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Enron Mail |
THE FRIDAY BURRITO=20
Depression is merely anger without enthusiasm=20 Slowly we sink into the abyss of the dreaded B word.? The State Legislature= =20 and our illustrious Governor, Emperor of the Dark Side, are showing a trait= =20 that heretofore I never noticed.? They are impotent in tackling complex=20 issues that involve big bucks.? They are simply unable to manage the task.?= I=20 used to hold these institutions in relatively high regard.? Forget the=20 bellyaching in which all taxpayers and voters engage.? I mean, there was an= =20 element of something bigger than the PUC, the ISO, and the utilities when= =20 reference was made to the boys and girls working in the State Capital.? I a= m=20 no longer impressed.=20 I suppose there are things the Gov and the Legislature do well.? Let me=20 think.? Well, law enforcement, environment, transportation, water,=20 agriculture, education, parks and recreation, and health.? I suppose they d= o=20 all right managing those things.? But as for electricity, it seems this top= ic=20 is like a hungry monster that chews up politicians and spits them out after= =20 sucking the political marrow from their bones.? The mix of money and=20 electrons is too rich for their appetites.=20 Yet, hope springs eternal. Today the Governor will announce his package for= =20 curing California's energy crisis.? There is one part of his plan that is= =20 good news.? He will announce a new component of electric rates that will=20 increase revenue to cover the under-collected wholesale power costs of PG&E= =20 and SCE.? The smelly parts include purchase of the transmission grid by the= =20 State, thereby transferring revenue collection for the grid to the Californ= ia=20 Department of Water Resources.? We discuss the whole package below.? Howeve= r,=20 it is mind boggling to me how deep the State is willing to sink to avoid a= =20 straight up rate increase.? I understand, based on recent e-mails you folks= =20 have sent to me, that DWR will re-organize and take on a new name: Californ= ia=20 Utility Buyers Agency (CUBA).? The head of CUBA will be S. Fidel Freeman, a= =20 well-known advocate of public systems. Helping Fidel fiddle at the helm wil= l=20 be Che Budraja, a jungle revolutionary who steals from the rich, and invest= s=20 the money in T-bills.? We look for great things from CUBA, not the least of= =20 which will be cigars that have printed on the label, "The Attorney General= =20 Has Determined that Retail Competition May Be Hazardous to Our Health".=20 As the state struggles to punch its way out of the mess, I have discovered = a=20 solution to our energy woes whilst in the comfort of my own home. My propos= al=20 is that we ship all our teenage children to Montana for the summer.? This= =20 will conserve thousands of megawatts of in-state electric generating=20 capacity, bring down the price of alcohol, and make our roads safe.? The=20 other day, I entered the bedroom of my 13-year old boy, and noticed that=20 everything electrical was humming.? His computer was the main focus of his= =20 attention at that moment, but at the same time his TV was on, the=20 electric-guitar amplifier was on standby ready, all the lights were on, and= a=20 CD player was filling the air with the sounds of screeching voices.? One=20 megawatt may light 1,000 homes, so they say, but it only energizes 14=20 teenagers.? Send our teenagers to Montana (I have a name for this program = =01(=20 Energy Conserpation: We Don't Give a ____ about Saving Energy) and put them= =20 on the right side of the Western grid.? Plenty of coal power out there, and= =20 the program will lessen the need for burning natural gas to produce=20 electricity.? When Montana gets tired of our 6 million California teenagers= =20 because they emptied the state of Snicker Bars, Pepsi, and cellophane wrapp= ed=20 junk food, we'll send them by bus to Mexico.? Our Governor and even Preside= nt=20 Bush believe that all the power we be needin' is south of the border.?=20 Anyway, the dollar is strong relative to the peso, and we can feed our=20 beloved children snacks from Source Taco Bell with enough gorditas and=20 chalupas until the cows come home; which is soon.? When school re-starts in= =20 the Fall, the summer rolling blackout threat ("The ISO is in Day 206 of a= =20 Stage 3 Alert") will be over, and we can welcome home our new heroes.? It's= a=20 plan.