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=DJ Enron Turns Internal Credit-Risk Tool Into New Product
Dow Jones, 04/04/01 Duke, Enron Get 1st-Qtr Profit Boost From California: Outlook Bloomberg, 04/04/01 Edison, PG&E File to End Williams's Open-Market Sales (Update1) Bloomberg, 04/04/01 Enron Europe Pres Sees NETA Boosting Trade Volumes Dow Jones News Service, 04/04/01 CANADA: Enron calls on Ontario to open power market quickly. Reuters English News Service, 04/04/01 BG Group: UK Court Rules In Favor Of Co Against Enron Unit Dow Jones International News, 04/04/01 GERMANY: Enron starts online quotes for German gas market. Reuters English News Service, 04/04/01 BG to get back 51 mln stg as House of Lords finds against Enron's Teesside Gas AFX News, 04/04/01 Utilities' merger faces challenge The Oregonian, 04/04/01 Wholesale market bright for PGE The Oregonian, 04/04/01 =DJ Enron Turns Internal Credit-Risk Tool Into New Product 2001-04-04 17:19 (New York) By Christina Cheddar Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--With the number of corporate bankruptcies on the rise, knowing the creditworthiness of one's customers is becoming more and more important. For Enron Corp. (ENE), the world's largest energy trading company, keeping track of credit risk has always been part of doing business. That became even more true with the company's launch of EnronOnline, its Internet-based commodities trading network. In order to deal with the accelerated volume and speed of transactions on EnronOnline, the company developed a tool to help its own commercial traders manage the credit risk. Early last year, Enron rolled out this tool, Enron Credit, on a limited basis. Gradually, the company expanded its use and scope. Last month, the company re-launched Enron Credit in its current format. Enron Credit tracks more than 10,000 companies, giving each a rating known as the "Enron cost of credit." The rating is expressed as an interest rate. The Web site also provides news, a company's expected chance of bankruptcy and other related information. While much of this information is free to registered users, Enron also has turned the product into a new revenue stream. Users may download data into a spreadsheet and receive periodic updates for a fee. The site also can sell a user a "digital bankruptcy swap," which is a way to hedge against credit exposure. The price of the swap is determined by a rating Enron's staff assigns to a company and the amount of credit exposure a company needs to protect against. For a supplier, the main advantage of a swap is that if a customer is unable to pay due to bankruptcy, the supplier will be paid immediately. According to Enron Europe President John Sherriff, the goal of Enron Credit is to create a more efficient credit market by increasing trading liquidity. The tool is important because "in just a short amount of time, a company's credit can go from stellar to bad literally overnight." At present, some analysts haven't factored in revenue from Enron Credit into their earnings models. However, as the commodity markets Enron trades in mature, it is possible the need for products such as Enron Credit could increase. -By Christina Cheddar, Dow Jones Newswires; 201-938-5166; Duke, Enron Get 1st-Qtr Profit Boost From California: Outlook 2001-04-04 17:21 (New York) Duke, Enron Get 1st-Qtr Profit Boost From California: Outlook Houston, April 4 (Bloomberg) -- Duke Energy Corp., Enron Corp. and other power sellers continued to reap the benefits of California's electricity shortage in the first quarter, with some bringing in record profits, analysts said. Duke, which owns generation in California that can light more than 3 million homes, had an 18 percent increase in per-share profit, forecasters say. Earnings at Enron, which sells electricity and natural gas in California and helps companies protect themselves from the risks of energy price movements, rose about 13 percent, analysts estimated. Jeffrey Skilling, chief executive of Houston-based Enron, said demand is rising for the Houston-based company's business of helping companies cut energy costs by reducing consumption and finding lower-priced suppliers. ``We're seeing the positive effect of the chaos going on out in California,'' Skilling told investors in March. California officials and consumers have criticized energy suppliers for profiting from their crisis. Power prices in the state averaged nine times higher in the quarter than a year earlier because a shortage of power plants limited supplies, and generators demanded higher payments to offset the risk of selling to the state's near-bankrupt utilities. Most of the big suppliers sell electricity worldwide and insist California is a small part of total sales. Dynegy Inc., which for example, has said California power sales accounted for about 15 percent of last year's profit in marketing and trading. Higher Prices Dynegy said on Monday that first-quarter profit rose to 40 cents a share from 26 cents a year earlier because of increased demand and higher energy prices. The Houston-based company was expected to earn 31 cents. San Jose, California-based