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Enron Mail |
November 1, 2000
< < < <Chairman James Hoecker <Federal Energy Regulatory Commission <888 First Street, N.E. <Washington, DC 20426 < <Dear Chairman Hoecker: < <I want to compliment you and your fellow Commissioners and staff on <the substance of your initial proposed order concerning the California <market. I am writing to share my initial reaction and expect to <provide more detailed comments in the near future. < <While the proposed order is not as clear and unambiguous as I would <like it to be, your call for sweeping changes in the FERC-approved <tariffs which were filed in December of 1995 is an important <contribution to at least partially mitigating the exercise of market <power as well as helping to establish the legal basis for what will <surely prove to be a vigorous court fight. < <Your unambiguous declaration that the rates being charged in the <wholesale market are, and have been, "unjust and unreasonable", would <have restored credibility to the wholesale market. But your action is <more than adequate for the California Public Utilities Commission to <deny the applicability of the filed rate doctrine to the wholesale <prices produced by a FERC-approved tariff, which FERC has now ruled <failed to produce "just and reasonable" rates. < <For California consumers, it means that there is now a legal <justification for these unjust wholesale costs to not be passed on to <the retail ratepayers. In turn, the State and consumers should <support utilities in litigating for relief against those parties who <profited from "unjust and unreasonable" wholesale rates which, of <course, will likely require action against FERC itself. < <As I have indicated in prior correspondence, we disagree with your <counsel's opinion that you are constrained from acting retroactively. <If the tariffs produced "unjust and unreasonable rates" and were, <therefore, illegal in October, they were similarly illegal in prior <months in which the effect of market power was even more evident. < <However, we appreciate both your stated desire to act retroactively <and your request to Congress to clarify this authority. While we would <certainly prefer that Congress act on your request, we are also <confident that the Federal Court will confirm our legal analysis. In <the interim, your invitation to California to suggest equitable <remedies for earlier periods, is most welcome. As a threshold matter, <a statement by you of your intention to host a settlement conference <in San Diego would be most useful in moving such a remedy forward. < <I support your present proposals to restructure the previously <FERC-approved tariffs to address the ability of parties to exercise <market power as far as they go. However, I do have concerns that <enhancing the ability of California utilities to make forward <purchases will not mitigate market power. Since forward contracts <will be based upon sellers expectations regarding real- time markets <and since real-time market prices will still be distorted by the <exercise of market power, forward contract prices will themselves be <distorted. < <Finally, I will take particular satisfaction in the conversion of the <discredited ISO and PX stakeholder boards into non-stakeholder boards. < I do question, however, the wisdom of allowing these dysfunctional <boards to have a last hurrah and choose their non-stakeholder <successors. < <Mr. Chairman and Commissioners, these are difficult and complex issues <subject to the push and pull of gigantic economic interests. There <will be much regulatory work as well as litigation to follow. <However, your action -- coupled with appropriate action by the <California PUC -- will help assure that, as these gigantic interests <fight over economic theory and their balance sheets, consumers will <not foot the bill. < <Thank you. < < <Sincerely, < < <Steve Peace < <Cc: Commissioner Linda K. Breathitt < Commissioner Curt Hebert Jr. < Commissioner William L. Massey
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