations with India, and noted that the past few years had seen "the beginning of a transformation" in ties with the world's largest democracy. "Now is the time to complete that transformation," she said. Rocca said non-proliferation remained an important goal of U.S. policy, but Washington wanted to broaden its engagement with India on defence to include potential areas of cooperation. The Clinton administration held several rounds of talks with New Delhi to reconcile its proliferation concerns with India's plans to build a "minimum nuclear deterrent". But the two sides, once on opposite sides of the Cold War, have moved closer since then and President George W. Bush won warm backing from New Delhi for his controversial nuclear vision. Rocca said the recent summit between India and Pakistan, which ended without even a joint statement because of differences over the Kashmir territorial dispute, was "a good first step". "...the serious and constructive atmosphere of these talks tell me that both sides are committed to resolving their differences, even if this turns out to be a lengthy process". Turning to India's decade-old drive for economic reform, Rocca had some polite criticism. "During the past 10 years, India has achieved considerable progress in liberalising its trade policy," she said. "But, in our candid assessment, the level of protectionism remains too high. This suits some vested interests, I suppose, but clearly impedes overall economic efficiency." She said the problems clouding India's "entire investment climate" could be summed up with a five-letter word, "Enron". U.S. energy giant Enron Corp has threatened to walk out of its $2.9-billion Indian Dhabol project due to a row with the authirities over payment defaults and high tariffs. "...I have to emphasise that it will be difficult for international investors to view India favourably until it is resolved, and in a reasonable manner," Rocca said. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. BUSINESS Allegheny Energy to split up Hagerstown utility to create company for power generation; Permission for IPO sought; Remaining company to distribute energy to retail customers Dan Thanh Dang SUN STAFF 07/24/2001 The Baltimore Sun FINAL 1C (Copyright 2001 @ The Baltimore Sun Company) In a move that follows an industry trend, Allegheny Energy Inc. said yesterday that it will split itself into two companies next year - an unregulated power generating business that will sell electricity on the wholesale market, and a regulated distribution business that will sell energy to retail customers. The Hagerstown utility filed yesterday with the Securities and Exchange Commission seeking approval for an initial public offering of up to 18 percent in the new, as yet to be named holding company. The holding company will own 100 percent of Allegheny Energy's unregulated generating unit, Allegheny Energy Supply Co. LLC. Allegheny Energy also announced that it expects next year to distribute to its shareholders the remaining equity ownership in the new holding company in a tax-free distribution. The transaction will leave Allegheny Energy as a retail distributor of electricity and natural gas to about 3 million people in parts of Maryland, Ohio, Pennsylvania, Virginia and West Virginia. The initial public offering will need regulatory approvals, two of them from the Securities and Exchange Commission. The Hagerstown utility had $4 billion in revenue last year and employs 5,900 nationwide, 533 of them in Maryland. Allegheny Energy Supply's new holding company also likely will have its headquarters in Hagerstown. Company officials said a decision has yet to be made on the headquarters site of the distribution business, which will retain the Allegheny Energy name. "We're positioning both companies to compete in the new energy marketplace," said Alan J. Noia, chairman, president and chief executive of Allegheny. "If you've been following the company, this is the next logical step." Shares of Allegheny fell $2.11 on the New York Stock Exchange yesterday to close at $42.65. The spinoff announcement comes on the heels of a similar plan announced in October by a Baltimore competitor, Constellation Energy Group Inc. But, instead of separating in one step like Constellation, Allegheny Energy hopes to first raise money by selling up to 18 percent of the common stock in the new holding company in an IPO expected in the fourth quarter. Allegheny said it will use the proceeds to pay down debt and invest in its building projects. The company is also considering a $1 billion leveraged lease of one of its power stations to finance the growth and development of its generation portfolio, officials said. Noia said the two companies will have different dividend policies, and more details will be established at the time of the stock offering. Noia also said that the merchant energy company is expected to grow