Calpine Corp. said Thursday it earned almost twice as much as it had forecast to analysts in the quarter, helped by sales in California. Calpine said it made 20 cents to 25 cents a share, about three times as much as it earned a year earlier. Atlanta-based Mirant Corp. said March 14 it would earn 46 cents to 48 cents a share in the quarter, more than twice as much as expected, because of gains in its natural gas and electricity business in the U.S. West. Avista Corp., which also sells energy in the western U.S., said in March it would earn 33 cents to 35 cents a share in the quarter, more than the 30-cent average estimate of analysts polled by First Call/Thomson Financial. Enron said in March it expected to earn $1.70 to $1.75 this year, but wouldn't break out first-quarter estimates. First Call estimates are that Enron will make 45 cents a share, up from 40 cents a year earlier. Seeking Payments Enron's shares fell 30 percent in the quarter, partly on concern about debts owed by customers in California. Investors questioned whether Enron and others would be paid for power and gas they delivered to the utilities owned by PG&E Corp. and Edison International. The utilities have more than $14 billion in debt because regulators wouldn't allow them to pass on all of soaring power- buying costs to consumers. Prices jumped as high as $3,000 a megawatt-hour in December -- about 100 times normal levels -- because of the power shortage, cold weather and high natural-gas prices. California regulators approved a $4.8 billion annual rate increase on March 27 to help PG&E and Edison pay the bills. The rise isn't expected to cover all the power-buying costs. PG&E and Edison have delayed reporting fourth-quarter earnings because of their financial problems and haven't said when they'll report first-quarter results. Several suppliers agreed during the first quarter to sell electricity to California, which is buying on behalf of nearly bankrupt PG&E and Edison. The contracts' average price is less than half the average price utilities paid last year, but more than double the average price in 1999. In the fourth quarter, power suppliers, including Duke and Reliant, set aside money for bills they might not be able to collect from California customers. Duke offered in March to take less money if given guarantees of payment for the power it sold. Summer Boost California could endure blackouts this summer if more generation isn't built quickly. Generators may see even bigger profits then than in the winter, analysts said. Harvey Padewer, president of Duke's energy-services division, said the summer shortage could total as many as 10,000 megawatts, enough to light 10 million homes. Water reservoirs in the Pacific Northwest, which fuel hydroelectric power plants that supply California, will be at their lowest levels in history going into the summer, Skilling said. That's because the water was used to produce power in January, when it's not normally needed, to avert blackouts. That puts the summer burden primarily on gas-fired plants. Gas prices skyrocketed last year because of increased demand for the power-plant fuel. ``If we have a warm summer this summer, I think natural gas has a lot of escalation left to do,'' Skilling said in a recent speech in Dallas. The power shortage in California, the most populous state, may impact energy prices across the country, analysts said. ``There are going to be good earnings for people who have plants across the country and for people marketing gas across the country,'' Salomon Smith Barney analyst Raymond Niles said. Company 1st-Qtr Year-ago Number of Estimate EPS analysts AES Corp. $0.43 $0.42 6 Avista Corp.+** $0.30-$0.35 $0.20 2 Calpine Corp.** $0.20-$0.25 $0.07 Duke Energy Corp. $0.58 $0.49 4 Dynegy Inc.** $0.40 $0.26 Edison International N/A $0.32 N/A Enron Corp. $0.45 $0.40 13 Mirant Corp.** $0.46-$0.48 $0.28 PG&E Corp. N/A $0.78 N/A Reliant Energy Inc. $0.66 $0.47 1 Sempra Energy $0.49 $0.49 3 Williams Cos.** $0.65-$0.75 $0.30 Estimates based on surveys by First Call/Thomson Financial and IBES International Inc. Year-ago numbers supplied by First Call. + Numbers from IBES. ** Estimates provided by companies, not by analysts --Margot Habiby in Dallas, (214) 740-0873 or mhabiby@bloomberg.net, through the Princeton newsroom (609) 279- 4000/slb/alp Edison, PG&E File to End Williams's Open-Market Sales (Update1) 2001-04-04 17:14 (New York) Edison, PG&E File to End Williams's Open-Market Sales (Update1) (Adds Williams comment in fourth paragraph. For more on the California energy crisis, see {EXTRA <GO<}. Washington, April 4 (Bloomberg) -- PG&E Corp. and Edison International, owners of California's two largest utilities, asked federal regulators to stop Williams Cos. from selling power at market-based rates in the state. PG&E's Pacific Gas & Electric and Edison International's Southern California Edison filed with the U.S. Federal Energy Regulatory Commission to stop Williams's California power sales at rates that aren't ``just and reasonable,'' the filing said. Tulsa, Oklahoma-based Williams, a natural-gas pipeline company that's become one of the largest