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Enron Mail |
FYI.
Best, Jeff ----- Forwarded by Jeff Dasovich/NA/Enron on 02/13/2001 10:46 AM ----- CERA: Study Says Long-Term Power Contracts `No Solution' 02/12/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- Californians will likely see 20 hours of rolling blackouts spread across the state this summer, as short-term solutions to the state's ongoing power crisis come too late, according to a report from the Cambridge Energy Research Associates. CERA, an international energy consulting company, estimates California will be short 5,000 megawatts this summer, which will force the state's independent grid operator to declare some stage of emergency for 200 hours. However, if consumer rates are allowed to increase before summer, Californians will likely cut consumption by 1,500 MW, or one-third of the predicted shortfall, Larry Makovich, a senior director of CERA, said Monday at a press briefing in Houston. A California Public Utilities commissioner agreed with the report. "It will be bad," said Richard Bilas. "We've had no additional generating capacity, and until we have price signals, it won't get better." CERA experts said long-term steps California must take to create a functioning wholesale market include: establishing a capacity requirement and payment method; streamlining plant siting and approval; resolving the credit crisis the state's utilities face; ending the consumer rate freeze; avoiding tinkering with market rules; creating a positive investment climate, and restructuring the regional transmission grid. In addition, CERA said California utilities should move to portfolio buying over the next three years, rather than contracting long-term supplies now. "Long-term contracts aren't a solution," Makovich said. He added that utilities could contract for huge volumes of power that will be above the market price in as little as 18 months, as natural-gas drilling increases, improving tight gas supply. One of the problems that led California to restructure its power industry was the large amount of power under contract under federal law at above-market prices. With long-term contracts being discussed at $70.00 a megawatt-hour "we run the risk of creating a bigger problem," should natural gas prices retreat over time to around $3.00 a thousand cubic feet, Makovich said. In addition to the obvious move to improve the state's power supply by allowing construction of new generating units, the CERA study urged the state to take several short-term steps to help reduce supply problems this summer, including: expanding load curtailment programs; encouraging conservation; providing flexible emission restrictions; coordinating plant outages on an emergency basis, and providing for flexible hydroelectric facility operations. "The biggest problem is that we are running out of time," said Steve Kean, executive vice president at Enron Corp. (ENE), at the briefing on the first day of CERA's five-day energy conference in Houston. While the state Legislature has taken steps to restore the credit situation facing California utilities, the recent disclosure that the Department of Water Resources isn't buying all the power the state needs "isn't a good way to keep the lights on," said Joe Bob Perkins, president of Reliant Energy Inc.'s (REI) Wholesale Group, which owns generation in California. He called the credit situation "increasingly fragile." And while California's governor and lawmakers stepped in when the two largest California utilities appeared headed for bankruptcy, Bilas said a bankruptcy proceeding might be a way to end rate freezes for California consumers - an unpopular move that other parties have been unwilling to forcefully pursue. "A bankruptcy judge will say rates have to go up, costs have to be cut," Bilas said. "It's a way to say rates have to go up, but I didn't do it." -By Eileen O'Grady; Dow Jones Newswires, 713-547-9213; eileen.ogrady@dowjones.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.
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