about 20 percent a year, while the delivery company will grow about 4 percent to 5 percent. It is unclear whether Allegheny's spinoff will have to pass reviews by five state regulatory agencies. Gregory V. Carmean, executive director of the Maryland Public Service Commission, said: "You can expect us to follow the same path of examining their regulated utility's financial strength after the split as we have done with Constellation's separation plan." Yesterday, utility analysts praised the company for its timing despite the public relations and regulatory pounding some energy producers have received recently as a result of the California energy crisis. Energy stocks have also suffered recently because of greater supply and lower demand because of cooler weather. "The unregulated power producers have done quite well in recent years with the exception of this year, because of California," said Craig Shere, a Standard & Poor's analyst. "These stocks have been so beaten up over the issue of price caps and rebates, but there's very little substance behind it all. "It's not the greatest market right now, so if Allegheny had to do an IPO right now, I'd wait. But the market for this sector should not be bad for the fourth quarter. "At the end of the day, these companies will continue to post very strong earnings. Allegheny's done quite well because everyone's been expecting this to happen. This is, and will continue to be, a growth industry," Shere said. In the past couple of years, Allegheny has carefully completed each step toward making a spinoff possible. Allegheny began preparing for deregulation by transferring power plants from its regulated utility, Allegheny Power, to the unregulated generating business in 1996, starting with its plants in Pennsylvania. Allegheny Power still owns power plants in West Virginia, which has only partially deregulated the electric industry, but Noia said those remaining 2,000 megawatts will be transferred to Allegheny Energy Supply before the separation takes place. In order to meet the electricity needs of customers in each state, Noia said the regulated utility has a number of long-term contracts with its unregulated supply affiliate to buy back power, the last of which ends in 2008. As part of the plan to split, Allegheny also launched an aggressive $1 billion plan to purchase and build power plants across the country. Allegheny Energy Supply is building power plants in Arizona, Indiana and Pennsylvania. The company also acquired 83 megawatts of coal-fired generation in Pennsylvania and three power plants in the Midwest from Enron Corp. in May. By 2005, Allegheny Energy Supply is expected to own or control about 14,500 megawatts of energy, which is enough to provide electricity to about 14.5 million homes. To trade in electricity, natural gas and other fuels, Allegheny paid $490 million in March for Merrill Lynch & Co.'s Global Energy Markets, an energy trading unit that was renamed Allegheny Energy Global Markets. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. FERC Should Oversee All Utilities, Lawmaker Says (Update1) 2001-07-24 17:05 (New York) FERC Should Oversee All Utilities, Lawmaker Says (Update1) (Adds that energy department, FERC officials will testify before the committee in 16th paragraph.) Washington, July 24 (Bloomberg) -- The U.S. government agency that regulates interstate electricity prices should get expanded authority to oversee all public and cooperative power utilities, the chairman of the Senate's energy panel said. The Federal Energy Regulatory Commission approves wholesale interstate electricity rates for investor-owned utilities and power sellers, such as Enron Corp. The proposal from Senator Jeff Bingaman would add to the FERC's jurisdiction federal utilities such as Tennessee Valley Authority, rural electricity cooperatives and public power utilities. Extending FERC's power will help deregulate electricity markets so that new generating companies can compete against utilities, Bingaman said. ``To leave a legislative solution for another day would be to ensure the problems faced now in California and the West will be replicated across the country,'' the New Mexico Democrat said. Bingaman's panel next week will begin debating legislation to address conservation, natural gas drilling and other energy issues. It may include electricity deregulation, he said. The proposal may help make it easier for private companies compete against public utilities that traditionally have had monopolies in many regional markets, one analyst said. ``There may be merit to this,'' said Pietro Nivola, a senior fellow at the Brookings Institution, a Washington-based policy group. The plan may ``ensure that markets are operating freely.'' Rate Setting Any move to boost FERC's power to enforce ``just and reasonable'' wholesale rates, though, would be unwise, he said. ``They should cease worrying