|
|
Enron Mail |
I think that this is what Sandi was referring to. If not, please let me kn=
ow. Best, Jeff ----- Forwarded by Jeff Dasovich/NA/Enron on 02/22/2001 12:35 PM ----- =09Jeff Dasovich =09Sent by: Jeff Dasovich =0902/21/2001 01:31 AM =09=09=20 =09=09 To: Richard Shapiro/NA/Enron@Enron, skean@enron.com, Paul=20 Kaufman/PDX/ECT@ECT, Susan J Mara/NA/Enron@ENRON, Sandra=20 McCubbin/NA/Enron@Enron, Harry Kingerski/NA/Enron@Enron, Leslie=20 Lawner/NA/Enron@Enron, James D Steffes/NA/Enron@Enron, mpalmer@enron.com,= =20 Karen Denne/Corp/Enron@ENRON, Linda Robertson/NA/Enron@ENRON, Joe=20 Hartsoe/Corp/Enron@ENRON =09=09 cc:=20 =09=09 Subject: DRAFT Message Points for Hertzberg Conversationq Here are some draft message points. Please review. Apologies in advance i= f=20 they're a little rough, but these guys are getting bothersome at this point= . Best, Jeff Recent legislative proposals designed to 1) give the State the role of=20 developing, owning and operating power plants in California (SB6X--Burton)= =20 and 2) buy PG&E and Edison's electric transmission assets (SB33X--Burton) a= re=20 taking California in the wrong direction and won't solve the State's=20 electricity crisis. Two other recently introduced new bills are equally disturbing and=20 counter-productive: AB60X (Hertzerg) would make plant certification=20 contingent upon the developer agreeing to sell the power to the state at=20 "just and reasonable, cost based rates." SB39X (Spier) would classify powe= r=20 plant as public utilities and would dictate plant operations to a very=20 significant degree. The proposals are significantly outside the mainstream and offer a politica= l,=20 as opposed to an economic, commercial, financial, or technical solution. = =20 Around the rest of the world, governments are privatizing these industries,= =20 relying on efficient capital markets to provide both the infrastructure an= d=20 the products and services that derive from that infrastructure. Astonishingly, California is moving in the opposite direction, toward a=20 state-owned and operated, centrally-planned industry. The notion that a state takeover of the industry is the only choice that=20 California has left is false, will lead to a seriously flawed economic=20 policy, and will result in consumers paying higher prices for lower quality= =20 services for years to come. As a political solution, these bills will not increase supply, decrease=20 demand, or get the utilities back on their financial feet. In fact, they are likely to do just the opposite: They will result in a significant expansion of the state bureaucracy and=20 create additional burdens on the state budget. =20 The transmission buyout contemplated in SB33X is extremely complex, requiri= ng=20 buy-in from state and federal authorities, bondholders, creditors and=20 others. =20 California will be forced to spend an enormous amount of time and resources= =20 trying to achieve the deal, with no certainty of success, particularly in= =20 view of PG&E's public opposition. =20 There is no evidence that the State has any expertise in overseeing a TX=20 system as large and complex as the ones possessed by PG&E and Edison, even = if=20 it did manage to complete the transaction. Nor have any estimates been made regarding how much additional capital=20 California will be required to invest in what is generally viewed as a=20 transmission network in desperate need of repair and upgrading. In the meantime, summer approaches, and the gap between supply and demand= =20 remains staggering. =20 This complex, costly and litigious alternative will in no way reduce the=20 serious threat of blackouts that California faces this summer. When those blackouts arrive=01*and they will unless bold action is taken sw= iftly=01* consumer will wonder why policy makers spent their time negotiating the pri= ce=20 of utility transmission assets. As important, it is extremely difficult to see how the transmission buy-out= =20 offers creditors a better alternative to bankruptcy court. =20 Indeed, when viewed against the uncertainty of achieving the transmission= =20 buy-out, particularly in light of the politically charged atmosphere in whi= ch=20 the debate is taking place, creditors seem increasingly inclined to opt for= =20 the relative certainty that comes with a bankruptcy court.=20 If that happens, the State loses a significant amount of influence over the= =20 situation. Moreover, SB6X squarely inserts the State into the power plant business,=20 despite the face that there is abundant private capital ready and willing t= o=20 invest in California=01*IF California provides the investment environment t= o=20 attract that capital.=20 Unfortunately, these bills create an environment that is hostile toward=20 investment capital. Distressingly, the state could finance, develop, own and/or operate power= =20 plants, at the same time that it controls the monopoly transmission system.= =20 In addition, any company that uses the newly-created =01&Power Authority=01= ,s=018=20 financing authority would have the price that it can charge for power set b= y=20 the =01&Authority,=018 or, if the developer is a utility, by the California= PUC. In sum, the biggest player in the power business=01*the State=01*will contr= ol the=20 network that power suppliers must use to get their power to market. The state will control the price to use the network, and in many cases it= =20 will also control the prices power suppliers charge for power services. This scenario makes the old vertically-integrated monopoly structure look= =20 inviting. Capital markets will run from this =01&solution=018 and put capital to more= =20 productive uses outside of California. Under this proposed =01&solution=018 only IOUs and municipal utilities will= build=20 plants, and the state will be forced to finance them. =20 That=01,s the same recipe for inefficiency and waste that got California to= =20 electricity prices that were 50% higher than the national average. =20 We=01,ve been down that route; it=01,s been given chance after chance to su= cceed,=20 and it=01,s failed. State-ownership and intrusive regulation haven=01,t wo= rked in=20 the past, and they won=01,t work today. This package of bills will increase the risk of blackouts this summer;=20 increase the time it takes to close the gap between supply and demand in=20 California; increase the likelihood of bankruptcy; and force businesses to= =20 look elsewhere to locate and/or expand operations, all of which put=20 California=01,s economy at risk. The real solution is to succeed in doing what California failed to do the= =20 first time=01*lay the groundwork for truly competitive retail and wholesale= =20 markets and foster an environment designed to foster investment, invest,=20 rather than chase it away.
|