Washington Post articles 5/16/01

----- Forwarded by Cindy Derecskey/Corp/Enron on 05/16/2001 08:49 AM -----

Lora Sullivan
05/16/2001 08:33 AM

To: Mark Palmer/Corp/Enron@ENRON, Cindy Derecskey/Corp/Enron@Enron
cc: Lora Sullivan/Corp/Enron@ENRON
Subject: Washington Post articles 5/16/01

Per the request of Linda Robertson attached please find the following:

Midterm Jitters in the House
By David S. Broder

Wednesday, May 16, 2001; Page A23
President Bush may not be a scholar, but he is an avid student of politics.
For understandable reasons, he has given especially close scrutiny to the
lessons of his father's presidency -- and what went wrong to deny him a
second term in 1992.
The results can be seen in the current chief executive's adamant support of
the large tax cut on which he campaigned; he knows that his dad's retreat
from his "no new taxes" pledge cost him vital conservative support. The
younger Bush is also the opposite of the elder in emphasizing education. Bush
I did little or nothing to change the schools; Bush II put them at the top of
his agenda, just as the voters persistently do.
But the most costly error -- in political terms -- that Bush I made was
refusing to consider any short-term fixes for the economic slump that began
in the third year of his presidency. When the jobless rate began to edge up,
Treasury Secretary Nicholas Brady counseled Bush against any stimulus
measures, saying that market forces would be enough by themselves to keep the
recession short.
Brady's advice brought no comfort to the Republican politicians on Capitol
Hill, who were picking up bad vibes from their constituents. Vice President
Dan Quayle, who was on the GOP fundraising circuit in 1991, expressed his
frustration that Brady was blocking even modest short-term measures. History
has recorded that Brady was right. The recession was short, and recovery --
as measured by the statisticians -- actually began before the 1992 election.
But that did not spare the incumbent president from charges of indifference
to persisting unemployment, and Bill Clinton was elected on a promise to pep
up the economy.
The current Bush has accepted congressional changes in his tax plan that will
apply short-term stimulus to a sluggish economy. But on the energy problems
that began on the West Coast and have swept across the country, Bush II is as
scornful of short-term fixes as his father was a decade ago.
This week the administration is releasing its energy plan -- crafted by a
task force under Vice President Dick Cheney -- in an atmosphere of growing
crisis. Even before summer has arrived, California is experiencing rolling
blackouts. Oregon and Washington have sacrificed the salmon runs to save
river water for hydroelectric power. Midwest gasoline prices have surged past
$2 a gallon. And natural gas prices are sky-high everywhere.
When I spent a weekend at Rocky Mountain College in Montana earlier this
month, I was astonished to learn that even in that energy-exporting state,
the first phase of deregulation has sent prices soaring and made energy the
hottest issue.
In the face of all this, Cheney and Bush have refused to consider temporary
price caps on electric power or any other short-term "fix" that violates
free-market principles. The complex of production incentives and conservation
measures that make up the energy strategy is designed to bring supply and
demand into balance over the next several years, not to provide immediate
relief.
That may be sound economics, but it leaves congressional Republicans as
nervous as their counterparts were 10 years ago. Rep. Tom Davis, the able
Virginian who heads the National Republican Congressional Committee, told me
last week that he is hearing more worries from his colleagues about energy
prices than about the overall economy.
"We can stand one bad summer," Davis said, "but if we're facing the same
thing next summer, we've got problems."
Davis said he had communicated his party's concerns to the White House. "Do
they get the message?" I asked.
"No," he said. "They think in four-year terms; we think in two."
That comment reflects a reality that few politicians are as candid as Davis
in acknowledging. Much as the members of one party's congressional wing may
hope for a president of their own party, who will sign the bills they pass
and help them raise money for their own campaigns, owning the White House
creates dilemmas.
The basic political strategy is always set by the president's people, and
naturally enough, they think about creating favorable conditions for the year
in which he will run for reelection. They can be more patient, and more
oblivious to short-term problems, than those who are focused on the battle
for the House and Senate.
Republicans like Tom Davis remember that eight years ago, when the Democrats
controlled both the White House and Congress, it was Clinton's policy
decisions on taxes, trade, guns and health care that left his party so
vulnerable that Democrats lost both the House and Senate in 1994. That's the
risk Republicans are facing now. And that's why they're nervous.
, 2001 The Washington Post Company

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More Than California's Problem
By Gray Davis

