|
|
Enron Mail |
Mime-Version: 1.0
Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: "SCIENTECH IssueAlert" <IssueAlert@scientech.com< X-To: X-cc: X-bcc: X-Folder: \Mark_Haedicke_Jun2001\Notes Folders\Notes inbox X-Origin: Haedicke-M X-FileName: mhaedic.nsf Today's IssueAlert Sponsors:=20 [IMAGE] The CIS Conferencec provides utility management personnel unequaled insight= =20 and current information on Customer Relationship Management (CRM),=20 E-Commerce, Technologies and Marketing. Fifty-four sessions conducted by=20 utility industry representatives will focus on issues facing the industry.= =20 Over 100 companies will exhibit the latest technologies and services.=20 Former President George Bush is our Honored Keynote Speaker=20 www.cisconference.org=20 Identify and discuss current issues confronting the energy and=20 telecommunications industries at the Center for Public Utilities' annual=20 spring conference. How should these problems be resolved? What tradeoffs ar= e=20 made with each solution? Join panel discussions led by utility executives a= nd=20 PUC commissioners in Santa Fe, NM, March 25-28th, at "Current Issues=20 Challenging the Utility Industry." To register, or for more information,=20 contact Jeanette Walter, Associate Director, at 505-646-3242 or=20 505-646-4876. The Center for Public Utilities is part of New Mexico State= =20 University, presenting programs sanctioned by the National Association of= =20 Regulatory Commissioners (NARUC).=20 For advertising information, email Nancy Spring, or call (505)244-7613.=20 [IMAGE] IssueAlert for March 6, 2001=20 Texas Announces Launch of Pilot Program;=20 Pat Wood Distinguishes Texas from California by Susan Kellogg, Issues Analyst and Will McNamara, Director, Electric Industry Analysis In a satellite media event on March 5, Pat Wood, the chairman of the Public= =20 Utility Commission of Texas (PUCT), introduced the media to a statewide=20 campaign of television advertisements that are part of a kick-off of the=20 Texas Electric Choice Pilot Program. Electric choice begins in Texas on Jun= e=20 1, 2001, with the start of a pilot program in which 5 percent of customers= =20 served by Texas investor-owned utilities can choose their retail electric= =20 provider (REP). Most other customers will be able to choose their REP when= =20 full-fledged electric choice begins on Jan. 1, 2002. =20 After fielding questions from a bevy of television media reporters at the 1= 1=20 a.m. broadcast, Wood conducted an exclusive interview with SCIENTECH Issues= =20 Analyst Susan Kellogg on how and why the Texas deregulation plan will work;= =20 why California didn't; and what role the expanding renewables market=20 (particularly wind power) will play in developing a vibrant, competitive=20 energy market in Texas. =20 Analysis: PUCT Chairman Wood is confident that Texas has done its homework= =20 well, and the state's overall deregulation plan has set the stage for a=20 successful retail competitive market. When we think of Texas, we think "big= ,=20 confident, independent." However, a comprehensive, statewide group of=20 stakeholders explored deregulation from all sides=01*getting information an= d=20 advice from other deregulating states and international sources=01*to make = sure=20 that Texans have a different experience with electric choice than=20 Californians did.=20 The summary of "what didn't work in California" has circulated in the media= =20 for weeks, but Wood has an interesting perspective on what complicated the= =20 state's energy deregulation market. Basically, Wood says, the California=20 market worked pretty well until it stopped raining in California, Oregon an= d=20 Washington. In Wood's opinion, the fact that California is dependent for=20 one-quarter of its power supply on an intermittent source (in this case,=20 hydroelectric power) makes little sense and is largely to blame for the=20 supply / demand imbalance still wreaking havoc in the state. The lack of=20 power plant investment exacerbated the dynamics of the market when a critic= al=20 piece of the power supply dried up last summer.=20 Wood's criticism of the California mismanagement focused on the "it's not m= y=20 job" mentality, considering that three state agencies were involved in=20 California deregulation and yet no specific agency seemed to be in charge.= =20 "Bush would have run me out of Texas if we had done anything like that,"=20 mused Wood. "Our job is to not only do our job today but to plan for the=20 future to look ahead. Granted, there had been no power plant investment, bu= t=20 not looking ahead with accountable facts was an inexcusable critical piece = of=20 planning missed by the California Energy Commission." =20 The perfect storm of colliding conditions that plunged California into=20 survival mode could have been prevented. The whole energy market has a less= on=20 to learn, says Wood. And Texas has an opportunity to practice.