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Enron Mail |
gngr 713-853-7751 ----- Forwarded by Ginger Dernehl/NA/Enron on 03/15/2001 11:18 AM ----- Margaret Carson 03/15/2001 10:56 AM To: Ginger Dernehl/NA/Enron@Enron cc: Lorna Brennan/Enron@EnronXGate Subject: PLEASE DISTRIBUTE TO THE GROUP. THANKS. The FT/RDI March 14 California Conference call discussed the plight of California utilities and customers. California is a state with IOUs on the verge of bankruptcy, that wants to buy up the utilities power grid assets that is now seeing, after more than a year of constant natural gas price hikes, gas prices starting to decrease. There are 3 ways for California to get out of this electricty supply bind and ease off its power price spikes: add generation over capacity; have retail users reduce peak use consumption and find methods to use cheaper storage of power. The latter is not available and the first will eventually be available medium term. Thus dynamic pricing programs could help the retail power decrease strategy. The California crisis is indirectly causing several other states to stall their deregulation progress, namely Oklahoma, Arkansas, Nevada and Missouri. Fifty percent of US power load is used by 1 percent of customers--the industrials. In California, the industrials are only one-third of one percent of customers and they use 25 percent of the electricity in the state. Going to this industrial market and using technoogy and pricing to conserve electricity use would go a long way towards reducing peak demand use. RDI believes the gas infrastructure in the US is there for 100 GW of new gas power plants, but many local hookups must be done to meet super peak days on a localized basis. California is racing to get 5 or 6 peakers by this summer yet there may not be enough gas this summer to fill their needs. Plans to add capacity inside the state to receive gas at the border are lagging the plans of interstates to add capacity. Summer peak use may be just as difficult to meet in the US as winter peaks have been. As new merchant plants come online on a regional basis differentials will change a lot. But most pressure on prices medium term will be downward, and the items to watch is where/when the new supplies show up and where the new niche interconnects get built. In California the Gov. does not want to let power prices go above current price caps and this will be hard for him to do and still give price signals that will take off demand at the peak of the market. Average electricity demand growth annually in California has been about 3 percent per year since 1998 but less than 1 percent of new capacity has been added. In concluding remarks, RDI's John Egan noted due to the expected crush of changes, market vigilence will be critical for the successful participants in the gas and power markets over the next few years.
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