=20 ISO Governing Board Chairman Ghengis Kahn is reported to be constantly=20 reminding the ISO staff at Governing Board meetings that reality is an=20 important element of their new strategy.? I wonder how he would know.? And= =20 PUC President Loretta "Let's Do" Lynch, the Darth Vader(ess) to Davis'=20 Dark-Side Emperor, is reported to be "loving her job" at the PUC.? I'm not= =20 making this up.? She actually told the San Francisco Chronicle how much she= =20 loves getting things back to the way they were before 1996.? I hear that wh= en=20 she is done with electricity reform, she will be assigned to work on Civil= =20 Rights.? Return that system back to circa 1950.=20 The way I see it, the State will enter into relatively costly long-term=20 contracts.? The effect will nail consumers to default utility service by=20 suspending direct access, and in just a few years we will be back to where = we=20 were in 1994: high cost electricity against which businesses want an out=20 because spot wholesale prices will be below the long-term price benchmark.?= ?=20 But this time we can take advantage of our 18/90 hindsight to craft a bette= r=20 solution. I have a suggestion.? Let's gather together in advance=20 representatives of all segments of our business, and develop a memorandum o= f=20 understanding.? The MOU will spell out a new competitive market that allows= =20 utilities, by then financially upright, to collect their "new" stranded=20 costs.? Consumers will be given the Province of British Columbia, soon to b= e=20 purchased by? Governor Davis as a peace offering to Harvey Rosenfield. All= =20 the nuclear plants will be purchased by the state and operational control= =20 will be turned over to the consumer advocates.? Everyone will be happy.? Al= l=20 we need is a Republican Governor for California in 2004 we can rely upon to= =20 enact the necessary legislation.=20 I am delighted to be back in Burrito-ville.? Phoenix was nice, the crowd wa= s=20 great, our speakers were terrific, but I need my weekly slab of salty meat= =20 and salsa.=20 Things in the People's Republic of California=20 ?@@@ Dr. Davis' Miracle Cure=20 ?@@@ Phoenix Principles are on the Table=20 ?@@@ Is there a Credit Committee in your future?=20 ?@@@ APX Announces Special Workshop on Feb 21=20 Things National=20 ?@@@ FERC Kicks ISO Tariff Amendment 36 in the Chops=20 ?@@@ Ohio Ushers in Retail Competition=20 Odds & Ends (_!_)=20 =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=20 Things in the People's Republic of California=20 ?@@@ Dr. Davis' Miracle Cure=20 As I write this week's Burrito, the Governor and his aides are trying to=20 convince the Democratic Caucus in the state legislature that his plan has= =20 legs.? If it had legs, then I wish it would run away.? Here are the major= =20 points of Dr. Davis' plan as I heard it yesterday afternoon:=20 * Authorize DWR to acquire the high voltage transmission grid and/or other= =20 assets,? enter into related agreements with utilities and contract for=20 operation of transmission with utilities=20 * Direct the PUC to amend and transfer the appropriate portion of retail=20 rates applicable to transmission from utilities to DWR=20 * Authorize revenue bond financing for acquisition and required improvement= s=20 of the transmission grid=20 The state's purchase of the transmission system is conditional upon PG&E's= =20 and SCE's parent companies returning their Year 2000 tax refunds back to th= e=20 affected utility (about $1.5 billion); extending cost-based rates on native= =20 generation for 5 additional years, banning the sale of generating assets; a= nd=20 dismissing the pending rate litigation against the state in federal Distric= t=20 Court.=20 If the utilities are willing to accept the deal, then the state will direct= =20 the PUC to establish a Dedicated Rate Component (DRC) to allow recovery of= =20 portions of the utilities' unrecovered costs pursuant to negotiations with= =20 the administration.? The state will authorize the utilities to sell revenue= =20 bonds secured by the DRC.=20 Shoot me for saying this, but bankruptcy is beginning to look like an=20 attractive alternative.? Sure, we might not get all the money owed to the= =20 power marketers and generators, but there is no guarantee of getting all th= e=20 money in the Gov's plan.? There are loopholes big enough through which you= =20 can drive a 18-wheeler.? Further, shouldn't we do something to help the sta= te=20 from swallowing itself?? The right thing to do is say, "Mr. Governor, thank= =20 you so much.? You have tried mighty hard to wipe your hands clean of this= =20 mess, but your plan just isn't enough.? We'll take our chances." I can't=20 believe the Wall Street investors and bondholders will encourage the=20 utilities to accept the offer, although they might.? The plan has too many= =20 bureaucratic traps.? Too much that can go wrong, and incur potentially long= =20 delays.? It smells bad.