U.S. energy traders, was licensed to sell power at market rates in California in March 1998. The utilities say Williams and other generators can manipulate electricity prices. Williams spokeswoman Paula Hall-Collins said she couldn't comment on whether the company would continue to sell power in California if it had to do so at prices set by federal regulators. The average price of electricity in the California-Oregon border region rose ninefold last quarter from a year ago, according to Bloomberg Energy Service statistics. Other companies selling power in California include Duke Energy Corp., Enron Corp., Reliant Energy Inc., Calpine Corp., El Paso Corp. Mirant Corp. and AES Corp. Edison, based in Rosemead, California, and PG&E, based in San Francisco, have lost more than $14 billion buying power in the open market at prices that far exceeded what they could charge customers. Williams sells gas to AES Corp., the largest U.S. power-plant developer, to fuel California generators, and also sells the power from those plants in the open market. Shares of Williams rose 11 cents to $40.26. PG&E rose 12 cents to $11.65, and Edison rose 16 cents to $12.98. --Mark Johnson in Washington, (202) 624-1849 or mjohnson7@bloomberg.net, through the Princeton newsroom, (609) 279-4000/slb/pjm Enron Europe Pres Sees NETA Boosting Trade Volumes By Christina Cheddar Of DOW JONES NEWSWIRES 04/04/2001 Dow Jones News Service (Copyright © 2001, Dow Jones & Company, Inc.) NEW YORK -(Dow Jones)- Enron Europe President John Sheriff expects the U.K.'s New Electricity Trading Arrangements, or NETA, to lead to "dramatically" higher power trading volumes in the second quarter for his company. NETA, which has been touted as the most far-reaching reform of an electricity market in the world, went into effect last Tuesday. The system replaces the previous wholesale power market with a physically settled, bilateral, day-ahead market that is paired with a continuously traded balancing market. However, in the first quarter, the flow of transactions in the U.K. was hurt as companies operating there focused on integrating new computer systems associated with the new standard. Now that the system has been implemented, Sheriff told Dow Jones Newswires that he expects to see a pickup in the flow of transactions. Sheriff couldn't put a dollar figure on his estimate. He also didn't know whether the total volume of transactions had risen or declined from the fourth quarter. NETA is aimed at creating liquidity to reduce the cost of wholesale power. An increase in the cost of fuel in the region may place companies that haven't hedged fuel costs in difficult positions, Sheriff said, explaining that power prices have fallen, while the cost of fuels used to generate power has risen. Enron Europe, a unit of Houston-based Enron Corp. (ENE), is among the largest buyers and sellers of gas and power in Europe. In 2000, wholesale natural-gas trading volumes in Europe and other regions outside North America rose 131% to 3.6 trillion British thermal units per day from 1999, while power trading volumes jumped 372% to 55 million megawatt hours. -By Christina Cheddar, Dow Jones Newswires; 201-938-5166; christina.cheddar@dowjones.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. CANADA: Enron calls on Ontario to open power market quickly. By Scott Anderson 04/04/2001 Reuters English News Service (C) Reuters Limited 2001. TORONTO, April 4 (Reuters) - Enron Corp. , North America's biggest buyer and seller of natural gas and electricity, put pressure on the Ontario government on Wednesday to deregulate the provincial energy market, Canada's biggest, as quickly as possible. Ontario has already pushed back its previous deadline of November 2000 by one year to sort out its deregulation problems and avoid the problems encountered by California in energy deregulation. The delays have frustrated potential corporate players. "We think the right thing for Ontario is to move ahead with this plan, open the markets and get them working," Kenneth Lay, Enron's chairman, said at a breakfast speech at the Toronto Board of Trade. "Let people start building the new power plants and, of course, providing a lot of the types of services we provide elsewhere." Lay warned that the longer the government drags its feet on the issue, the more it places itself at risk of scaring off potential investors. "The delays continue to create uncertainty and uncertainty tends to discourage investment," Lay told reporters. "By discouraging investment, as the market keeps growing, it could be that Ontario is going to have a tough time keeping up with the needs of the economy." Enron plans to build a $250-million generating plant near the southwestern Ontario town of Sarnia, but has delayed the project until Ontario sets a firm date for deregulation. Lay said Enron is "committed to Ontario" even though other companies have said they will move to other jurisdictions if the government does not open up the market by the fall. He said Ontario is far better prepared for deregulation than was California. "I think what California shows is that if you're going to do it, you've got