Wednesday, May 16, 2001; Page A23
SACRAMENTO -- As President Bush this week rolls out his new energy policy, I
once again urge him to confront the energy elephant in the middle of the room
-- the out-of-control wholesale prices of electricity in California and
across the West.
In 1996, California ventured headlong into a flawed scheme to deregulate
electricity. Although Californians were promised lower rates and plentiful
supply, both predictions have turned out to be disastrously wrong. We have
now seen our first statewide rolling blackouts since World War II. Unheard-of
wholesale prices for power have bankrupted our largest utility, threaten to
bankrupt the second largest and have begun to seriously affect our economy.
If we don't get the situation under control, it could quickly threaten our
national economy.
California bears some fault for the current situation. In addition to the
botched deregulation plan, centermost was our failure for the 12 years before
I took office to build any major power plants. But my administration has
moved quickly to remedy that by streamlining the permitting process for
generating facilities. In the past two years, my energy commission has
licensed 14 new major power plants, nine are under construction, and four
will be on line this summer or fall. Nearly a dozen more are in the pipeline.
In addition, we've approved six new "peaker" plants to meet this summer's
demand. We're moving at unprecedented speed to deal with the supply problem.
The state, however, has absolutely no jurisdiction over the wholesale prices
being charged by the unregulated, mostly out-of-state generators that
purchased the utilities' power plants as part of deregulation. Since the
Federal Power Act was passed in 1935, price regulation has been the exclusive
domain of the federal government. But the Bush administration and the Federal
Energy Regulatory Commission have consistently refused to carry out their
statutory obligation to ensure energy prices are "just and reasonable."
To the contrary, the free-market ideologues in the administration argue that
uncontrolled market prices are needed in order to increase the supply of
electricity. In other words, if we don't allow power generators to shoot the
moon on prices, they won't have sufficient incentive to build additional
supply. That's as ridiculous as saying we need to pay dairies $300 a gallon
to motivate them to produce milk. In fact, I have joined my fellow governors
in Oregon and Washington in proposing temporary cost-based pricing that would
still allow generators and marketers a healthy profit -- but without
bankrupting the system.
Last week, however, Vice President Dick Cheney told the Los Angeles Times
that he would remain philosophically opposed to any federal intervention on
wholesale power prices even if it threatened the national economy. With all
due respect to the vice president, that is one of the most irresponsible
statements I've ever heard. Here is the eye-popping result of the federal
government's rigid stance: In the spring of 2000, a megawatt of electricity
in California cost an average of $30. By last December, after the Federal
Energy Regulatory Commission precipitously removed the hard price cap of $250
per megawatt hour that been in effect, the spot-market price shot up to
$1,500 for the same megawatt of power. Just last week, we paid an astounding
per-megawatt record of $1,900 to Houston-based Reliant Energy for the last
100 megawatts of power we needed to keep the lights on.
The macro result of this unconscionable price gouging is predictable -- and
scary. In 1999, California power users paid approximately $7 billion for all
electricity consumed. Last year, that figure shot up to $27 billion. This
year, estimates are that total spending on electrical power may hit $50
billion to $60 billion.
The California Independent System Operator, the state's electric grid
manager, has estimated in a report to the federal energy commission that
electricity overcharges during the past year have totaled more than $6
billion. Even the federal commission itself has formally ruled that the
electricity market in California is dysfunctional and that prices charged
have been unjust and unreasonable.
Where is that money going? Simply put, into the pockets of the generators and
marketers -- almost all of them in the South and many of them located in
Texas. It is one of the most massive transfers of wealth from the consumers
of one state to companies located in another region of the country in our
nation's history. But other than ordering a pittance in limited refunds --
none of which has yet been returned to the state -- the Federal Energy
Regulatory Commission has stood fast in its opposition to real price caps.
The day before President Bush was sworn in, he stated on national television
that the energy problem here was California's to solve. Well, we are moving
aggressively to do our part to get it under control on both the generation
and conservation fronts. But without just and reasonable prices for wholesale
power, the crisis inevitably will spill over and damage the already-sluggish
national economy.
That, Mr. President, not only will be your problem, it will affect every one
of us. Californians are demanding action. We are doing our part, leading the
nation in building power plants and in aggressive conservation. The federal
government must do its part to temporarily control runaway energy prices in
the West until we can bring on line the major new power plants California has
approved.
The writer, a Democrat, is governor of California.
, 2001 The Washington Post Company