=20 What do you folks think?=20 Things in the People's Republic of California=20 ?@@@ Phoenix Principles are on the Table=20 While the Governor is busy peddling his plan, last week in Phoenix, our gro= up=20 also got involved with long-term and short-run solutions to California's=20 electricity market.? About 40 WPTF members had a discussion with a wide ran= ge=20 of ideas and options.? WPTF Chair, Rob Lamkin, and I facilitated the=20 discussion, and took notes of people's comments.? Over the weekend, Phil=20 Muller helped me draft the short-term principles in a summary document that= =20 is three pages.? The meaning of "short-term" is recommendations that can be= =20 implemented in time for Summer of 2001.=20 We are still working on the details, and as many of you know, we will=20 teleconference next week to discuss the recommendations, and hear your=20 comments. However, below is a thumbnail synopsis of the seven short-term=20 recommendations that we are currently considering:=20 * Electric price must be an incentive for energy conservation (Pleas for=20 voluntary conservation are not taken seriously unless accompanied by=20 meaningful price signals.)=20 * Rely on positive incentives to achieve demand reductions (Positive=20 incentives align the interests of consumers with the need to reduce=20 consumption and give consumers the ability to choose for themselves how to= =20 participate.)=20 * Market participants in the Western states should agree to a self-imposed= =20 "damage control" circuit-breaker mechanism for wholesale prices (Market=20 participants should individually establish for a limited time a voluntary= =20 circuit-breaker wholesale price above which their company will not charge a= ny=20 load serving entity.)=20 * Suppliers must be paid (Suppliers, who are still owed for deliveries made= =20 last October, can not continue to sell power to California if they are not= =20 confident that they will be paid.)=20 * Temporarily ease air-quality requirements to allow older power plants to= =20 operate more hours during the year. * Retain consumer choice options in selection of electricity suppliers (A= =20 preferred alternative to the state becoming the only creditworthy party is= =20 for consumers themselves to take on the credit responsibility by purchasing= =20 directly from a third party supplier.)=20 * Suppliers' bid data should be released on a time-delayed basis to an=20 authorized monitor. (In order to satisfy the needs of both the public, and= =20 the desires of the sellers, a repository of suppliers' bid data should be= =20 kept by an authorized market monitor that is independent of both buyer and= =20 seller influence.)=20 There are major policy changes for WPTF in a few of the bullet items, above= .?=20 Therefore, the WPTF Board will need to hear from you either via e-mail or a= t=20 next week's teleconference.? We are anticipating that a Board vote will tak= e=20 place next Thursday, at the earliest.=20 Things in the People's Republic of California=20 ?@@@ Is there a Credit Committee in your future?=20 Get organized now, and avoid the rush.? It may come to pass that we will=20 learn a whole new facet of business.? That is, the rules and procedures of= =20 bankruptcy.? I was introduced to Mr. Jonathon Rosenthal of Saybrook Capital= =20 earlier this week.? Saybrook is an investment-banking firm in LA that=20 specializes in purchasing defaulted bonds from issuers going through=20 difficult workouts and bankruptcies.? They represented many creditors in th= e=20 Orange County bailout in 1994.? Remember that one?? Well, currently Saybroo= k=20 is representing MBIA, the largest bond insurance company in the world, and = a=20 major creditor against the utilities if the utilities do not pay their=20 bondholders.? MBIA is interested in discussing with other potential credito= rs=20 the role of an informal credit committee prior to a petition for bankruptcy= .=20 WPTF is playing a role by introducing Saybrook and MBIA to our membership.?= =20 Towards that end, a teleconference call has been scheduled next Tuesday for= =20 WPTF members, and Saybrook Capital.? Because it is a member's only call, an= d=20 limited to potential creditors, interested parties must contact me for the= =20 call-in number, and time.? If you want to learn more about Saybrook Capital= ,=20 their website address is www.saybrook.net.=20 Things in the People's Republic of California=20 ?