about if the prices are fair and make the market more competitive,'' Nivola said. Last month, the FERC set limits on the wholesale prices for energy in California after lawmakers, including Bingaman, criticized the agency for not intervening earlier to help the state as it faced power shortages and rising prices. Critics of the price limits such as Senator Frank Murkowski of Alaska, the senior Republican on the energy committee, have said they will discourage companies from building generators in California because of fears that the caps will cut into profits. California in 1996 deregulated its wholesale electricity market and allowed prices to fluctuate based on supply and demand. Rising electricity use, a lack of new power plants and low rainfall that hurt hydroelectric facilities drove up prices last year, leaving California's two largest utilities insolvent with almost $14 billion in debt. The state began buying power on their behalf in January and has spent almost $8 billion. Under the Bingaman proposal, utilities would set rates, overseen by FERC to make sure they are comparable to the rates utilities charge themselves. The agency also would get authority over rates charged for power within states, not just interstate transmissions. The plan would let FERC force utilities to team up in regional organizations to better manage their power grids. Currently, some transmission system management is handled state-by- state. FERC also would aid in approving sites for transmission lines with input from regional governments, under Bingaman's proposal. States now control the location of the lines. Francis Blake, the deputy energy secretary, will testify before the committee tomorrow on the Bingaman plan. The five FERC commissioners, including Chairman Curt Hebert, will discuss the plan before the panel on Thursday. Energy Generators Fall With Gas, Electricity Prices (Update1) 2001-07-24 16:36 (New York) Energy Generators Fall With Gas, Electricity Prices (Update1) (Updates with closing share prices in second and third paragraphs and analyst comment in eighth paragraph.) New York, July 24 (Bloomberg) -- Shares of El Paso Corp., Williams Cos., NRG Energy Inc. and other energy producers and natural-gas suppliers tumbled because of falling gas and electricity prices, analysts said. Speculation the U.S. Federal Energy Regulatory Commission is ready to toughen rules on business between pipeline companies and trading affiliates also drove shares lower, analysts said. Shares of El Paso, owner of the largest U.S. interstate pipeline network, fell $4.26, or 8.2 percent, to $47.64. Earlier, they touched $47.20, a 52-week low. Enron Corp., the biggest energy trader, fell $3.42, or 7.3 percent, to $43.24. It touched a 52-week low of $42. Williams Cos., a pipeline company and trader, fell $2.07, or 6.4 percent, to $30.28. Calpine Corp. fell $4.25, or 11 percent, to $33.90. NRG fell $2.35, or 11 percent, to $19.15. Earlier, it touched a 52-week low of $18.40. Salomon Smith Barney Inc. analyst Ray Niles cut his ratings on several energy generators because lower power and gas prices probably will hurt third-quarter earnings. The average price of electricity in California so far this month had fallen 41 percent from a year ago, partly because new generators have opened. Gas on the New York Mercantile Exchange fell today to $2.97 per million British thermal units. That's down from around $10 per million British thermal units in late December. FERC has been investigating whether El Paso held back pipeline capacity in California to drive gas price higher. FERC might issue new rules on affiliate business this week, Dow Jones Newswires has reported. ``There's concern about what FERC might come out with tomorrow,'' Merrill Lynch analyst Donato Eassey said. ``(It is) a combination of a lot of issues.'' He cited the pipeline affiliates' code-of-conduct rules and the dispute over refunds to California by power generators. Tamara Young-Allen, a FERC spokeswoman, couldn't confirm whether the commission would discuss new rules at its meeting tomorrow. Tomorrow's agenda includes standards of conduct for transmission providers. Allen declined to say whether the rule would deal directly with company affiliates. --Mark Johnson in the Princeton newsroom, (609) 279-4017 or mjohnson7@bloomberg.net, and Mark Jaffe in Washington with reporting by Margot Habiby in Dallas, through the Princeton newsroom, (609) 279-4000/pjm Black Hills to Purchase Generation Complex From Enron (Update1) 2001-07-24 16:20 (New York) Black Hills to Purchase Generation Complex From Enron (Update1) (Updates with closing stock activity in fourth paragraph.) Rapid City, South Dakota, July 24 (Bloomberg) -- Black Hills Corp., a utility owner that primarily operates in the western U.S., agreed to buy Enron Corp.'s power-generation complex in North Las Vegas, Nevada, for an undisclosed price. The purchase will