|
|
Enron Mail |
Mime-Version: 1.0
Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: "SCIENTECH IssueAlert" <IssueAlert@scientech.com< X-To: X-cc: X-bcc: X-Folder: \Mark_Haedicke_Jun2001\Notes Folders\All documents X-Origin: Haedicke-M X-FileName: mhaedic.nsf Today's IssueAlert Sponsors: [IMAGE] Are you looking to invest in, attract investors for, provide services to or understand the business and technology dynamics of the hottest companies emerging in the energy sector? Attend the Energy Venture Fair, June 25 & 26, 2001, in Boston, MA and hear CEOs from 75 hot energy companies present their business plans. Complete event description available at www.energyventurefair.com or call Nannette Mooney at (818) 888-4445, ext. 11. [IMAGE] In an exclusive SCIENTECH PowerHitters interview, Wayne Brunetti, CEO of Xcel Energy, talks about the company's methodical expansion through the resolution of a successful merger and a new name, the successful IPO of NRG, and the recent partnering with Peace Software to address it's CIS needs. Read more about Brunetti and Xcel Energy at: www.scientech.com [IMAGE] The most comprehensive, up-to-date map of the North American Power System by RDI/FT Energy is now available from SCIENTECH. The Wall Map measures 42" x 72"; the Executive Map Set consists of 18 11" x 17" maps. Visit our website at www.scientech.com for a detailed description of these valuable maps and complete ordering instructions. [IMAGE] [IMAGE] May 30, 2001 California Update: Bush and Davis Have Face-to-Face Meeting; No Compromise in Sight By Will McNamara Director, Electric Industry Analysis [IMAGE] With California facing a summer of anticipated power outages, Gov. Gray Davis and President George W. Bush met for approximately 20 minutes on May 29 to discuss the state's energy crisis in general and a federal cap on wholesale energy prices in particular. Davis did not win any concession during the brief meeting, in which he reportedly reiterated his contention that Texas energy producers have engaged in price gouging in California. In fact, after the meeting, Gov. Davis said, "On the thing that really matters above all others [price caps], I'm disappointed that we still have a fundamental disagreement." Analysis: For once, it's rather easy to imagine myself as a fly on the wall during this much-anticipated meeting between the nation's leader and the leader of the nation's most populous state. The firmly held positions of both President Bush and Gov. Davis have been so well defined and articulated over the last few months that it is not hard to speculate on how their brief conversation unfolded. Unfortunately, their positions are currently so far apart that any compromise on the key issue of Western wholesale price caps shows little chance of being reached. Once again, the issue appears to be headed to court, with Gov. Davis having now confirmed that he will bring suit against FERC. Meanwhile, what was previously perceived as "California's problem" has now become a national concern and one of the issues (if not the main issue) on which the political reputations of both Bush and Gray currently depend. For clarity, and to establish why compromise is so unattainable, let's crystallize the philosophical gulf that exists between Bush and Davis. Although the issues surrounding California's energy crisis are complex, the main issue on which Bush and Davis disagree is rather simple: price caps or no price caps. Gov. Davis claims that Californians have been unfairly charged nearly $8 billion since January and acknowledges that his own plan to keep Pacific Gas & Electric Co. out of bankruptcy failed. The governor also pointed to a record price of $2,000/MWh that the state paid for power last week, compared with an average price of $30/MWh in the spring of 2000. Thus, Davis wants the Bush administration to enforce federal law by making FERC put wholesale price caps into place for a period of six or seven months (long enough to get past the summer power crunch). The temporary price cap also would allow for the four power plants that are already under construction in the state to come online. FERC already has instituted a price cap for times when California's power reserves fall below 7.5 percent, but Davis has argued that this approach is not sufficient. Davis' argument is based on the belief that FERC has not fulfilled its federal obligation to ensure just and fair electricity prices. In an interesting development, Davis has gained some influential support regarding his plea for price caps from a consortium of ten economists, including Cornell professor emeritus Alfred Kahn, generally considered the "father of deregulation." In a letter sent to the president late last week, Davis and the group of economists claimed that FERC's failure to act soon on the issue of price caps "will have dire consequences for the state of California and will set back, potentially fatally, the diffusion of competitive electricity markets across the country." In contrast, President Bush, along with Vice President Cheney, maintain that price caps won't solve the power shortage, and in fact would only do further damage to California's power problems as price restrictions would discourage further production. In addition, Bush has argued that the core of California's problems is a supply / demand imbalance, something that price caps would do nothing to solve. Vice President Cheney has said that price caps might worsen the situation by limiting supply, resulting in more blackouts for California this summer. Further, Bush has argued that California officials (including Davis' predecessor, Pete Wilson) are responsible for the state's power woes and that the only real solution is a combination of increased supply and conservation efforts. The subtext of the Bush administration's approach to the California power crunch is that the problem can be solved in time, but not with temporary