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Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: 7bit X-From: Jeff Dasovich X-To: James D Steffes, Richard Shapiro, skean@enron.com, mpalmer@enron.com, Karen Denne, Linda Robertson, Tom Briggs, Joe Hartsoe, Janel Guerrero, Susan J Mara, Sandra McCubbin, Paul Kaufman, Michael Tribolet X-cc: X-bcc: X-Folder: \Jeff_Dasovich_June2001\Notes Folders\Sent X-Origin: DASOVICH-J X-FileName: jdasovic.nsf This is yet another, tangible case of why price caps don't and can't help; they can and will only make matters worse. Caps are a policy chainsaw when a scalpel is needed. The result of the caps being imposed on QFs by Davis and the Legislature will be shut downs and bankruptcy, which will reduce supply and decrease reliability----the exact opposite of what the state needs to be doing. FYI: I listened in to Sokol's conference call yesterday re: court case freeing CalEnergy from the QF contract. Sokol blasted Edison over and over (e.g., accumulated war chest of over $2 billion in cash). Sokol said that, at least for the time being, this lessens the need for CalEnergy specifically to force an involuntary. Be interesting to see if other QFs take similar tack. Sokol also said that CalEnergy has sold the power to El Paso---lot's of press questions about price and where the power's headed (i.e., in our out of state). He said he expects to get a "market price" from El Paso and that if the "prices are higher out of state, well......." Best, Jeff James D Steffes 03/22/2001 10:16 AM To: Jeff Dasovich/NA/Enron@Enron, Sandra McCubbin/NA/Enron@Enron cc: Subject: California Update 3/22/01 FYI. ----- Forwarded by James D Steffes/NA/Enron on 03/22/2001 10:16 AM ----- Kristin Walsh/ENRON@enronXgate 03/22/2001 08:20 AM To: John J Lavorato/ENRON@enronXgate, Louise Kitchen/HOU/ECT@ECT cc: Phillip K Allen/HOU/ECT@ECT, Tim Belden/HOU/ECT@ECT, Mike Grigsby/HOU/ECT@ECT, Tim Heizenrader/PDX/ECT@ECT, Vince J Kaminski/HOU/ECT@ECT, Rob Milnthorp/CAL/ECT@ECT, Kevin M Presto/HOU/ECT@ECT, Claudio Ribeiro/ENRON@enronXgate, Richard Shapiro/NA/Enron@Enron, James D Steffes/NA/Enron@Enron, Mark Tawney/ENRON@enronXgate, Scott Tholan/ENRON@enronXgate, Britt Whitman/ENRON@enronXgate Subject: California Update 3/22/01 ? The legislature will meet and vote to repeal Section 390 of AB 1890. This will reverse what the QFs get paid from natural gas costs and replace it with the formula in the governor's current plan - 7.9 cents/kwh for 5-year contracts and 6.9 cents/kwh for 10-year contracts. According to sources, this is "locked in to pass." It will be implemented by a PUC order on Monday. ? The QFs met on this plan all day yesterday and have calculated what they would get paid. This plan would not generate enough money for many QFs to operate profitably. At least 2,000 MW of the total 5,407 MW of gas-fired QFs would be unable to generate a positive cash flow and would have to either operate unprofitably or shut down. ? The QF community is responding with an increased militancy for an involuntary filing, according to sources. The most aggressive QF after Coram Energy is David Sokol and Walter Scott of Mid-America Energy (based in Nebraska). Sokol is described by sources as "extremely aggressive." ? An involuntary bankruptcy filing appears imminent. Sources believes the trigger event will either be the legislative passage of the plan tomorrow or the PUC order implementing the plan on Monday.
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