@@@ APX Announces Special Workshop on Feb 21=20 The PX markets are gone, and the ISO transmission market is a mess.? There= =20 are no adjustment bids to provide economic signals regarding SCs willingnes= s=20 to alter their schedules at various congested intertie points.? John Streme= l=20 of APX made a presentation in Phoenix, last week, at the WPTF general meeti= ng=20 on a proposal that APX may undertake to fill the adjustment-bid gap.? The= =20 folks at APX wanted me to alert you regarding the special meeting on Februa= ry=20 21, and encourage you to attend the workshop at their offices in Santa Clar= a,=20 California.=20 Without a congestion market, all SCs stand to loose millions of dollars by= =20 having schedules cut by the CAISO because there are no other short term=20 alternatives to congestion management.? The investment APX will require fro= m=20 participants to develop an interim solution will be minor compared to the= =20 financial impact without it.=20 APX is asking you to attend this meeting and to confirm your desire to help= =20 fund a solution to be provided by APX.? Ultimately they will seek financial= =20 commitments prior to developing a solution, but they believe it is feasible= =20 to have a system in place well before the summer season.? Due to its interi= m=20 nature, APX will seek a flat fixed fee such that its planned abandonment wi= ll=20 not negatively impact APX with the more permanent change to congestion=20 management that will eventually be implemented by the CAISO.=20 Contact Michael L. Heinrich at APX for more information, 408-517-2159.? His= =20 e-mail address is mheinrich@apx.com.=20 Things National=20 ?@@@ FERC Kicks ISO Tariff Amendment 36 in the Chops=20 On Wednesday, FERC issued an order that you can download at=20 http://www3.ferc.fed.us/bulkpower/bulkpower.htm .? The order is in response= =20 to several petitions, not the least of which is the ISO's proposed Tariff= =20 Amendment 36.? The Amendment requested a relaxation of the credit requireme= nt=20 of PG&E and SCE so that the ISO could continue ordering real-time generatio= n=20 to meet the load of the two major load-serving entities.? FERC stated that= =20 the credit requirement may be relaxed for the utilities' scheduling of thei= r=20 own generation to meet their own load.? However, for all "net short"=20 purchases, the ISO can not relax the credit limit.? The FERC wisely counsel= ed=20 the ISO to have a third party credit-worthy buyer sleeve the net short=20 schedules, such as DWR.? A credit worthy backer, said FERC, would encourage= =20 more supply into the real-time market (e.g., supplemental energy) and reduc= e=20 the need for out of market calls.=20 It would be tempting to conclude that generators with ISO PGA's, given the= =20 FERC Order, do not have to respond to ISO calls if a credit worthy buyer is= =20 not available to back the ISO payments.? But I don't think that is what FER= C=20 was saying.? FERC was careful to avoid stepping on the toes of the US=20 District Court that is addressing that very petition made by the ISO, and= =20 under which a temporary restraining order is in effect mandating that all= =20 generators with ISO PGA's comply with ISO orders.? That case continues toda= y=20 in federal court in Sacramento.? However, the FERC Order did do two things.= ?=20 One, if removed the risk that generators had the burden to sell to the ISO= =20 even if the buyers were not credit worthy.? Two, it affirmed that=20 "reasonable" price is in FERC's authority, not the power buyer, i.e., DWR.?= =20 Although not stated directly, DWR had been chanting in word and deed that i= t=20 wouldn't pay prices that in their sole discretion were unreasonable.? That = is=20 the type of uncertainty that can stop a market stone cold.=20 Maybe in next week's Burrito we will have a matrix of legal suits filed on= =20 behalf of or against our members, and the state.? It would make things so= =20 much easier to understand.? You can't tell the players without a program.= =20 Things National=20 ?@@@ Ohio Ushers in Retail Competition=20 Green Mountain's Rick Counihan is excited about a news release regarding a= =20 community aggregation deal that his company is entering in Ohio, even as=20 California is moving=20 to end such possibilities.=20 Green Mountain Energy Company was selected to serve over 400,000 Ohio=20 electricity customers in the country=01,s largest-ever energy aggregation= =20 contract.? The selection was made by the Northeast Ohio Public Energy Counc= il=20 (NOPEC), a governmental, public electricity buying group formed to serve=20 nearly 100 communities in the area surrounding Cleveland.