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Enron Mail |
I agree that we should not be opposing rate caps for small customers and
schools, but I think we should be pounding on the fact that market participants have been putting offers in front of sdge and that allowing the market to provide this solution is superior to legislated caps that require the creation of huge deferrals (and more problems in the future). Can we make that argument work? Mona L Petrochko 08/24/2000 09:45 PM To: Bruno Gaillard/SFO/EES@EES cc: West GA, Edward Hamb/HOU/EES@EES, Jennifer Rudolph/HOU/EES@EES, Chris Hendrix/HOU/EES@EES, Greg Cordell/HOU/EES@EES, Harold G Buchanan/HOU/EES@EES, Martin Wenzel/SFO/HOU/EES@EES, Douglas Condon/SFO/EES@EES, James M Wood/HOU/EES@EES, Gary Mirich/HOU/EES@EES, Dennis Benevides/HOU/EES@EES, Roger Yang/SFO/EES@EES, David Parquet@ECT, mday@gmssr.com, Paul Kaufman/PDX/ECT@ECT, Marcie Milner/Corp/Enron@ENRON, Mary Hain@Enron, Harry Kingerski/HOU/EES@EES, James D Steffes/HOU/EES@EES, Richard Shapiro/HOU/EES@EES, Peggy Mahoney/HOU/EES@EES, Karen Denne@Enron, Mark Palmer/Corp/Enron@ENRON, Steven J Kean/NA/Enron@Enron, Tim Belden/HOU/ECT@ECT Subject: Re: Daily Update/ Legislative activity - 08/24/00 I attended Cmmr. Wood's two-day hearing on Wholesale Markets, which concluded today (8/24) in San Diego. Three Commissioner's were present (Wood, Lynch and Neeper) with Duque and Bilas participating by phone. Administrative Law Judge Wetzel was present and a transcript was taken. The quasi-legislative hearing was the beginning of a record developed for the investigation into the workings of wholesale/retail markets. This session focused on Wholesale markets. There will be subsequent sessions on retail issues, market structure and other related issues in the future. My conclusion from this session is that Wood is looking for support for increasing regulatory intervention in the market. Dan Larcamp, Director of the Office of markets, Tariffs and Rates, FERC, was present. He relayed FERC's concern of this matter and a desire to hold hearings in San Diego. He also relayed that Hoecker held a press conference announcing the opening of a 206 investigative proceeding into the operation of the wholesale markets in California, which carried with it refund authority. The format of the hearing was to respond to pre-filed questions developed by Wood/Lynch. Each member of the panel would respond to the questions and any questions posed by the Commissioners, the Judge or the CPUC Attorney. No questions were posed by members of the audience. Yesterday's panel of academics were comprised of: 1. Dr. Timothy Duane-UC Berkley 2. Dr. William Hogan-Harvard 3. Dr. Frank Wolak-Stanford (ISO Market Surveillance Committee) 4. David Marcus-Energy Consultant for the Coaltion of Utility Employees 5. Dr. Gene Coyle 6. Dr. Jean-Michel Glachant, Universite Paris I Pantheon Sorbonne The panel was asked to speak as individuals and not on behalf of any institutions they may represent. While the purpose of the panel seemed to be to determine that market power was being exercised and that prices were too high and therefore not just and reasonable, the panelist stopped short of blaming generators and market participants in behaving illegally. The concensus generally was that market power did exist at various times, but the mere existence did not constitute bad behavior. None, with the exception of Dr. Wolak who is in the process of doing a study using recent data as part of his role for the Market Surveillance Committee, had done a study. There was some discussion, though not much, of the monopsony power of the utilities. I think ultimately the group conceded that scarcity of supply amplified concerns about the exercise of market power, as even the increase in gas costs did not fully explain the recent spikes. Wolak believes that encourage utilities to enter into forward purchases will reduce the exercise of real-time market power. Hogan seemed to be there with Sempra's interests in mind. He continued to promote expansion of the ISO's abilities to dispatch load as well as maintain system reliability. There was alot of discussion about forward purchase ability for utilities so as to be less subject to volatile market prices. The concerns were also discussed about the appropriateness of a distribution utility making purchasing decisions on behalf of its customers. This included discussion of separation of these functions and the default provider role. Most everyone agreed that rolling back to a regulated market was not feasible