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Enron Mail |
---------------------- Forwarded by Jennifer Rudolph/HOU/EES on 07/09/2001
03:27 PM --------------------------- From: Alan Comnes/ENRON@enronXgate on 07/06/2001 06:33 PM To: Jeff Dasovich/NA/Enron@Enron, Angela Schwarz/HOU/EES@EES, Beverly Aden/HOU/EES@EES, Bill Votaw/HOU/EES@EES, Brenda Barreda/HOU/EES@EES, Carol Moffett/HOU/EES@EES, Cathy Corbin/HOU/EES@EES, Chris H Foster/ENRON@enronXgate, Christina Liscano/HOU/EES@EES, Craig H Sutter/HOU/EES@EES, Dan Leff/HOU/EES@EES, Debora Whitehead/HOU/EES@EES, Dennis Benevides/HOU/EES@EES, Don Black/HOU/EES@EES, Dorothy Youngblood/HOU/ECT@ECT, Douglas Huth/HOU/EES@EES, Edward Sacks/ENRON@enronXgate, Eric Melvin/HOU/EES@EES, Erika Dupre/HOU/EES@EES, Evan Hughes/HOU/EES@EES, Fran Deltoro/HOU/EES@EES, Gayle W Muench/HOU/EES@EES, Ginger Dernehl/NA/Enron@Enron, Gordon Savage/HOU/EES@EES, Harold G Buchanan/HOU/EES@EES, Harry Kingerski/NA/Enron@Enron, Iris Waser/HOU/EES@EES, James D Steffes/NA/Enron@Enron, James W Lewis/HOU/EES@EES, James Wright/Western Region/The Bentley Company@Exchange, Jeff Messina/HOU/EES@EES, Jeremy Blachman/HOU/EES@EES, Jess Hewitt/HOU/EES@EES, Joe Hartsoe/Corp/Enron@ENRON, Karen Denne/Corp/Enron@ENRON, Kathy Bass/HOU/EES@EES, Kathy Dodgen/HOU/EES@EES, Ken Gustafson/HOU/EES@EES, Kevin Hughes/HOU/EES@EES, Leasa Lopez/HOU/EES@EES, Leticia Botello/HOU/EES@EES, Mark S Muller/HOU/EES@EES, Marsha Suggs/HOU/EES@EES, Marty Sunde/HOU/EES@EES, Meredith M Eggleston/HOU/EES@EES, Michael Etringer/ENRON@enronXgate, Michael Mann/HOU/EES@EES, Michelle D Cisneros/ENRON@enronXgate, mpalmer@enron.com@SMTP@enronXgate, Neil Bresnan/HOU/EES@EES, Neil Hong/HOU/EES@EES, Paul Kaufman/ENRON@enronXgate, Paula Warren/HOU/EES@EES, Richard L Zdunkewicz/HOU/EES@EES, Richard Leibert/HOU/EES@EES, Richard Shapiro/NA/Enron@Enron, Rita Hennessy/ENRON@enronXgate, Roger Yang/SFO/EES@EES, Rosalinda Tijerina/HOU/EES@EES, Sandra McCubbin/NA/Enron@ENRON, Sarah Novosel/Corp/Enron@ENRON, Scott Gahn/HOU/EES@EES, Scott Stoness/HOU/EES@EES, Sharon Dick/HOU/EES@EES, skean@enron.com@SMTP@enronXgate, Tanya Leslie/HOU/EES@EES, Tasha Lair/HOU/EES@EES, Ted Murphy/HOU/ECT@ECT, Terri Greenlee/ENRON@enronXgate, Tim Belden/ENRON@enronXgate, Tony Spruiell/HOU/EES@EES, Vicki Sharp/HOU/EES@EES, Vladimir Gorny/ENRON@enronXgate, Wanda Curry/ENRON@enronXgate, William S Bradford/ENRON@enronXgate, Kathryn Corbally/Corp/Enron@ENRON, Jubran Whalan/HOU/EES@EES, Tony Riley/Enron@EUEnronXgate, Richard B Sanders/Enron@enronXgate, Robert C Williams/ENRON@enronXgate, Greg Wolfe/ENRON@enronXgate, James Wright/Western Region/The Bentley Company@Exchange, Dirk vanUlden/Western Region/The Bentley Company@Exchange, Steve Walker/SFO/EES@EES, Jennifer Rudolph/HOU/EES@EES, Martin Wenzel/SFO/HOU/EES@EES, Douglas Condon/SFO/EES@EES, wgang@enron.com@SMTP@enronXgate, Scott Govenar <sgovenar@govadv.com<@SMTP@enronXgate, Hedy Govenar <hgovenar@govadv.com<@SMTP@enronXgate, jklauber@llgm.com@SMTP@enronXgate, Mike D Smith/HOU/EES@EES, John Neslage/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Janel Guerrero/Corp/Enron@Enron, Eric Letke/DUB/EES@EES, Richard B Sanders/Enron@enronXgate, gfergus@brobeck.com@SMTP@enronXgate, Michael Tribolet/ENRON@enronXgate, Robert Frank/NA/Enron@Enron, Richard B Sanders/Enron@enronXgate, gfergus@brobeck.com@SMTP@enronXgate, Susan J Mara/NA/Enron@ENRON, Chris Holmes/HOU/EES@EES, David Leboe/ENRON@enronXgate cc: Subject: POWER POINTS:Nevada Suffers FERC Unintended Consequences Great dialog on everything that's wrong with price controls. -----Original Message----- From: "Onukogu, Ernest" <Ernest.Onukogu@dowjones.com<@ENRON [mailto:IMCEANOTES-+22Onukogu+2C+20Ernest+22+20+3CErnest+2EOnukogu+40dowjones+ 2Ecom+3E+40ENRON@ENRON.com] Sent: Friday, July 06, 2001 1:11 PM To: undisclosed-recipients:;@ENRON Subject: POWER POINTS:Nevada Suffers FERC Unintended Consequences -- < POWER POINTS:Nevada Suffers FERC Unintended Consequences < < By Mark Golden < A Dow Jones Newswires Column < < NEW YORK (Dow Jones)--Those who have opposed wholesale electricity price < controls have been labeled as extreme free-market ideologues who are < insensitive < to the practical impacts on peoples' lives of high electricity prices. < But the most common argument against price caps has been logical, not < ideological: Price controls have never worked. Market participants always < find a < way around the rules. < This week the Federal Energy Regulatory Commission decided that it will < have < to consider at its meeting next week revisions to its June 19 price < control < ruling. The initial price cap rule, set by the California Independent < System < Operator last spring, was only a few paragraphs long. Each successive < price cap < order has gotten longer, though effectiveness