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Enron Mail |
Sorry about this gang, but my new computer messed up the e-mail list.
It's 4 am and I think I have fixed it. Maybe. Bear with me if you are getting this for the second time this morning. gba X-Mozilla-Status2: 00000000 Message-ID: <398A81DA.E883D290@idt.net< Date: Fri, 04 Aug 2000 01:42:26 -0700 From: Gary Ackerman <foothi19@idt.net< Reply-To: foothi19@idt.net Organization: Foothill Services X-Mailer: Mozilla 4.74C-CCK-MCD {C-UDP; EBM-APPLE} (Macintosh; U; PPC) MIME-Version: 1.0 To: webmaster <charlotte@wptf.org< Subject: WPTF Friday Amen Burrito Content-Type: multipart/alternative;=20 boundary=3D"------------5CA857B6E2003A3BEF3A907F" ?=20 THE FRIDAY BURRITO=20 "...more fun than a fortune cookie, and at least as accurate."=20 Everyone is getting into the act.? When I started this gig, I was the only= =20 guy in town writing to folks like you about the power industry in=20 California.? I wrote about what=01,s new, what=01,s happening, and all the= =20 important stuff.? This week, Governor Gray Davis decided to write his own= =20 Burrito.? His epistle got more press than mine, but why is he muscling in o= n=20 my turf?? Not to be outdone, PUC President Loretta Lynch released a report= =20 which looks into every facet of California=01,s power business.? No stone l= eft=20 unturned. I=01,m telling you, there isn=01,t enough room in this business f= or all=20 of us.? They need to clear out.=20 With people like Herr (Hair?) Peace, Governor I=01,m-Not Mr.-Rogers Davis a= nd=20 Let=01,s Do Lynch, who needs a Friday Burrito?? They re-define our reality = each=20 week with mind-numbing aplomb.? For example, starting in early June, the PX= =20 was ordered to compete for business against other Qualified Trading=20 Vehicles.? Then, two weeks later, the Energy F_hrer legislated that idea to= =20 an early death which kept the status quo for at least one year.? This week= =20 the PUC approved 5-year bilateral deals for PG&E and SCE, thereby opening t= he=20 PX to competition, and emasculating the PX=01,s Block Forward Market. Zip, = bam,=20 boom.=20 I can=01,t wait to see what next week will bring.? I hear Senator Bowen is= =20 holding Committee hearings on re regulating the industry, and the Governor= =01,s=20 new Energy Security Council will meet to decide six things:=20 What=01,s for lunch?=20 Who will sit at the head of the table?=20 Does anyone have good seats for next week=01,s Democratic convention?=20 Is there anyone we haven=01,t indicted yet in the power industry?=20 Who will crank up the air conditioning in this room?? It=01,s getting too w= arm.=20 Then, they will collect data from innocent businesses under subpoena, ignor= e=20 the facts, and publish a report.? It makes one want to take a deep breath,= =20 and inhale the scented fumes of democracy.=20 You know, I can=01,t think about where to begin, so let=01,s start somewher= e.=20 Things on the Island of California=20 ?@@@ Is there anyone left at SDG&E with a brain?=20 ?@@@ The PUC issues its scathing report=20 ?@@@ The ISO invokes $250 price caps.? Duh!=20 Things at the throne of FERC=20 ?@@@ Amen for the Morgan Stanley Order=20 Odds and Ends (_!_)=20 Things on the Island of California=20 ?@@@ Is there anyone left at SDG&E with a brain?=20 Well, the answer very clearly is no.? I have been astounded by repeated=20 attempts of SDG&E=01,s most senior people to ape humans, but instead they m= imic=20 apes.=20 Consider the following.? First, they waltz their default customers into the= =20 summer with little of no protection from price spikes in the wholesale=20 market.? Forgivable in that it is human to err.? The prices skyrocket in=20 June, and they start looking for who to blame.? =01&Must be them damn=20 independent generators,=018 say their managers.? Gary Cotton informs the IS= O=20 Governing Board that hedging SDG&E=01,s position in the Block Forward Marke= t=20 wouldn=01,t have made any difference.? There=01,s one nobel laureate who mi= ssed his=20 prime.=20 Next, under pressure, they ask for help from suppliers and anyone else who= =20 will assist the utility and their customers.? Nine offers show up at their= =20 table, and they can=01,t choose any of them.? Again, Mr Cotton tells his fe= llow=20 ISO Governing Board members that these things take time, and we don=01,t to= rush=20 since there are many legislative barriers, and, well, the surfing was good= =20 this week so why spoil it?