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-----Original Message-----
From: Shapiro, Richard Sent: Friday, July 27, 2001 3:34 PM To: Dernehl, Ginger Subject: FW: EPSA Press Release and New Brochure/Study Please distribute worldwide. Thanks. -----Original Message----- From: Samantha Slater [mailto:SSLATER@epsa.org] Sent: Friday, July 27, 2001 12:05 PM To: bhueter@enron.com; Linnell, Elizabeth; Kingerski, Harry; jmigden@enron.com; jsteffe@enron.com; Robinson, Marchris; Petrochko, Mona; Kaufman, Paul; rboston@enron.com; rshapiro@enron.com; snord@enron.com; steve.montovan@enron.com; Landwehr, Susan M.; Chapman, Tom Subject: EPSA Press Release and New Brochure/Study Wholesale Competition Contributed to Trend of Lower Power Prices, According to New EPSA Study Washington, D.C., July 23, 2001 -- Calls for a return to cost-plus rate regulation in the wake of the California power crisis are misplaced, according to an independent study released today that found that competitive markets contributed to a 36 percent decline in retail electricity prices among surveyed utilities. "That decrease is in sharp contrast to the increases that consumers experienced in the days of solely cost-plus rate regulation," said Electric Power Supply Association President Lynne H. Church, who released the findings during a media luncheon in conjunction with the group's summer membership meeting. "This analysis is evidence that we should continue to move forward toward more competition in order to apply downward pressure on prices." The study: "Assessing the 'Good Old Days' of Cost-Plus Regulation," analyzed sales data for 60 of the nation's investor-owned utilities during 1985-1999, when traditional cost-plus rate regulation began evolving toward more competition. Complete sales figures for 2000 were not yet available when the study was completed. The study was commissioned by EPSA and conducted by Craig Roach, Ph.D., principal of Boston Pacific Co. "In the wake of the California power crisis, some people have expressed a longing for a return to the 'good' old days of cost-plus regulation, but those days were far from good," Roach said. "People seem to forget that, in the days of cost-plus regulation between 1970 and 1985, inflation-adjusted electricity prices actually increased 25 percent for residential customers and increased 86 percent for industrial/commercial customers." "So much for the good old days," Church said. "The price increases under cost-plus regulation were precisely what drove the start of electricity competition in the early and mid-1980s." During the 1985-1999 period, according to the analysis, inflation-adjusted electricity prices decreased an average 30 percent for residential customers and 36 percent for industrial/commercial customers. "We should not allow the problems in California to cast a false shadow on competition," Church said. "The evidence presented in this study makes it clear that it would be counterproductive and unwise to go back to the old ways." "It is important to understand that what happened in California resulted, in part, from market rules that prohibited basic risk management," Roach said. "Specifically, utilities were required to take on the risk of selling at a fixed price to customers, but not allowed to manage that risk by arranging contracts with fixed-price suppliers or use other risk management tools. Managing risk appropriately benefits consumers, and risk management is more efficient and effective in a truly competitive regime." "This study bolsters our belief that the Federal Energy Regulatory Commission should continue to move expeditiously toward more efficient wholesale markets, states should continue to move quickly toward opening their retail power markets, and Congress should quickly adopt comprehensive legislation to help them along," Church said. -EPSA- Note: A copy of the complete study is available at www.bostonpacific.com/powerprices.
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