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Enron Mail |
Greetings Mark:
Here is the latest. ENA signed a short-term deal (5 -week term, I believe) with DWR that goes through the end of the month, at which time we have the option to extend the deal to a five-year term. We are discussing other longer-term deals, too. As Steve points out, we've had serious concerns regarding DWR's creditworthiness. (DWR, the Dept. of Water Resources, is the state agency that Davis made the purchaser of power when the utilities hit the financial skids a few months ago and the market stopped selling them power.) The problem has been simple and significant---while our brilliant Governor and Legislature gave DWR the authority to buy power on behalf of the cash-strapped utilities, they neglected to t spell out how DWR would recover its costs of buying the power. Based on comments from us and other suppliers regarding the creditworthiness issue, the California PUC issued an order last week establishing that 1) the PUC would indeed pass DWR's power costs through to ratepayers and 2) the PUC would NOT second-guess (i.e., impose "reasonabless" standards) on any contracts signed by DWR as a condition of passing the costs through to ratepayers. With the CPUC decision (and other language that ENA's negotiated into the DWR contract), ENA is close to being comfortable signing the 5-year deal, even in the face of the FERC order. That's predominantly due to the fact that the power price in the 5-year deal would come in well under the $150/MWH threshold that FERC has set up for any sort of "refund review." But other things could crop up between now and the exercise date that could muck things up. I'll keep you posted on developments as they transpire. The big problem (as Steve notes) is that the State is on the verge of (some say hell bent on) taking over the entire electricity industry in California in perpetuity. Our original proposal focused on getting price volatility and the utilities' financial position back under control. Our contracting proposals have always been couched in the context of a temporary, stop-gap measure. That is, the state would do the minimum amount needed via contracts to stabilize prices while simultaneoulsly doing what was necessary to get de-regulation back on track in California. And once the situation had been righted, the State would as soon as possible exit the industry and let the market step back in. Unfortunately, command-and-control, anti-deregulation policymakers have taken hold of the agenda (with the blessing, seemingly, of the Governor), and are moving the state toward a "takeover" response. That's what we're actively opposing. If you have any questions, don't hesitate. Best, Jeff
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