=20 To counteract the mistakes made, Wood freely acknowledges that Texas=20 "pirated" most of the infrastructure of Texas' deregulation bill from=20 Pennsylvania's largely successful plan. The Texas legislature meets every t= wo=20 years for a 90-day session. Right before the 1999 session, Wood and a=20 deregulation team went to Pennsylvania and visited with state commissioners= ,=20 legislators, industry executives, consumer groups, and customers to find ou= t=20 what was working and what was not in the Pennsylvania model. =20 What they decided to leave behind from Pennsylvania's overall successful=20 deregulation strategies was the provision that allowed a Philadelphia=20 electric affiliate to go back into Philadelphia and attract the customers= =20 away from their own utility in the name of competition. Texas' goal, Wood= =20 clarifies, is to have a market of unaffiliated companies participating, whi= ch=20 will hopefully generate genuine, long-term competition. Yet, in contrast to= =20 Pennsylvania, Texas adopted a policy in which customers that do not opt to= =20 switch to a new provider are defaulted to an affiliated REP of their=20 incumbent utility. This affiliated REP, which cannot be the T=02=15operatio= n of=20 the incumbent utility, will remain subject to regulated rates in its assign= ed=20 service territory, although it is allowed to freely compete without price= =20 regulation outside of its service territory. =20 As a result of this policy, Texas-based companies such as Reliant and TXU= =20 have submitted multiple applications to the PUCT, covering separate=20 subsidiaries that will serve different customer classes and allowing the=20 companies to compete outside of their service territories. At last count,= =20 over 11 companies had filed for certification with the PUCT to be a REP in= =20 Texas. Companies that plan to be active in the Texas retail market include= =20 The New Power Company, Green Mountain Energy, First Choice Power (the=20 competitive spin-off of Texas-New Mexico Power Company), TXU Energy Service= s,=20 Sempra, Shell, Reliant, and Enron Energy Services (among others).=20 Another Texan invention was the Electric Reliability Council of Texas=20 (ERCOT), the independent power grid that serves the bulk of the state and i= s=20 essentially an electrical island in the United States. Not possessing=20 multi-state jurisdictions has both its advantages and disadvantages. Wood= =20 sees it being a plus for the Texas energy market because of the ability to= =20 monitor the balance of supply and demand of energy flow. =20 Another feature of the Texas approach to deregulation is to make the=20 transition easier for both retailers and operators, in part by developing a= =20 seamless integration between supply and demand. Perhaps most significant i= s=20 the emergence of wind power and other renewables in the state, in part=20 because of a mandate (Renewables Credit Exchange) that allows a retailer to= =20 buy renewable credits from a renewable operator at whatever price they agre= e=20 on. In addition, Texas has established the Texas Renewables Portfolio=20 Standard. Until the end of 2001 is providing a federal tax credit for=20 companies that produce electricity from wind. The deregulation law in Texas= =20 is considered the most supportive of renewable forms of energy when compare= d=20 to the 24 states that have enacted legislation for electric competition. Th= e=20 key challenge for harnessing wind power in the state is to get the=20 transmission grid to consistently and efficiently transport the power back= =20 into the main system. =20 There is a high desire for wind power in Texas. According to Wood, once=20 green power programs were available in the state, people jumped on board so= =20 fast that the pilot had to be put off a year so enough power supply could b= e=20 purchased. Wood thinks the demand will certainly outstrip the 3-percent=20 mandate put into place by the state. Right now, constructing a wind power= =20 plant in Texas is actually less expensive than building a more traditionall= y=20 fueled power plant. An ambitious mandate of having 2,000 MW of renewable=20 resources by 2009 is fueling investors interest, sending millions of dollar= s=20 to Texas for renewable projects, says Wood. =20 Will Wood take his lessons and leadership to Washington D.C.? There are two= =20 open positions on the Federal Energy Regulatory Commission (FERC), which is= =20 now chaired by Curt H,bert. For months, it has been rumored that Wood will = be=20 appointed by President Bush to assume one of those positions. When asked=20 whether he had any potential interest in a role with FERC, Wood fielded the= =20 question diplomatically. He'll "leave that decision to the president," he= =20 said. =20 Right now, Wood is focused on bringing electric competition to Texas. As=20 noted, the state's pilot program for electric choice begins this June with= =20 full competition starting in January 2002. With regard to population, Texas= =20 represents the second largest energy market (behind California), offering a= =20 market value of about $20 billion. Thus, many eyes within the energy indust= ry=20 are anxiously watching to see how deregulation will unfold in the Lone Star= =20 State.