band-aids. Under the recently released federal energy plan, President Bush has outlined a plan to increase power supply over the next 20 years, fueled by traditional and non-traditional sources. Bush's approach to California is that, in time, increased production and transmission capacity upgrades will rectify the state's current supply / demand imbalance. Affixing temporary price caps, according to Bush, would do no good and could cause a great deal of damage. While touring California, President Bush announced a proposed expansion of the Low Income Home Energy Assistance Program, which provides special help to cash-strapped residents of California and other states. Funding of this program, which requires congressional approval, would increase by $150 million (adding to the already-budgeted $300 million). Gov. Davis again responded that this measure was "inadequate" and reiterated that all California wants is for Bush to invoke the federal power that only he has as president and provide short-term relief to the state. Gaining momentum for Bush's travels in California, Energy Secretary Spencer Abraham weighed in on the California debate on May 29. Abraham stated that the state's problems were not just a result of insufficient supply, but also related to poor transmission capacity. As such, Abraham directed the Western Area Power Administration, a federal agency, to finish its pending plans for increasing capacity along the so-called Path 15, an 84-mile stretch of power lines that presently is insufficient to carry the necessary load between Northern and Southern California. Bottleneck problems along Path 15 have been cited as a main cause of power outages in the central part of the state. Remaining at issue is whether or not there will be enough funding to support a new transmission line along Path 15. Of course, politics continue to play a key role in this ongoing saga. Both Bush and Davis have seen their approval ratings dip as a result of the power crisis and are seeking redemption (and a place to transfer blame). A Field Poll released last week indicated that President Bush's approval rating in California is at 42 percent (40 percent disapproving), 12 points behind the national average. Gov. Davis' approval rating in the state is also at 42 percent, with disapproval coming in at 49 percent (a sharp decline from more favorable ratings held in January). In addition, remember that President Bush lost the state of California in November's election (by as much as a 12-point margin, or more than one million votes). It is also reported that Gov. Davis may make a play for the presidential election in 2004. Further, Davis has publicly singled out a handful of power suppliers such as Reliant and Enron, which are based in Texas, the president's home state. Now that any sort of compromise appears unlikely between California and the Bush administration, Gov. Davis has confirmed that he will pursue legal action against FERC, hoping to force it to honor rulings that electricity prices in California were unjust and unreasonable. Further, Davis indicated that the U.S. Senate, soon to be Democrat-controlled, would hold hearings into the soaring prices and perhaps be more responsive to the state's claims. The California State Legislature already has filed a suit against FERC, claiming that the federal commission has failed in its efforts to stop what it already determined were unjust and unreasonable wholesale prices. Nevertheless, on May 29, the 9th U.S. Circuit Court of Appeals declined to order FERC to cap wholesale prices in California, responding to a sideline claim issued by the city of Oakland and two California legislators. The three-judge panel of the court ruled that the appeal did not warrant intervention on the part of FERC. However, this ruling does not directly impact any additional lawsuits that are pending or might be filed. Keep in mind that FERC continues to apply pressure on California to join RTO West, the regional transmission organization that is overseeing transmission in the Pacific Northwest. California officials have maintained that they want the California ISO to remain independent. Consequently, California and FERC may reach a deal sooner than Gov. Davis and President Bush, as a trade-off between price caps and California joining RTO West could become the much-sought-after compromise. On the record, FERC officials share the Bush administration's opposition to price caps, but Chairman Curt Hébert has previously indicated that he is open to the use of price caps as a temporary solution. An archive list of previous IssueAlerts is available at www.scientech.com Reach thousands of utility analysts and decision makers every day. Your company can schedule a sponsorship of IssueAlert by contacting Nancy Spring via e-mail or calling (505)244-7613. Advertising opportunities are also available on our website. SCIENTECH is pleased to provide you with your free, daily IssueAlert. Let us know if we can help you with in-depth analyses or any other SCIENTECH information products. If you would like to refer a colleague to receive our free, daily IssueAlerts, please reply to this email and include their full name and email address or register directly on our site. If you no longer wish to receive this daily email, send a message to IssueAlert, and include the word "delete" in the subject line. SCIENTECH's IssueAlerts(SM) are compiled based on the independent analysis of SCIENTECH consultants. The opinions expressed in SCIENTECH's IssueAlerts are not intended to predict financial performance of companies discussed, or to be the basis for investment decisions of any kind. SCIENTECH's sole purpose in publishing its IssueAlerts is to offer an independent perspective regarding the key events occurring in the energy industry, based on its long-standing reputation as an expert on energy issues. Copyright 2001. SCIENTECH, Inc. All rights reserved.
|