to do it right. And California did it wrong," he told reporters. "Increasingly politicians are understanding that. You can't deregulate half the market, but not the other half. You can't set up a system that does not allow price signals to be sent to consumers and even after prices go up, you can't just keep shielding consumers from price signals and get no response." Power demand from California's industries and 32 million residents has increased dramatically, but the state has not seen any new generating capacity added in about 10 years. The crisis there has been blamed on California's own 1996 power deregulation law, which required utilities to buy energy on the spot market, where prices have skyrocketed, but maintained caps on the rates they could charge consumers. The problem was then compounded by California's own surging demand, resulting in the rolling blackouts and voluntary power cutbacks of the past months. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. BG Group:UK Court Rules In Favor Of Co Against Enron Unit 04/04/2001 Dow Jones International News (Copyright © 2001, Dow Jones & Company, Inc.) LONDON -(Dow Jones)- BG Group PLC (BRG) said the U.K.'s House of Lords Wednesday found in favor of its 51.18% owned Central Area Transmission System (CATS) in a dispute with Teeside Gas Transportation Ltd. The latest ruling overturns a Court of Appeal decision made in 1999 which found in favor of Teeside Gas, a unit of Enron Corp (ENE). The dispute between BG and Teeside Transportation involved a 25-year capacity, transportation and reservation agreement signed in 1990. A BG spokeswoman told Dow Jones Newswires Wednesday that Teeside ended its payments connected to the agreement in February 1995. The CATS pipeline and terminal system began transporting gas from the North Sea fields of Everest and Lomond in 1993. It currently handles around 1.7 billion cubic feet a day of natural gas, which represents about 20% of U.K. gas production, the spokeswoman said. BG Group said Teeside is now required to repay CATS the money gained following the 1999 ruling, plus interest. It said its share of the payment will amount to about GBP34 million, plus interest of approximately GBP17 million. The other shareholders in CATS are BP Amoco PLC (BP), Amerada Hess Corp. (AHC), Phillips Petroleum Co. (P), Totalfina Elf (TOT) and Agip SPA (I.AGI). -By Sarah Turner, Dow Jones Newswires; 44-20-7842-9299; sarah.turner@dowjones.com -0- 04/04/01 15-16G Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. GERMANY: Enron starts online quotes for German gas market. 04/04/2001 Reuters English News Service (C) Reuters Limited 2001. FRANKFURT, April 4 (Reuters) - Enron Energie GmbH, the German divison of the U.S. energy giant , has started quoting German gas prices on its website, it said on Wednesday. "We have launched spot gas quotes for the domestic delivery point at Lampertheim," managing director Andreas Radmacher told Reuters in an interview. "This is a good point to choose to generate liquidity and to create a wholesale market inside Germany, because there is a range of suppliers." "We hope that other traders will also get involved." Enron on its trading platform enrononline.com currently quotes gas offers and bids for the day ahead, the weekend and the week ahead in parcels of 20 megawatt hours in euros. Lampertheim lies near Heidelberg in south-west Germany on the border of the Hesse and Baden-Wuerttemberg states. So far, the market had been restricted to border quotes in a market controlled by five incumbents involved in importing gas, which account for 80 percent of total requirements. Gas trading inside the country is only just beginning to start, because distributors and customers have taken years to agree on voluntary terms for network access and transport. Radmacher said it was difficult to start a reliable gas business because current transmission and supply agreements were still not clearly defined or binding. Supply contracts had not been standardised and shippers had to negotiate with three or four pipeline owners per deal. But new suppliers were ready to overcome the bureaucracy. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. BG to get back 51 mln stg as House of Lords finds against Enron's Teesside Gas 04/04/2001 AFX News © 2001 by AFP-Extel News Ltd LONDON (AFX) - BG Group plc said it will receive some 34 mln stg and 17 mln interest from Enron Corp unit Teesside Gas Transportation Ltd (TGTL), after the House of Lords overturned a Court of Appeal decision on TGTL's dispute with BG's 51.18 pct-owned Central Area Transmission System (CATS). The other owners of the CATS pipeline and terminal system are BP Amoco PLC, the operator, with 29.53 pct; Amerada Hess Corp with 17.72 pct; Phillips Petroleum Co with 0.66 pct; TotalFinaElf with 0.57 pct; and ENI Spa unit Agip with 0.34 pct. The Court of Appeal decision in favour of TGTL was made in July 1999. CATS began transporting gas from the Everest and Lomond fields in the Central North Sea in 1993. It currently handles around 1.7 bln cubic feet per day of natural gas. The dispute involvedthe Capacity Reservation and Transportation Agreement (CRTA) signed in 1990 between CATS' owners and TGTL for the provision of a 25-year transportation service. Under the terms of that agreement, TGTL would pay for 300 mmscf/d of reserved capacity, whether or not it was used. The CATS pipeline was completed in March 1993 and TGTL began making payments the next month, even though it had no contracted field ready to use its capacity at that time. In Feb 1995, it stopped payments and reclaimed its previous payments, after which CATS' owners issued proceedings against TGTL for the outstanding monies. jsa For more information and to contact AFX: www.afxnews.com and www.afxpress.