without raising other major and serious concerns, however there seemed to be support for some interim measures where cost-of-service regulation may be a good idea and that was during peak periods. All agreed that a demand response, and price signals, are important in the long-run, although not to the extent currently experienced in San Diego. Today's panel included representatives from SDG&E, SCE and PG&E, TURN, UCAN and ORA. While yesterday's panel maintained objectivity as to whether or not generators were exercising market power to the detriment of the system, today's panel made no bones about the generators being to blame. SCE/PG&E indicated their need for relief for recovery of market costs in excess of the rate freeze. SDG&E was still on the hot seat for their inaction in hedging any of their supply. SDG&E brought up their failed PBR proposal and ORA and UCAN thought that that may be one way to incent the utility to be more responsible with their purchases. UCAN discussed the Governor's direction and the potential for putting rate caps into affect for residential and small commercial. He mentioned that C&I customers are experience difficulties as well. TURN raised the need for cost-based bid caps and cost-based peaking contracts. Mike Florio, TURN, urged against any further divestitute of assets and alleged market concentration on those assets that had been divested. In fact, TURN urged the Commission to seek legislation to clarify the Commission's authority to order retention of assets. Neeper urged that part of the solution should be changing the current requirement to use the PX as the only authorized exchange, although TURN disagreed. Bruno Gaillard 08/24/2000 06:09 PM To: SF Directors, Edward Hamb/HOU/EES@EES, Jennifer Rudolph/HOU/EES@EES, Chris Hendrix/HOU/EES@EES, Greg Cordell/HOU/EES@EES, Harold G Buchanan/HOU/EES@EES, Martin Wenzel/SFO/HOU/EES@EES, Douglas Condon/SFO/EES@EES, James M Wood/HOU/EES@EES, Gary Mirich/HOU/EES@EES, Dennis Benevides/HOU/EES@EES, Roger Yang/SFO/EES@EES, David Parquet@ECT, mday@gmssr.com, Paul Kaufman/PDX/ECT@ECT, Marcie Milner/Corp/Enron@ENRON, Mary Hain@Enron, Harry Kingerski/HOU/EES@EES, James D Steffes/HOU/EES@EES, Richard Shapiro/HOU/EES@EES, Peggy Mahoney/HOU/EES@EES, Karen Denne@Enron, Mark Palmer/Corp/Enron@ENRON, Steven J Kean/NA/Enron@Enron, Tim Belden/HOU/ECT@ECT cc: Subject: Daily Update/ Legislative activity - 08/24/00 Siting related bills 1. Good new - The Williamson Act passed the Senate 34-1, It should be heard at the assembly Saturday or Monday if it is not redirected to a Committee hearing. 2. There was a long meeting with Ducheny with regards to AB 970. The enviro's boycotted, they want to draft a bill with Keeley. Labor was obstructionist - they wanted to gut all the expediting siting language with regards to all facilities except for the peaking plants. Rate Cap related bills 1. The Edison Language on Rate Stabilization may not go anywhere. Edison has not found an author because of the efforts of Enron and others lobbying against it. Furthermore there are signs that Gov. Davis opposes it. 2. The Governor's office has issued a proposed language for a rate cap bill. The language however is not available as of yet. It may be released today or tomorrow. SDG&E has shown concerns over the content of the bill. They seem to think that it is worse than initially proposed by the Governor in his press release. The bill includes retroactive rate caps through 6/1/00. The rate cap could reflect Wood's rate cap proposal (6.5 cts cap on the energy component The bill does not specify who or how the costs associated with the cap will be recovered. (The reasoning is that UDCs will be more cautious in their procurement if there is uncertainty on who is responsible for the costs.) All of this is speculative. We hope to see the actual language soon. 3. Enron has been working with the Republican leadership to promote a rate cap proposal similar to the amended language we have proposed for AB2290. The bill focuses only on SDG&E customers and our major principals are the following. The Interim Rate Cap should be limited to residential and small commercial customers, plus specific institutions that have a significant public role, such as schools and hospitals. The Interim Rate Cap should be limited to the period ending December 31, 2001. The Interim Rate Cap must be structured so that any undercollection is eventually recovered from the same customers who benefit from the lower rates provided by the rate cap.
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