Fwd: Dow Jones Newswires - Article on TX Stranded Cost Issue

FYI
---------------------- Forwarded by Lance Cunningham/NA/Enron on 04/24/2001
12:50 PM ---------------------------
From: Geriann Warner on 04/24/2001 11:26 AM
To: Jean Ryall/NA/Enron@Enron, Joe Allen/NA/Enron@Enron, Patrick
Keene/NA/Enron@Enron, Stacey Bolton/NA/Enron@Enron, Leslie
Lawner/NA/Enron@Enron, Ron McNamara/NA/Enron@Enron, Gloria
Ogenyi/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Lance Cunningham/NA/Enron@Enron,
Thane Twiggs/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Nancy
Hetrick/NA/Enron@Enron, clandry@enron.com, pochsner@enron.com,
bevin.hunter@enron.com
cc:

Subject: Fwd: Dow Jones Newswires - Article on TX Stranded Cost Issue

FYI

Geriann Warner
Government Affairs - The Americas
1400 Smith Street, EB 4740C
Houston, TX 77002
Tel: 713-853-5036
Fax: 713-853-7297
E-Mail: geriann.warner@enron.com
----- Forwarded by Geriann Warner/NA/Enron on 04/24/2001 11:26 AM -----

"Bill L. Bryant" <BILL@katzlaw.com<
04/24/2001 10:23 AM

To: <Marchris.Robinson@enron.com<
cc:
Subject: Fwd: Dow Jones Newswires - Article on TX Stranded Cost Issue

Katz, Kutter Haigler, Alderman, Bryant & Yon et al
106 East College Avenue, Suite 1200
Tallahassee, FL 32301
(850) 224-9634
www.katzlaw.com
_______________________________________

This transmission is intended to be delivered only to the named addressee(s)
and may contain information that is confidential, proprietary, attorney
work-product or attorney-client privileged. If this information is received
by anyone other than the named addressee(s), the recipient should immediately
notify the sender by E-MAIL and by telephone (850) 224-9634 and obtain
instructions as to the disposal of the transmitted material. In no event
shall this material be read, used, copied, reproduced, stored or retained by
anyone other than the named addressee(s), except with the express consent of
the sender or the named addressee(s). Thank you.

----- Message from "Stiles, Billy" <billy.stiles@myflorida.com< on Tue, 24
Apr 2001 10:50:53 -0400 -----
To: "Carole Joy Barice (E-mail)" <fbfolaw@aol.com<, "David B. Struhs (E-mail)"
<david.struhs@dep.state.fl.us<, "E. Leon Jacobs (E-mail)"
<ljacobs@psc.state.fl.us<, "Helen A. Ferre' (E-mail)" <haferre@aol.com<, "J.
Dudley Goodlette (E-mail)" <goodlette.dudley@leg.state.fl.us<, "Jack Shreve
(E-mail)" <harder.kay@leg.state.fl.us<, "John J. Anderson (E-mail)"
<johnja26@aol.com<, "Joseph K. Tannehill (E-mail)" <jktsr@merrick-inc.com<,
"Joshua High (E-mail)" <joshuahigh@entechpartners.com<, "Kaaren
Johnson-Street (E-mail)" <kjstreet@prodigy.net<, "Kenneth W. Littlefield
(E-mail)" <littlefield.ken@leg.state.fl.us<, "Lou Frey Jr. (E-mail)"
<lou.frey@lowndes-law.com<, "Miguel De Grandy (E-mail)"
<degrandy@bellsouth.net<, "Sandra B. Mortham (E-mail)" <smortham@aol.com<,
"Sandy J. Woods (E-mail)" <sandy.woods@publix.com<, "Sanford (Sandy) V. Berg
Ph. D. (E-mail)" <berg@dale.cba.ufl.edu<, "Stephen J. Mitchell (E-mail)"
<Smitchell@ssd.com<, "Tom Lee (E-mail)" <lee.tom.web@leg.state.fl.us<,
"Walter Revell (E-mail)" <r528altara@aol.com<
Subject: Dow Jones Newswires - Article on TX Stranded Cost Issue
Dow Jones Newswires
Texas PUC To Rule On Thorny Stranded-Cost Issue

Dow Jones Newswires

HOUSTON -- The Texas Public Utility Commission
is set to unleash a hornet's nest of protest
from three investor-owned utilities this week
if it orders the electric firms to return
billions of dollars to rate payers.

At issue is money the utilities have collected
to offset expenses they contend will be left
"stranded" when electric retail competition
begins in Texas next year.

If the two-member PUC agrees with the proposed
rulings, it could be the first reversal of
stranded-cost recovery policy in the country.

The PUC is holding a two-day meeting, Tuesday
and Wednesday, to complete its work on several
contentious issues that must be resolved soon.

Texas is caught between early expectations that
wholesale power prices would fall under
deregulation and recent recognition that
wholesale prices may not fall due to higher
fuel costs.

Over-recovery of "stranded costs" - past
utility investment in generating units,
primarily nuclear power plants, that may not be
competitive in a deregulated electric market -
emerged with the dramatic rise in natural gas
prices over the past year.

Higher priced gas-fired generation makes
nuclear power more competitive in Texas' open
market, thereby reducing the stranded costs
utilities expected, say critics.

Texas PUC chairman Pat Wood and several Texas
legislators are worried that ongoing efforts by
TXU (TXU) unit TXU Electric & Gas, Reliant
Energy's (REI) Reliant HL&P and American
Electric Power's (AEP) Central Power & Light to
collect money to mitigate their stranded costs
will result in excess recovery which could hurt
new entrants and stifle early market
competition.

The PUC wants to use revised stranded-cost
estimates to decide if ongoing mitigation
efforts should be reversed.

When the Texas bill electric restructuring bill
was passed in 1999, the trio of utilities
expected total stranded costs to reach $7
billion.

Updating the economic model to reflect higher
natural gas prices eliminated the stranded
costs and led to talk of "negative" stranded
costs of nearly $5 billion.

The utilities say they don't believe they are
recovering excess dollars and argue that the
PUC can't alter the mitigation process until
2004 when the Texas restructuring law calls for
a final accounting procedure using actual
market data, not the economic model they call
flawed.

They argue that if PUC estimates are wrong,
power prices will jump in Texas in 2004.

They staunchly oppose the idea that customers
should benefit from negative stranded costs.

By the end of the year, TXU will have collected
roughly $1.2 billion; Reliant about $1.5
billion CP&L about $36.5 million.

The stranded-costs rulings are part of an
"unbundling" process each Texas investor-owned
utility is undergoing to establish transmission
and distribution rates. In addition, the PUC
will set certain non-bypassable wires charges
which will come into play as the state moves to
a competitive retail electric market beginning
in January.

TXU has said it will challenge any PUC ruling
to change the mitigation process before 2004.

In addition to the PUC effort, a bill is under
consideration in the Texas House of
Representatives that addresses over-recovery
and "negative stranded costs" not just for TXU,
Reliant and CP&L, but for other Texas utilities
as well.