=20 Now they are in a panic because the Energy F_hrer is visiting old ladies=20 living in trailer parks, advising them not to pay their SDG&E electricity= =20 bill, and to continue to operate their air conditioners.? SDG&E puts a full= =20 page ad in the local newspaper telling everyone that SDG&E is doing=20 everything it can to lower their electric bills, including asking the ISO f= or=20 a $250 price cap, but the public can help by calling the ISO [address and= =20 phone number provided in the ad] and urging them to lower the cap.? I alway= s=20 thought the location of the ISO was a State secret for security reasons.? N= o=20 secrets in San Diego.=20 But we are not done.? No sir, we are not.? Those buffalo heads who run that= =20 company decide they will win a gold star on their collective foreheads, and= =20 implement one of the four resolutions passed by the Electric Oversight=20 Board.? The one they pick is to petition FERC on an expedited basis to cap = at=20 $250, the price at which sellers may bid energy or ancillary services into= =20 the ISO and the PX.? The primary reason is that Western power markets are n= ot=20 workably competitive.? In other words, they want FERC to set a max price on= =20 what generators can sell in addition to the price limit at which the ISO ca= n=20 buy!=20 What I find most astounding about this double talk is that SDG&E continues = to=20 collect tons of money from the sales of regulatory must run energy into the= =20 PX.?? These are sales from their stranded assets.? Their grief hasn=01,t ab= ated=20 their greed.=20 So, to recap, SDG&E missed the boat on price hedging, failed to win consume= r=20 confidence in public meetings, asked for help from suppliers and did nothin= g=20 in response, then filed at FERC to cap the sale price because the wholesale= =20 market into which they sell (over-priced?) energy is not workably=20 competitive.? Too much time in the direct sun light.=20 Things on the Island of California=20 ?@@@ The PUC issues its scathing report=20 The PUC report released yesterday is a gem with which I have not spent enou= gh=20 time.? I only read the Executive Summary, and that only because our counsel= ,=20 Dan Douglass forwarded me a copy. Let me pick out some of the gems in=20 President Lets Do Lynch=01,s burrito.? I would recommend reading the whole = text=20 if you have time, and if you seek perverse entertainment.=20 =01&California is experiencing major problems with electricity supply and= =20 pricing caused by policies and procedures adopted over the past ten years.= =20 =01& Since June, wholesale prices for electrical power in California have= =20 increased on average 270% over the same period in 1999, resulting in over $= 1=20 billion in excess?? payments for electricity.=20 =01&Hot weather, aging power plant and transmission infrastructure, and=20 dysfunctional bidding behavior in the wholesale power markets combined to= =20 drive prices up ...=20 =01&Because of serious market defects and tight supply of electricity,=20 purchasers of California power will likely pay billions more in electricity= =20 costs this year. Moreover, these price increases do not necessarily fund ne= w=20 investments in electricity supply or delivery reliability - they may flow= =20 solely to power producer profit margins.=20 =01&Despite the Electricity Oversight Board's legislative mandate to overse= e=20 those institutions, we have been unable to obtain [bid] data. Nevertheless,= =20 ... , we believe enough evidence of questionable behavior exists that the= =20 Attorney General should conduct an investigation into these statewide marke= t=20 practices, coordinating with other State agencies, including the PUC and th= e=20 EOB. Such an investigation would provide the factual foundation that=20 California policy makers and regulators need to recover any illegally=20 obtained profits.=20 =01&A momentous consequence of California's attempt to create a market in= =20 electricity is that the federal government now regulates California's=20 electric system. Washington D.C. now controls pricing decisions directly at= =20 the wholesale level and indirectly at the retail level and, to the extent= =20 that supply incentives are correlated to prices, Washington, D.C. now affec= ts=20 California's ability to attract new investment in power plants.=20 =01&Past administrations' willingness to cede the State's authority to the= =20 federal government combined with the legislative creation of two non-public= =20 supervisory organizations that have no duty to protect the public or consid= er=20 the retail customer. The "Independent System Operator" (ISO) and the "Power= =20 Exchange" (PX), the nonprofit private corporations that operate the State's= =20 transmission system and control wholesale pricing policies, are governed by= =20 boards whose members can have serious conflicts of interest. Some of these= =20 board members or their companies financially benefit from higher prices in= =20 electricity markets. Neither of these private organizations is accountable = to=20 the State or its consumers ....