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Enron Mail |
could you please fax this text to steve and mark? thanks a million. jeff
----- Forwarded by Jeff Dasovich/NA/Enron on 01/25/2001 02:57 PM ----- "Katie Kaplan" <kaplan@iepa.com< 01/25/2001 12:15 PM Please respond to kaplan To: <kaplan@iepa.com<, "William Hall" <wfhall2@duke-energy.com<, "Ward Scobee" <wscobee@caithnessenergy.com<, "Tony Wetzel" <twetzel@thermoecotek.com<, "Sue Mara" <smara@enron.com<, "Steve Ponder" <steve_ponder@fpl.com<, "Roger Pelote" <roger.pelote@williams.com<, "Rob Lamkin" <rllamkin@seiworldwide.com<, "Randy Hickok" <rjhickok@duke-energy.com<, "Paula Soos" <paula_soos@ogden-energy.com<, "Nam Nguyen" <nam.nguyen@powersrc.com<, "Milt Schultz" <bfpjv@c-zone.net<, "Marty McFadden" <marty_mcfadden@ogden-energy.com<, "Marc Tompkins" <marc.tompkins@bently.com<, "Lynn Lednicky" <lale@dynegy.com<, "Kevin Williams" <kwilliams@envres.org<, "Kent Fickett" <kfickett@usgen.com<, "Ken Salvagno" <kbssac@aol.com<, "Ken Hoffman" <khoffman@caithnessenergy.com<, "Kathryn Lynch" <Lynch@sl.net<, "Jorn Larsen" <JornL@forasenergy.com<, "Jonathan Weisgall" <jweisgall@aol.com<, "John Wood" <jwood@sithe.com<, "John Stout" <John_H_Stout@reliantenergy.com<, "John Prevost" <plenv01@northcoast.com<, "Joe Ronan" <joer@calpine.com<, "Joe Greco" <joe.greco@uaecorp.com<, "Jim Hinrichs" <jmhpower@aol.com<, "Jeff Dasovich" <jdasovic@enron.com<, "Jane Luckhardt" <jluckhardt@dbsr.com<, "James Bishop" <jim_bishop@msn.com<, "Jack Pigott" <jackp@calpine.com<, "Hap Boyd" <hap.boyd@enron.com<, "Hal Dittmer" <hedsf@aol.com<, "Greg Blue" <gtbl@dynegy.com<, "Graeme Donaldson" <GDonald386@aol.com<, "Glen Sheeren" <gsheere2@iccnet.com<, "Frank Misseldine" <fmisseldine@caithnessenergy.com<, "Frank DeRosa" <frank.derosa@gen.pge.com<, "Eric Eisenman" <eric.eisenman@neg.pge.com<, "Edwin Feo" <efeo@milbank.com<, "Edward Lozowicki" <elozowicki@sjo.coudert.com<, "Ed Maddox" <emaddox@seawestwindpower.com<, "Duane Nelsen" <dnelsen@gwfpower.com<, "Doug Fernley" <fernley.doug@epenergy.com<, "Don Scholl" <PurEnergyI@aol.com<, "Diane Fellman" <difellman@energy-law-group.com<, "Dean Gosselin" <dean_gosselin@fpl.com<, "Dave Parquet" <dparque@ect.enron.com<, "Curtis Kebler" <curtis_l_kebler@reliantenergy.com<, "Curt Hatton" <curt.hatton@gen.pge.com<, "Cody Carter" <cody.carter@williams.com<, "Carolyn Baker" <cabaker@duke-energy.com<, "Bob Escalante" <rescalante@riobravo-gm.com<, "Bob Ellery" <bellery@spi-ind.com<, "Bill Woods" <billw@calpine.com<, "Bill Carlson" <wcarlson@wm.com<, "Scott Harlan" <harlans@epenergy.com< cc: "Theo Pahos" <tpahos@ppallc.com<, "Andy Brown" <ABB@eslawfirm.com<, "B Brown Andy" <andybrwn@earthlink.net<, "Bob Weisenmiller" <rbw@mrwassoc.com<, "Douglas Kerner" <DKK@eslawfirm.com<, "Jan Smutny-Jones" <smutny@iepa.com<, "Jean Munoz" <jmunoz@mcnallytemple.com<, "Jeff Dasovich" <Jeff.Dasovich@enron.com<, "John Larrea" <john.g.larrea@williams.com<, "Julee Malinowski-Ball" <jmball@ns.net<, "Kassandra Gough" <kgough@calpine.com<, "kent Palmerton" <kent.palmerton@williams.com<, "Kristin Vellandi" <kvellandi@pstrategies.com<, "Marty Wilson" <mwilson@pstrategies.com<, "McNally Ray" <rmcnally@mcnallytemple.com<, "Norton Kelli" <knorton@mcnallytemple.com<, "Paula Hall-Collins" <paula.hall-collins@williams.com<, "Richard Hyde" <rwhyde@duke-energy.com<, "Stephanie-Newell" <stephanie-newell@reliantenergy.com<, "Tom Ross" <tross@mcnallytemple.com< Subject: Transcrip of Davis' speech last night TRANSCRIPT OF GOVERNOR DAVIS WITH DEPARTMENT OF WATER RESOURCES OFFICIALS SACRAMENTO At a press conference today, Governor Gray Davis, officials from the Department of Water Resources (DWR), and Legislators addresses the DWR Internet based auction for long-term electricity contracts. The following is a transcription of the governor's comments: Governor Davis: "For the remarks on the long-term bidding contracts, I am going to have Director Hannigan make those comments. I want to thank the work of the bipartisan team standing behind me. We are tied at the hip. We are making progress. We are keeping the lights on. We are assuring people that prices will be affordable and we are making real progress in securing good, well-priced long-term contracts. I am very positively inclined as a result of these bids. It is good news, I am enthusiastic, and it tells us we can stay within our general parameter, which is to provide power within the rate structure consistent with aggressive conservation and aggressive efforts to put more supply on line. This, as you know, is at least a three corner billiards shot, it may be more difficult than that. But so far the signs are positive, I want Director Hannigan to just give you a brief summary of the results of the bidding process and then I will give you a couple more comments and then I will ask the legislative leaders to add their commentary." Director of the Department of Water Resources Tom Hannigan: "Thank you Governor, as the Director of the Department of Water Resources, I am given responsibility for trying to keep the lights on. Our fundamental responsibility here is to purchase power at the best possible prices for California consumers and businesses, and to protect the state's ability to purchase power at the best price. We are only able to release general information about the bid opening today. There were 39 bidders, the majority of them were compliant, the weighted