eventually add 273 megawatts of power to Black Hills Energy Capital, Black Hills' independent power unit, the company said in a statement. The acquisition should be completed during the third quarter, the company said. Black Hill plans to add a plant adjacent to the current 51- megawatt Enron North America site. The new combined-cycle generation site, which would have an output of 222 megawatts, is expected to begin operating in the third quarter of 2002 and boost Black Hills Energy's total output to 1,000 megawatts. Shares of Rapid City, South Dakota-based Black Hills fell $2.56, or 6 percent, to $40.14. Houston-based Enron, the largest energy trader, fell $3.42, or 7 percent, to $43.24. Dan Walters: Blame game over California's energy crisis will continue for years Sacramento Bee (Published July 24, 2001) The wrestling match between politicians and Enron Corp. moved into a more intense arena over the weekend when a state Senate investigating committee sought contempt penalties because the huge energy company has refused to turn over internal documents. Although Houston-based Enron owns no major power plants in California, it has adopted the toughest stance of all energy companies against the multiple investigations of why wholesale energy prices spiked so high. And it has become, in turn, a whipping boy for California politicians. At one point last spring, state Attorney General Bill Lockyer said he wanted criminal charges against Enron and its chairman, Kenneth Lay. "I would love to personally escort Lay to an 8-by-10 cell that he could share with a tattooed dude who says, 'Hi, my name is Spike, honey,' " Lockyer said. With less colorful language, Gov. Gray Davis has often castigated Texas-based companies as price gougers -- even though Texas firms have been fairly minor suppliers to California. Some of it is just buzzword politics. Lockyer and Davis know that Californians dislike anything associated with Texas, and Lay has been one of President Bush's major political supporters. Enron, meanwhile, cites the rhetoric as evidence that Lockyer, Davis and legislative investigators are interested less in finding the truth than in seeking scapegoats. Enron also filed a lawsuit challenging the legality of the Senate's subpoenas of trading data. Most other energy companies have complied with the demands, creating Sacramento repositories of the data under elaborate confidentiality agreements worked out with the special Senate committee headed by Sen. Joseph Dunn, D-Santa Ana. But Enron has refused, and on Saturday, Dunn submitted a report asking the Senate for "an appropriate coercive sanction." Does Enron have something to hide? Or does it sincerely believe that what's happening in California is political scapegoating? Are the companies' fears about the confidentiality of the data sought by the Senate justified? Would data be selectively leaked to show the firms in the worst light? Would data be used by competitors? Or could the information find its way into the hands of class-action attorneys? Dunn, a prominent trial attorney himself, insists that confidentiality will be protected and that the information being sought is only for legislative purposes. But Enron and the other companies have some reason to be wary of turning over confidential information to politicians. Similar information was leaked -- without penalty -- in last year's investigation of former state Insurance Commissioner Chuck Quackenbush. And there are indications that private lawyers are working closely with investigators. Mike Aguirre, the San Diego attorney seeking a "smoking gun" to prove collusion among energy companies, supplied Dunn's committee with a few dissident Duke Energy workers who alleged, in highly publicized hearings, that the firm had manipulated production at its San Diego plant to create artificial shortages and drive up spot market power prices. Duke then refuted the charges by releasing some excerpts from the records of the Independent System Operator, the controller of California's power grid, indicating that ISO had ordered the plant operational changes. Aguirre subsequently asked the governor's office to pressure the ISO -- now under Davis' direct control -- to release all of the Duke-related documents that would show, he says, that the firm actually manipulated the situation. Duke and other companies insist that the ISO-held documents are proprietary. Aguirre pleaded with one Davis adviser in an e-mail that "we need your help in properly getting this information out." But Aguirre, in an interview, said he had not yet obtained cooperation from Davis aides. The political and legal struggle to affix blame for California's energy woes will continue for months, perhaps years. The crisis will cost ratepayers at least $50 billion, and they'll want to know why as they make out their utility bill checks.
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