=20 ?=20 =01&Despite the federalization and the fragmentation of the State's electri= c=20 services, the State of California should protect its businesses and consume= rs=20 from cartel pricing; collusive behavior; inadequate power plant maintenance= =20 and lack of market planning for adequate electricity supplies.=20 =01&California consumers and businesses deserve to know in advance - as San= =20 Diegans did not this summer - how and when the price of an essential servic= e=20 like electricity will double. California is now largely constrained by=20 federal mandates from providing comprehensive retail price relief as long a= s=20 wholesale prices remain so high. If California tried to re-impose a price= =20 freeze in San Diego now, federal regulators would likely prevent that=20 action.? ... Short-term price relief, however, cannot resolve market gaming= =20 or fundamental wholesale pricing problems controlled by federal regulators.= =20 ?=01&We have been precluded from obtaining the data necessary to know if th= e ISO=20 and PX failed to detect manipulation and gaming on several fronts. We do no= t=20 know how market players acted in price offering and bidding and scheduling.= =20 The FERC has just announced an inquiry into national pricing and energy=20 market issues. California should not wait for national findings before it= =20 investigates California market practices. We recommend that the California= =20 Attorney General immediately subpoena relevant records and data to determin= e=20 the pricing and offering behavior of market participants; the actions of th= e=20 ISO and its board members; and the actions of generators in supplying=20 California's energy needs.=20 =01&Ten Actions to Consider or Act Upon to Prevent Current Electricity Prob= lems=20 From Spreading in 2001: ...=20 ?=20 ? 2. Create a California Energy Council, modeled on the National Security= =20 Council, to unify State action to resolve energy problems and to perform=20 integrated energy planning;=20 3. Ask FERC for extended wholesale price cap authority to moderate Californ= ia=20 wholesale market pricing;=20 4. Ask FERC to recognize the defects in the California and western regional= =20 markets and find that no competitive market exists in California power=20 markets;=20 ?...=20 ? ?8. Eliminate potential conflicts of interest in ISO/PX stakeholder board= s;=20 9. Improve California's ability to obtain ISO and generator data and enhanc= e=20 the State's enforcement capability for power plant maintenance; price=20 manipulation and generation gaming, consistent with protection of proprieta= ry=20 business information;=20 10. Provide the EOB with effective enforcement ability and additional=20 oversight authority for the ISO and PX. =01&Ten Issues to Consider or Act Upon Within the Next Six Months: ...=20 ? 4. Streamline state power plant siting procedures; consistent with=20 environmental requirements, and prioritize applications to advance clean,= =20 BACT+ power plant proposals.=20 5. Institute "use-it -or- lose-it" permitting power plant licensing and=20 emissions credits rules to ensure power plants get built;=20 ...=20 ?8. Reform PX pricing protocols and structures to lower wholesale and retai= l=20 prices and reduce excess profits=018 I told you I don=01,t need to write a Burrito anymore.? The Democrats in=20 Sacramento are doing that for me.? Welcome comrade.=20 Things on the Island of California=20 ?@@@ The ISO invokes $250 price caps.? Duh!=20 It is really hard to describe the drama of an ISO Governing Board meeting,= =20 especially when our favorite topic arises.? It seems the only time the Boar= d=20 becomes animated is when one of three issues are on the agenda: price caps,= =20 FTRs, and priorities for software enhancements. Otherwise, its pretty much= =20 hum-drum.=20 =01+Round and =01+round we went, once again.? A few more forced votes tippe= d the=20 scale in favor of the cap.? There were 15 yes votes, which included a force= d=20 yes vote from our friend Jerry Toenyes by order of Secretary of Energy Mr.= =20 Richardson. [Jerry, did you realize that the last letters of your name coul= d=20 be re-arranged to spell =01&NO ET YES=018?? Kind of a french thing.] I=01,m= sorry=20 about that vote, Jerry.? You still go in my book as one of the brave and bo= ld=20 for standing up to that sort of intimidation for so long.? Your picture in= =20 the SF Chron said it all.