=20 In turn, Wood acknowledges that Texas officials have been watching Californ= ia=20 closely for the last year, and remain confident that the power supply=20 problems faced there won't happen in Texas. This is largely because Texas h= as=20 avoided making some of the critical mistakes made in California. One=20 important distinction between the two states is that Texas regulators have= =20 allowed for power plants to be built in about half the construction time th= at=20 has been common in other states such as California. Since 1995, 22 new plan= ts=20 have started operations in Texas, generating 5,700 MW. By the time=20 competition begins fully in January 2002, 15 more plants and 10,000 MW are= =20 scheduled to come online. As a result, Texas officials say that=01*unlike= =20 California=01*their state has more than enough generating capacity to meet = peak=20 demand and provide at least a 15-percent reserve for the next few years. Th= e=20 vast majority of these new plants are fueled by natural gas, with wind powe= r=20 being a supplement. =20 In addition, there are significant differences between the market structure= s=20 in Texas and California. First, California's structure is based on an aucti= on=20 pool, which the state modeled on the United Kingdom. Integral to California= 's=20 system is a Power Exchange, into which power suppliers submit power that th= ey=20 want to sell on the competitive market. California's PX discouraged a healt= hy=20 bilateral contract market from forming because generators could make more= =20 money selling into the PX. Texas, on the other hand, has no Power Exchange= =20 and in fact has encouraged bilateral contracts as the way in which electric= =20 service contracts will take place. In Texas, customers are encouraged to=20 establish long-term bilateral contracts with suppliers to secure the best= =20 rates, which introduces the opportunity to protect them from wholesale mark= et=20 prices as customers in San Diego discovered this summer.=20 The market potential for Texas competition appears very strong, which perha= ps=20 more than anything else is due to good planning on the part of Texas=20 legislators and regulators. However, there are still some lingering concern= s=20 about competition in the Lone Star State. First, there is a shortage of=20 transmission lines in Texas, especially in the northern half of the state.= =20 Although PUCT officials say that sufficient transmission lines will be put= =20 into place before competition begins, without sufficient lines companies=20 could experience transmission congestion.=20 Another concern is that Texas may be relying too much on natural gas. Almos= t=20 all of the new plants that have been built in Texas are powered by this fue= l=20 source. As the price of natural gas has remained high, this could pose a=20 problem for the market in Texas. Hedging will be a key part of a successful= =20 strategy for any provider in Texas, especially considering the rising=20 natural-gas prices. Still, the espoused advantages of competition (i.e.,=20 lower prices for end-users) could fall flat if so much emphasis is placed o= n=20 natural gas as the primary power source in the state. Yet, ironically,=20 customers may still benefit because of the multitude of power plants within= =20 the state. Abundant supply in Texas may keep the cost of power low for=20 end-users, but less profitable for suppliers. =20 Overall, though, Texas remains the bright shining hope for those who suppor= t=20 energy deregulation in this country. The size of the state's energy market= =20 will continue to attract new participants, at least on the front end of the= =20 restructuring process. Whether they remain in Texas, and whether or not=20 competition in the state will truly bring benefits to end-users, remains to= =20 be seen.=20 An archive list of previous IssueAlerts is available at www.ConsultRCI.com [IMAGE] The most comprehensive, up-to-date map of the North American Power System b= y=20 RDI/FT Energy is now available from SCIENTECH. =20 Reach thousands of utility analysts and decision makers every day. Your=20 company can schedule a sponsorship of IssueAlert by contacting Nancy Spring= =20 via e-mail or calling (505)244-7613. Advertising opportunities are also=20 available on our website.=20 SCIENTECH is pleased to provide you with your free, daily IssueAlert. Let = us=20 know if we can help you with in-depth analyses or any other SCIENTECH=20 information products. If you would like to refer a colleague to receive ou= r=20 free, daily IssueAlerts, please reply to this email and include their ful= l=20 name and email address or register directly on our site. =20 If you no longer wish to receive this daily email, send a message to=20 IssueAlert, and include the word "delete" in the subject line.=20 SCIENTECH's IssueAlerts(SM) are compiled based on the independent analysis= =20 of SCIENTECH consultants. The opinions expressed in SCIENTECH's IssueAlert= s=20 are not intended to predict financial performance of companies discussed, = or=20 to be the basis for investment decisions of any kind. SCIENTECH's sole=20 purpose in publishing its IssueAlerts is to offer an independent perspecti= ve=20 regarding the key events occurring in the energy industry, based on its=20 long-standing reputation as an expert on energy issues. =20 Copyright 2001. SCIENTECH, Inc. All rights reserved.
|