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Utilities' merger faces challenge PGE's dance card may take awhile to fill if its deal with Sierra Pacific fails Wednesday, April 4, 2001 By Gail Kinsey Hill of The Oregonian staff If Sierra Pacific Resources leaves Portland General Electric at the altar, other suitors may cool their heels awhile before proposing. Not only has the West's energy crisis apparently spoiled the pending marriage of Nevada's Sierra Pacific and PGE, it has chilled a consolidation trend that just a year ago was as hot as a starlet's love life . "I don't see any eager buyers out there," said Justin McCann, a senior analyst with Standard & Poor's. "Things are pretty rocky at the moment." Still, possibilities exist. Analysts suggest that Northwest Natural Gas in Portland, Puget Energy in Bellevue, Wash., and IdaCorp in Boise could be interested in going after PGE if Sierra Pacific and Enron Corp., PGE's parent company, part ways. On May 5, either Enron or Sierra Pacific can walk away from the transaction if closing documents aren't signed by then. Officials from both companies have said they remain committed to the deal, but they admit that changing regulatory and financial conditions make closure unlikely. Houston-based Enron said it's prepared to wait patiently for another offer. "This is not a fire sale," said Mark Palmer, an Enron spokesman. Enron, an energy and trading company, bought PGE in 1997, eager to benefit from markets that were being opened to greater competition and less government regulation. But officials grew impatient with the plodding pace of deregulation and decided to jettison such capital-intensive, slow-growing assets as PGE. In November 1999, Sierra Pacific Resources announced plans to buy PGE for $3.1 billion in cash and assumed debt, an amount similar to what Enron paid two years earlier. After more than a year of leaping regulatory hurdles, the deal appeared close to completion. Then last summer, energy shortages and sky-high wholesale electricity prices swept through California and the rest of the West. Wholesale prices, 10 times year-ago levels, have gouged Sierra Pacific's bottom line. The company owns generating plants that supply electricity for some business and residential customers, but it also buys on the wholesale market. Sierra Pacific had intended to become increasingly reliant on the wholesale market and to sell many of its generating facilities. The utility was to use proceeds from the sales to buy down its debt and secure financing for the PGE purchase. But the Nevada Legislature is close to slapping a moratorium on the sales of any generating plants. Lawmakers worry that divestitures could pinch energy supplies still further and roil wholesale markets for months to come. Sierra Pacific's weakened financial state also means that the federal Securities and Exchange Commission likely won't approve the merger. The SEC is the remaining regulatory body that must sanction the deal. PGE isn't in on the negotiations, but officials agree that the sale looks shaky. "It's anyone's guess right now," Peggy Fowler, PGE president and chief executive officer, recently told The Oregonian's editorial board. So far, talk about replacement bidders is more speculation than fact. Analysts said a utility based in the West is the most likely scenario. "It's probably going to be somebody close by," said Doug May, a senior portfolio manager with Wells Fargo Private Asset Management in Grand Junction, Colo. "It's tough to come in from another part of the country." But don't rule out foreign companies, May added. When ScottishPower bought Portland-based PacifiCorp in December 1999, it became the first foreign concern to buy a U.S. electric utility. The merger stirred up talk of more international linkups. Regionally, Northwest Natural's name comes up as a potential suitor. The Portland-based utility already works cooperatively with PGE in a number of business arrangements, including a joint meter-reading program. "A lot of programs we're doing are the kinds of things other electric and gas utilities are doing under one utility," said Mark Dodson, Northwest Natural vice president of public affairs and general counsel. "I'm not at all surprised people might speculate that we would acquire" PGE. Dodson declined to comment directly on whether Northwest Natural might try to buy PGE. "As long as there's an agreement in place, it's inappropriate for us to talk about it," he said. Officials of IdaCorp, a holding company