=20 The brave souls who stood tall and voted NO included David Parquet (Enron),= =20 Jan Smutny-Jones (IEP), Barbara Barkovich (CLECA), Caolyn Kehrein (CMA), Da= n=20 Kirshner (EDF), and Stacy Roscoe (Procter & Gamble).? Now, I must admit tha= t=20 Dynegy=01,s Greg Blue did help by voting a Texas No, spelled =01&A-B-S-T-A-= I-N=018.??=20 I have instructed Dynegy trader Dave Francis in Houston to work with Greg t= o=20 correct that problem.? We=01,re going to work things out.=20 The Energy F_hrer addressed the Board, again.? I didn=01,t mind that I only= had=20 a few brief, very brief moments to address the Board, and Herr (Hair?) Peac= e=20 got over 20 minutes.? That didn=01,t bother me at all.? He did more damage = to=20 himself in 20 than I could do in 2.? He blasted away at everyone who oppose= d=20 him.? He pined about Camden quitting the Board.? He said he knew how prices= =20 and markets work, that it isn=01,t the way those academic egg-head, FERC-lo= ving=20 economists tell you who pray to the gods of competition.? He lambasted WAPA= =20 for withholding generation to protect fish and wildlife (what was that all= =20 about?).? He predicted that on Thursday=01,s PUC meeting he and all the oth= er=20 powerful Democrats, Republicans and angry citizens of San Diego would deman= d=20 that the PUC impose a rate cap on retail electric rates in San Diego that a= re=20 just and reasonable (it didn=01,t happen).? And on and on and on.? This man= is=20 very delusional. He believes that Steve, and only Steve Peace can save the= =20 world.? He believes that political will trumps judicial, quasi-judicial, or= =20 independent Board actions.? This man makes relevant all the abstract musing= s=20 of the philosopher Friedrich Nietzsche (1844-1900) ... The will to power, t= he=20 ?bermensch, the transvaluation of values, etc.=20 But we are getting under (uber?) his skin, with the help of the press.?=20 Wednesday afternoon I called Commissioner Dick Bilas to see if he thought= =20 whether the next day=01,s PUC meeting was going to be a roll over. Dick sai= d he=20 got a call from Peace, and that Peace said he would not come to the meeting= .?=20 Apparently, Peace had received a lot of press, and all of it bad.=20 That=01,s the thin line of freedom which keeps tyranny at least one step aw= ay=20 from our front door.=20 ?<<< Things at the throne of FERC=20 ?@@@ Amen for the Morgan Stanley Order=20 And now, the good news.? You deserve this.? FERC gave the California market= a=20 little wiggle room last Friday.? FERC issued a last minute reply to the=20 complaint by Morgan Stanley Capital Group relating to the ISO=01,s intent t= o=20 lower the price cap.? FERC denied the complaint, but they didn=01,t waste t= ime=20 with an Order to simply deny a complaint.? FERC danced on the head of the I= SO=20 and pulled the bite out of the price cap.=20 Here are some excerpts:=20 =01&We accepted this [Amendment 21], not because it was a cap on sellers=01= , prices=20 but because it would promote order and transparency in the market by clearl= y=20 telling sellers of the maximum price the ISO was willing to pay and allowin= g=20 sellers to make informed economic choices on whether to sell in the ISO=20 market or to sell elsewhere...=20 =01& ... The ISO has no more or less ability to procure capacity and energy= than=20 any other buyer of these services ... If the ISO is unable to elicit=20 sufficient supplies at or below its announced purchase price ceiling (becau= se=20 generators are free to sell elsewhere if they choose), it will have to rais= e=20 its purchase price to the level necessary to meet its needs. ... Therefore,= =20 an increase in out-of-market (OOM) calls for generation may be necessary to= =20 maintain system reliability.? Because the current payment for OOM is not=20 subject to a maximum purchase price, the resulting overall payments may be= =20 higher.=20 =01&To the extent the ... ISO Board resolution contemplates implementing a= =20 directive that generators must bid their capacity into the ISO markets unde= r=20 any circumstances (e.g., when system load exceeds 38,000 MW), such a=20 requirement is not permitted by our ... Order and the ISO tariff. ... Futur= e=20 implementation of the ISO Board resolution with regard to a requirement to= =20 sell would require significant revisions to the ISO market rules.? Such=20 market changes could not become effective absent a corresponding amendment = to=20 the ISO tariff which would have to be filed under section 205 of the FPA.