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---------------------- Forwarded by Carla Hoffman/PDX/ECT on 08/15/2000 08:17
AM --------------------------- Enron Capital & Trade Resources Corp. From: "Pergher, Gunther" <Gunther.Pergher@dowjones.com< 08/15/2000 06:33 AM To: "Golden, Mark" <Mark.Golden@dowjones.com<, "Leopold, Jason" <Jason.Leopold@dowjones.com< cc: (bcc: Carla Hoffman/PDX/ECT) Subject: DJ Calif Pwr Producers Urge FERC Reject Price Cap Petition 12:15 GMT 15 August 2000 DJ Calif Pwr Producers Urge FERC Reject Price Cap Petition (This article was originally published Monday) WASHINGTON (Dow Jones)--California power producers urged federal regulators Monday to reject a petition for price caps in the state, arguing that intervention in the market would be counterproductive by discouraging needed investment in new power supplies. The petition was filed Aug. 2 with the U.S. Federal Energy Regulatory Commission by San Diego Gas & Electric Co., a unit of Sempra Energy (SRE). It alleges that California's first-in-the-nation competitive power market suffers from design and structural problems. Surging power prices plaguing the state this summer "do not reflect legitimate forces of supply and demand," SDG&E said, calling on FERC to impose across-the-board electricity price caps in California of $250 per megawatt-hour indefinitely until the market flaws are corrected. But the power producers rejected SDG&E's analysis of the market problems as "simplistic," and called the imposition of price caps on all California power sales an unwarranted response to the power supply shortage. "SDG&E asks the commission to take unreasonable and unprecedented action that would effectively rescind every California supplier's authority to sell energy and ancillary services at market-based rates," complained Southern Energy California, a subsidiary of Southern Co. (SO). "A strict cap will only exacerbate the current supply shortages in California," Southern Energy and the other power suppliers argued. "The imposition of this cap by FERC may discourage power developers from choosing to serve California markets," said Dynegy Power Marketing Inc. (DYN). "The cap may also convince (electricity users they) need not participate in load-reduction programs, since paying the $250 price cap is cheaper than shedding load," Dynegy told the commission. "The imposition of caps on every California market, and the increased uncertainty as to when - if ever - they might be removed, sends precisely the wrong message to potential suppliers of energy in California," Southern Energy said. The arguments of the individual power producers in the state were echoed by the Electric Power Supply Association, the national trade group representing competitive power producers and marketers. Imposing price caps in California's volatile electricity prices would "suffocate markets" and do nothing to address the chronic power-supply shortages causing prices to spike, EPSA told FERC. "The relief SDG&E seeks would actually prolong and intensify California's difficulties," EPSA said. Price caps would discourage electricity imports and investment in new power plants to supply the state, while discouraging price risk management, liquidity and accurate price signals, EPSA said. FERC has already allowed the California Independent System Operator to cap the price it is willing to pay for power, which it uses to assure the grid operates properly and to make up "energy imbalances" on the system. The ISO recently lowered its purchase price cap to $250 per megawatt-hour. The SDG&E petition asks FERC to extend that cap to the state's power exchange, or PX, which operates as a clearinghouse for wholesale power sales in California. "A PX bid cap is unnecessary because the ISO purchase price cap has historically acted as a de facto cap on the PX markets," Dynegy told FERC. -By Bryan Lee, Dow Jones Newswires; 202-862-6647; bryan.lee@dowjones.com Copyright © 2000, Dow Jones & Company Inc G_nther A. Pergher Senior Analyst Dow Jones & Company Inc. Tel. 609.520.7067 Fax. 609.452.3531 The information transmitted is intended only for the person or entity to which it is addressed and may contain confidential and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. If you received this in error, please contact the sender and delete the material from any computer. <<Gunther Pergher (E-mail).vcf<< - Gunther Pergher (E-mail).vcf
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