average which included all of the times of the days and nights of the year except for super-peaks was 6.9 cents per kilowatt. The useful sample across all times of the day across the spectrum of the year and we are quite pleased with the initial results. I look forward to looking through bids and developing some long-term contracts." Governor Davis: "I would like to make a further announcement of three people who have been advising me over the last several days, one is Mike Peevey, who is serving as my unpaid special advisor on a whole range of matters. He has had a discussion with the CEOs of the two utilities in question, he has sat in several meetings, he has a long history with the energy business, of which he is no longer a participant in or a shareholder in. His advice and counsel is very much appreciated and I thank him for his assistance thus far and what I know will be future assistance of great consequence. "I also want to announce David Freeman, the General Manager of the Los Angeles Department of Water and Power, has agreed to serve on a short-term basis, probably a month to six weeks, as a consultant for the Department of Water Resources. His job, working with Mike Peevey in this instance, is to get the very best possible deal for the ratepayers of California. His job will be to take the most favorable bids that came in today and consummate those into contracts to have unilateral discussions -- assuming we get the authority to do that -- for more good bids and if necessary, to go out and request more bids. "As anybody knows, in the power business you don't try and acquire all your long-term power at once. It's done sequentially over time, that's the methodology that assures the best price and best quantity of power for the rate payer. Mike, I want to make clear, will be advising on a whole range of issues, and in addition to that, he'll be working with David Freeman. David's exclusive responsibilities will be to advise the Department of Water Resources on additional long-term contracting and how to consummate the best bids that were offered today. "Obviously if you have an average weighted price of 6.9 cents per kilowatt hour, that means that there were some bids below that and some bids above that. We hope we will be able to consummate contractual relations with some of the bids that were below the average price, as well as move aggressively forward in the future. "The final name, I am very pleased to say that we have been consulting with is Frank Zarb. Frank is the CEO and chairman of the NASDAQ and he was President Ford's energy czar during the first oil and gas price crisis in the 1970's. He has subsequently been the CEO of Smith Barney, and he has years of experience in the utility business. He was tasked by Governor Pataki last year to be the temporary CEO of the Long Island Power and Energy Authority. He is well-versed in this area, and he will be advising us on a range of matters, including ways in which to keep the utilities viable in the future and keep us appraised of market and financial expectations in that regard. These three people have been advising us in the recent days and will continue to do so. "With that I would like to call upon..." (members speak) Question and Answers: "Thank you, we'll be happy to take a few questions." Question: "Will these bids assure that you'll be able to provide electricity without raising rates?" Governor Davis: "That has been my hope and it continues to be my expectation. This is a very good step. Obviously we have a way to go to finalize the best bids made today and to secure additional power to complete the entire profile necessary. This is a very good step, and all of us are pleased with the preliminary results." Question: "It's not an assurance though, the bids aren't so good that you are sure that you'll be able pull this off without a rate increase." Governor Davis: "No, but that continues to be my hope and expectation. There was nothing about the bidding process that discourages me, everything encourages methat we can live within the framework we've all described. Everyone has mentioned the three component parts -- Native Generation, QF's and what we call the net short. And the first two are well within the rate structure and it's our expectation that we can get the third piece within it as well." Question: "Governor, was there enough power bid in the short term to keep the lights on say to February without going into the spot market?" Governor Davis: "Let me ask Mr. Hannigan. As I said, I want to protect the integrity of the bid process. That's why the only information I asked of the Director is the information he's already described to you, so you're going beyond my pay grade at the moment, I have to call on the Director." Director Hannigan: "Well as I said at the outset, I have not seen the bids and I don't know what the numbers are. It is a sealed bid process and we're respecting the integrity of that. But we have been buying power both on the day ahead market and the real time market, hourly market, real-time market. It's a function of trying to work these generators down, get them to sell us power at the cheapest price we can get from them, and through that we hope to make it through the first of February. I think we're looking a little farther than that." Question: "The Legislature has set aside money to get us through February 2. My question is whether these