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Enron Mail |
FYI, the highlight of this morning's Senate Energy Committee hearing
is the tentative alliance between Dianne Feinstein and Gordon Smith in favor of regionwide price caps. You'll receive a fax of his press release this afternoon. The essence of the agreement (which has not been reduced to legislative language) is that Smith is agreeing to support regionwide price caps while Feinstein is agreeing to force California to raise retail rates. In other words, the price cap would only apply to a state that allows its retail rates to rise to allow utilities to pay their bills. But Feinstein got Smith to agree that there should be flexibility for states to determine how and when wholesale rates will be passed on to ratepayers. I seriously doubt that this whole proposal will become law, but if it does, I would expect the CPUC to thoroughly abuse this flexibility. In her plea for the proposal, Feinstein said that: "I agree that the CPUC was wrong to not allow long-term contracts." Secretary Abraham and Chairman Hebert were strongly opposed to price caps. When asked about the Feinstein/Smith proposal, Abraham noted that he hadn't seen anything in writing, but that, to the extent the proposal includes prices caps, the Administration would not support it. This was obviously an awkward situation for Abraham because he was essentially dumping on the proposal of a fellow Republican; nevertheless, he did it. Abraham said that his most important mission is to keep the lights on, and that price caps don't increase supply or decrease demand, so he's against them. One of Abraham's arguments against price caps was that it would discourage Canadian and Mexican sellers from selling into the U.S. Bingaman expressed strong skepticism that Mexico has much to offer, but Abraham said that he has had talks with his Mexican counterpart on this subject, and that every little bit helps. Senator Cantwell briefing endorsed the Feinstein/Smith effort, but it did not appear that she has yet studied it. Senator Craig said that he is "fundamentally skeptical" about price caps. He said that they have no history of success, and that they are a distraction from working on the real solutions. Locke testified in favor of "short-term, interim [seems redundant to me], wholesale price caps." He wants to base the cap on the cost of service, and then add a reasonable rate of return. He said that if you set the cap high enough, it will not discourage new generation. He also noted that NW suppliers are out tens of millions of dollars on sales to California for which they have not been paid. Counterbalancing Locke, Governor Marks (sp?) of Montana testified against price caps on the ground that it discourages new generation. It's worth noting that, of the 11 western governors, only the 3 coastal governors support price caps. The other 8 sent a letter to Bush opposing price caps. Hebert took the opportunity to speak out of a single RTO for the West. He made similar remarks yesterday at the Commission open meeting when they were discussing the order to increase generation output in the West. Please call me if you have any questions. Craig Craig Gannett Davis Wright Tremaine 2600 Century Square Building 1501 4th Ave. Seattle, WA 98101 Ph: (206) 628-7654 Fax: (206) 628-7699 E-mail: craiggannett@dwt.com
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