whose primary subsidiary is electric utility Idaho Power, also declined to discuss whether they have been eyeing PGE. "We can't really comment on deals we might get into," said Russ Jones, an IdaCorp spokesman. IdaCorp made an unsuccessful bid for PGE two years ago when Enron first solicited offers, Jones said. But, he said, "I don't know the answer to whether we'd be interested now. "If it becomes available," Jones added, "we'll probably investigate, as we would with any other assets that might become available." Puget Energy, a holding company for Puget Sound Energy, also declined to comment. "We never speculate on rumors," said Grant Ringel, Puget Energy's director of corporate communications. Puget Sound Energy serves electric and natural gas customers in Western Washington and is the result of the 1997 merger of Puget Sound Power and Light with Washington Energy, the parent of Washington Natural Gas. The merged utilities, serving about 1.4 million customers, formed the largest electric and natural gas utility in the Northwest. In the 1990s, as federal laws began deregulating electric power markets, utility mergers became increasingly common. Industry executives and analysts attributed the trend to increased competition and a drive toward greater efficiency. "With deregulation, economies of scale are very important," said Wells Fargo's May. "It's very difficult to do well as a small company. The trend has taken in couplings of electric utilities and natural gas utilities -- "convergence" in industry parlance -- as well as linkups of electric utilities. Yet, analysts note that the industry's consolidation has slowed of late. The uncertain regulatory environment throughout the United States, the energy shortage in the West and the electricity crisis in California are putting the brakes on the trend, they say. "This whole California thing has made everyone very cautious," said Standard & Poor's McCann. "People want to see the situation sort itself out." You can reach Gail Kinsey Hill by e-mail at gailhill@news.oregonian.com or by telephone at 503-221-8590. Wholesale market bright for PGE The utility reports $1.17 billion in revenue in fiscal 2000 from reselling electricity Wednesday, April 4, 2001 By Gail Kinsey Hill of The Oregonian staff Enron Corp. views Portland General Electric as a sluggish asset, weighted down by regulatory laws and political uncertainties. Maybe so. But PGE posted healthy financial gains in fiscal 2000, benefiting from the region's energy shortage and spiking wholesale electricity prices. Revenue from wholesale power sales jumped to a record $1.17 billion last year, more than triple the 1999 wholesale sales figure of $355 million. Bottom line: PGE recorded earnings of $139 million in 2000, up 10 percent from 1999 earnings of $126 million. "It was a banner year for us," said Jim Piro, PGE's chief financial officer. The utility's financial strength should continue, even if a pending sale to Sierra Pacific Resources falters, according to analysts. "I don't think PGE will be tainted as an asset" if the utility again is put on the block, said Doug May, senior portfolio manager for Wells Fargo Private Asset Management in Grand Junction, Colo. In contrast with PGE, Sierra Pacific suffered from high wholesale power prices, reporting losses of $39.78 million in 2000, a sharp decline from 1999 earnings of $51.75 million. Utility-owned hydroelectric and coal- and gas-fired generation plants supply about half of the electricity that's needed to serve PGE's 725,000 business and residential customers. The company buys the rest of its power on the wholesale market. Until last summer, wholesale prices remained relatively stable. Then, pushed by electricity shortages and California's botched deregulation plan, prices soared: from between $20 and $30 a megawatt hour to more than $200 a megawatt hour. The market became so volatile that on some days short-term, or "spot" prices, spiked above $600 a megawatt hour. Soaring prices cut into the financial reserves of utilities caught short of power and forced to the market for last-minute buys. But PGE, with experienced wholesale traders and a conservative purchasing strategy, had secured long-term contracts as a hedge against the market. The approach kept spot purchases to a minimum. In fact, PGE bought more electricity than its customers could use. The "long" position allowed PGE to resell the electricity -- California was among its customers -- for a tidy profit. "We were fortunate to be in a good situation last year," Piro said. Wholesale electricity sales accounted for 52 percent of PGE's operating revenue last year, a turnaround from prior years when retail sales dominated financial returns. Wholesale sales proved so lucrative that PGE withdrew a request to raise rates by 16.5 percent. The utility may raise rates late this year, officials said, or if cash continues to pour in, it may issue refunds to customers. PGE's expenses also have gone up dramatically. The utility spent $1.5 billion on electric power and fuel purchases last year, up from $654 million in 1999.
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