still appears out of reach. < The < FERC's April order was 28 pages long; the June order was 48 pages. And now < additional rules are on call to plug the new loopholes. < The revisions will also try to repair damage done to the market by the < June < order. During a spell of very hot weather Monday, Sierra Pacific Resources < (SRP) < subsidiary Nevada Power had to initiate limited rolling blackouts to a < small < number of customers for 45 minutes. The company attributed the blackouts, < in < part, to the new price controls. < Sierra Pacific's chief spokesman, Paul Heagen, provided a bird's eye < view of < the practical realities of the FERC's new price cap regime. < Power Points: After having a few days to look into it, can you say that < price < caps definitely contributed to blackouts in Nevada on Monday? < Paul Heagen: Yes, but first let me say that all of it was unintentional. < FERC < was trying to do the right thing. Price caps were a noble effort to solve < a real < problem in California. < But on Monday the market needed speed and clarity to function. It had < neither, < and that can be attributed to the price caps. Normally, in one or two < phone < calls we could have got what we needed. On Monday, we were five to six < calls < into it and still on the phone. < Price caps are having the unintended consequence of dragging other < states into < the California morass. We have this artificial environment which we are < all < trying to sort through. < PP: How, specifically, are the caps having this effect? < PH: There are a couple of elements. The 10% premium for power sold to < California is supposed to reflect concerns about credit. That 10% in an < open < market is no big deal, but in a constrained situation the seller will grab < it, < because now it's his only chance to make money. < Also, the way this is set up, they look backwards. They determine the < price < after the fact. I can't think of any business in the world where you sell < a < product and find out later what price you sold at. < This had a very chilling effect on people's willingness to sell. < Normally, a < cloud cover comes in and a utility has a little extra power to sell in the < real-time market. Normally, those little 50-megawatt packets move pretty < easily, < and that's really important for maintaining reliability. < With the price cap, utilities hunkered down. Selling at $92 wasn't worth < the < risk. They figured they might as well hang on in case they needed it. < Also, we have a voluntary curtailment program that allows us to share < savings < with customers who agree to curtail use. If the market is, say, $500, we < might < pay them $250/MWh to curtail demand. But in a $92/mkt, we can offer them < such a < small amount of money that they stay on. < PP: Have you talked to FERC about these problems with the price < controls? < PH: We've had a senior team in Washington, D.C., at the FERC since last < week. < Right away we saw another effect of the FERC order: It penalizes companies < like < ours that signed long-term supply contracts before the order because many < of < those deals were done at prices above the price cap. < The biggest issue for us, is, did FERC really mean to penalize companies < like < us that planned ahead? It's long-term contracts that provide price < stability. < It's unfair to our customers to expect them to pay for long-term < contracts < that have been undercut by price caps. If we get into a situation where we < have < a little extra to sell, now we can't recover our costs. < PP: With such high prices the past year, a lot of small, oil-fired < turbines < have been dusted off and put into service on time for this summer. Traders < for < other southwest utilities have said that all these little turbines have < been < very helpful when supplies got tight earlier in the year, but they weren't < available this week because they cost more to run than the price cap. Did < you < see the same thing? < PH: We have some small turbines that we put in Reno and the Lake Tahoe < area in < the last few months. They were supposed to provide peak power, but they < get < uneconomic in a hurry under the price cap scheme. < You know, we've tried to isolate ourselves as best we could from the < California situation and behave very independent of how California < behaves. So < Nevada is a great test case to see if price caps have an unintended effect < outside of California. We were able to minimize the impact on our < customers < Monday, but the situation has maximized the attention of the country on < the < impact of price caps. < -By Mark Golden, Dow Jones Newswires; 201-938-4604; < mark.golden@dowjones.com < < (END) DOW JONES NEWS 07-06-01 < 03:14 PM- - 03 14 PM EDT 07-06-01 <
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