contracted governments." Director Hannigan: "These contracts really don't relate to the short-term getting through that time frame." Question: "When does the long-term begin?" Director Hannigan: "Well the long-term begins, of course, when the contract date suggests they begin, but we don't know what that will be at this point. It could be in a week, it could be shorter. Some of them it could be longer, it depends on how long it takes to negotiate them with them and what kind of terms you get." Question: "Do you think based on these numbers that you could reach the point described frequently as 5 1/2 cents?" Director Hannigan: "I don't know that. That is the same question as can you reach a point where you don't raise the rate." Question: "That apparently is the point in which you don't raise the rate?" Director Hannigan: "Yeah, so I don't know that Dan." Unknown Speaker: "I don't know that that is correct. Built into that presumption is that you don't get any relief on the QF's which we're now paying between 16 and 19 cents to the extent that you get relief on the QF's then that 5 1/2 cents can raise without a rate increase." Question: "Does that mean that, Hertzberg, you don't need your front-loaded program which leaves the bonds up front to cover the initial cost? You don't need the program at all?" Speaker Hertzberg: "No, I think you do in order to use revenue bonds to pay for the near term. Obviously, yes, the answer is yes, you do need it. It will be smaller." Question: "The near terms are going to need those revenue bonds?" Speaker Hertzberg: "Well yeah, you need them to take out that bump in the near term. But how many bonds you issue depends upon what these prices are. But yeah, you are going to need some facility clearly just as a means to collect the money back from the customers. There still has to be some mechanism in place to do that." Question: "Governor do you agree with having to use revenue bonds up front?" Governor Davis: "I believe it is an appropriate mechanism, we'll have more to say about that in the next couple of days, but we have been in constant contact with all the people behind me as well as Assemblyman Campbell, who we were visiting earlier tonight. And we understand that what we're looking forward to is essentially price stabilization. So in the short-term, price paid by energy customers is going to be less than the actual price of energy. In the long-term, the price of energy will fall but the price will remain constant to the consumers. It is our collective expectation that if we can tell the business and residential consumers of the state that their price will stay relatively stable over a sustained period of time, that they will see that as a good deal. Do you understand what I'm saying? Obviously if you look at the spot market, you can see today's prices considerably higher than the 5 to 5 1/2 percent range that we originally thought was necessary to stay within the current rate structure. Because the negotiations led primarily by Senator Battin and Assemblyman Keeley were so successful in the QF part of the equation, we have a little more flexibility on the long-term contracting although not a lot more flexibility. Question: "Is there enough energy bids to cover the net short positions? Especially this summer?" Governor Davis: "It is my understanding that we had a very representative bid and that's the only information that we've been shared... We had a good deal of power bid for and it was a very good sample and certainly one that gives us all optimism." Question: "What I mean to ask is this 10,000 Kilowatts or Megawatts that possibly the state's looking for? Is it enough to cover that gap?" Governor Davis: "As I said before, it would be a mistake. I'm talking in general terms now. It would be a mistake for the state to try and acquire all its power at once. That would drive up the cost and saddle the taxpayer with higher costs than are necessary. The Department of Water Resources knows that and they are proceeding appropriately." Question: "Governor, just for our viewers very simply, is it reasonable to expect that some of these long-term bidding contracts will start next week? Next month? When do you think?" Governor Davis: "We're hopeful to get authority from the Legislature within a week to begin consummating the better proposals that were received today. Under the guidance and advice from Mike Peevey and David Freeman, we expect the Department of Water Resources to move aggressively to enter into unilateral arrangements with other potential bidders, go back to ones whose bids were initially rejected to see if we can negotiate better prices. We're on this like white on rice, we are determined to get the best prices as soon as we can. But it is a mistake to try and get it all done within a week. We'll end up paying more for it than we have to." Question: "Is there any possibility that you'll run out of cash before you sign the contract?" Governor Davis: "It's my expectation and hope that we will not. We have obviously emergency authorities so we can draw upon but it is my expectation and hope that we can live within the resources allocated to us on a short-term basis and then have the authority to switch over to long-term contracting." ### Katie Kaplan Manager of State Policy Affairs Independent Energy Producers Association (916) 448-9499
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