= =018=20 Well. What do you think about that?=20 Just wait.? Here is what the sleeping bear, Commissioner Hebert said in his= =20 concurring remarks:=20 =01&Getting to the bottom of the problem, in my view, requires us to begin = a=20 proceeding to rescind our approval of the ISO as the operator of the=20 California grid.? The record supports such a move. ... A memorandum to the= =20 ISO from a stakeholder who resigned from the governing board eloquently=20 brings to our attention repeated attempts to undermine the independence of= =20 the ISO. The memorandum also thoughtfully outlines consequences to the=20 markets of a return to =01+command and control.=01,=20 =01&Because these allegations come from a non-market participant, especiall= y=20 should we take heed.? We must also take notice of the public pressure on th= e=20 Board to compromise its independence.=018=20 Amen, brother, amen.=20 Odds and Ends (_!_)=20 As you can imagine, this week, like an endless string of weeks before this= =20 has been interminable.? I get about three phone calls a day from press=20 reporters, very little of which ever sees print.? My shtick is just too=20 complex for casual readers.? But I do notice that the reporters are asking= =20 better questions.? The public is becoming more savvy.? The information flow= =20 is moving in our favor, and will disarm the forces of evil, in about 10=20 years.=20 I have other problems on my mind.? I am working on a new computer system.?= =20 Really, it=01,s just an upgrade of an older computer that is a bit faster t= han=20 the laptop I tried to upgrade, very unsuccessfully.? As a result of the all= =20 the new hardware and software I purchased, my office looks like a war zone= =20 with an odd mix of PUC service copies, computer documentation, and diskette= s=20 laying all around. Quite a mess.=20 Prepare for the future.? Our next general meeting is scheduled for Thursday= =20 and Friday, October 5 and 6 at Moro Bay.? Barb Ennis will prepare a blurb f= or=20 us in next week=01,s Burrito about room reservations, timing, golf, etc.? O= ur=20 guest speakers will include MSC Chairman Professor Frank Wolak who will tal= k=20 on the subject of his choice, Ms. Irene Moosen of Grueneich Resource=20 Advocates who will make a presentation on the distributed generation case= =20 before the PUC, and William Freddo of PG&E National Energy Group who will= =20 give us some education on operating a power plant inside the New England IS= O.=20 Now for your daily bread, provided this week by Dan Douglass.? Last week we= =20 had a joke about Catholics.? This week it=01,s agnostics.=20 =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=20 An atheist was taking a walk thru the woods, admiring all that the accident= ?=20 of evolution had created.? "What majestic trees!? What powerful rivers! Wha= t?=20 beautiful animals!"? he said to himself.=20 As he was walking alongside the river he heard a rustling in the bushes?=20 behind him.? As he turned to look, he saw a 7 foot grizzly bear charging?= =20 towards him. He ran as fast as he could up the path.? He looked over his?= =20 shoulder and saw that the bear was closing in on him.? He tried to run even= ?=20 faster, so scared that tears were coming to his eyes. His heart was pumping= ?=20 frantically as he tried to run even faster, but he tripped and fell on the?= =20 ground.? He rolled over to pick himself up and saw the bear right on top of= ?=20 him raising its paw to kill him.=20 At that instant he cried out "Oh my God!" And time stopped. The bear froze.= ?=20 The forest was silent.? The river even stopped flowing.? A bright light=20 shone? upon the man, and a voice out of the sky said, "You deny my existenc= e=20 all? these years, teach others I don't exist and even credit my creation to= =20 a? cosmic accident, and now do you expect me to help you out of this?=20 predicament?? Am I to count you as a believer?"=20 The atheist, ever so proud, looked into the light and said, "It would be=20 rather hypocritical to ask to be counted as a believer after all these=20 years,? but could you make the bear a believer?"=20 "Very well" said the voice. And the light went out, the river flowed, the?= =20 sounds of the forest continued, and the bear brought both paws together,?= =20 bowed his head, and said, "Lord, I thank you for this food which I am about= ?=20 to receive."=20 =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=20 Amen.? And have a great weekend.? Oh, and thanks to all of you who sent me= =20 happy birthday wishes.? It was very much appreciated.=20 KSB=20 gba
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