=20 Under the letter of understanding, NOPEC and Green Mountain Energy Company= =20 will enter into a six-year supply contract.? With the addition of these new= =20 Ohio customers, Green Mountain Energy Company=01,s total customer base will= =20 surpass 500,000 across deregulated markets in California, Pennsylvania, New= =20 Jersey and Connecticut.? The Company received regulatory approval in Januar= y=20 to enter the Texas market later this year.=20 Under the terms of the letter of understanding, the NOPEC and Green Mountai= n=20 Energy Company supply contract will provide for the Company to begin servin= g=20 customers in September, 2001.=20 Odds & Ends (_!_)=20 Today my wife and I played hooky.? It was a belated Valentine's Day=20 celebration.? We took to the beautiful Napa Valley and enjoyed a three-hour= =20 lunch on the Napa Valley Wine Train.? I highly recommend the journey.? The= =20 food is superb, the train is a classic, and watching the valley of wineries= =20 unfold to the rocking motion of the train is incredibly relaxing.? Nothing = in=20 the world, not even our state energy crisis meant a thing during today's=20 adventure.=20 The train speaks to another era - a world that we might vaguely remember fr= om=20 our childhood.? Nothing like it exists in our daily lives today.? Iron,=20 steel, brass, and wood paneling are everywhere.? The girth of the train car= s=20 and engines are unlike the plastic moldings that coat our automobiles,=20 computers, and modern day tools.? Dining in a dome car with heavy sterling= =20 silverware, starched white linen, attentive waiters and waitresses, and=20 classic cuisine lifts you from the humdrum of fast food to another time and= =20 place.? In short, it was a thankful break from a stress-filled reality that= =20 is taking all of us down.? Don't forget to let go every now and then. Okay?= =20 Jobs, jobs, jobs.? It seems that many of you folks are changing jobs, and= =20 others of you are eagerly trying to find people.? The demise of the PX=20 certainly provides the rest of us with some very qualified candidates.? I= =20 encourage those of you trying to hire employees to post in the Burrito the= =20 positions you are trying to fill.? Also, those of you looking for new=20 opportunities should drop me a Burrito line, and tell me what you are looki= ng=20 for.? We might as well make the search as easy as possible.=20 Speaking of new jobs, Marcie Milner, formerly of Enron's Phoenix office=20 recently switched to Coral Energy, and relocated to Coral's La Jolla,=20 California office.? Best of luck to you, Marcie.? Marcie's new phone number= =20 is 858-320-1506.=20 This week's humor injection is from Randy Young at Pinnacle West in Phoenix= .?=20 Randy, we didn't see you on the golf course last week when we were in=20 Phoenix, but we'll accept your contribution any way.=20 =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =20 Divine Advice=20 A businessman was in a great deal of trouble. His business was failing, he= =20 had put everything he had into the business, he owed everybody - it was so= =20 bad he was even contemplating suicide. As a last resort he went to a priest= =20 and poured out his story of tears and woe.=20 When he had finished, the priest said, "Here's what I want you to do: Put a= =20 beach chair and your Bible in your car and drive down to the beach. Take th= e=20 beach chair and the Bible to the water's edge, sit down in the beach chair,= =20 and put the Bible in your lap.=20 Open the Bible; the wind will riffle the pages, but finally the open Bible= =20 will come to rest on a page. Look down at the page and read the first thing= =20 you see. That will be your answer, that will tell you what to do."=20 A year later the businessman went back to the priest and brought his wife a= nd=20 children with him. The man was in a new custom-tailored suit, his wife in a= =20 mink coat, the children shining. The businessman pulled an envelope stuffed= =20 with money out of his pocket, gave it to the priest as a donation in thanks= =20 for his advice. The priest recognized the benefactor, and was curious.=20 "You did as I suggested?" he asked.=20 "Absolutely," replied the businessman.=20 "You went to the beach?"=20 "Absolutely."=20 "You sat in a beach chair with the Bible in your? lap?"=20 "Absolutely."=20 "You let the pages riffle until they stopped?"=20 "Absolutely."=20 "And what were the first words you saw?"=20 "Chapter 11."=20 =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=20 The way things are going with high wholesale prices, and the utilities'=20 accumulated debt, the utilities are so broke they may need to file Chapter= =20 10.5.=20 Have a great (holiday) weekend.? I'll be in Las Vegas for my son's ice hock= ey=20 tournament.? Never a dull moment.=20 gba=20 ?
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