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Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Steven J Kean X-To: Ray Alvarez X-cc: X-bcc: X-Folder: \Steven_Kean_June2001_1\Notes Folders\All documents X-Origin: KEAN-S X-FileName: skean.nsf I left Hartsoe a voicemail on this issue too. I'm not sure we can convince Massey and others not to cap the secondary market for example, but they need to understand the facts before they run off attacking the pipelines: gas utilities in California opposed interstate capacity expansions into the state. gas utilities had just as much opportunity as anyone else to participate in open seasons for capacity. gas utilities fialed to fill storage. gas utilites have failed to build adequate take away capacity at the Cal border I suspect Socal gas is using its interstate capacity and its in state storage to line its own pockets. In short, if FERC wants to get to the bottom of the problem they need to look in California, not outside. Ray Alvarez 05/04/2001 09:02 AM To: Steven J Kean/NA/Enron@Enron cc: Subject: House and Senate Energy Hearings Today on California/Western Electric Situation Steve, I've been thinking about the intense preoccupation with gas prices lately and decided to pass this info along because I think it's a red flag. My concern is that there might not only be a backlash affecting our interstate pipelines, but that our gas marketing efforts might be adversely affected. It might well be found that the holders of the firm capacity (i.e. marketers?), and not the pipes themselves, are at "fault" for the large basis differentials between the basins and the CA delivery points. Whoever is blamed might not really matter. My gut feeling is that the other shoe is about to drop, with calls for price caps on gas commodity prices into the West. This, of course, could affect years of effort on the gas marketing side in establishing competitive markets. Pipeline open access is of no avail if there is government intervention in the gas markets. Commissioner Massey, Senator Feinstein and other Western Senators were saying some very concerning things about gas prices, the impacts in their states and that something needed to be done. FERC responded with an announcement of their technical conference on interstate pipeline capacity and intrastate take away capacity (which, by the way, doesn't appear to address storage). Everyone wants an explanation as to why the basis differential is much higher than in other states, since they thought it should only consist of transport costs. Ray ---------------------- Forwarded by Ray Alvarez/NA/Enron on 05/04/2001 09:18 AM --------------------------- Ray Alvarez 05/03/2001 06:54 PM To: Steve Walton/HOU/ECT@ECT, Susan J Mara/NA/Enron@ENRON, Alan Comnes/PDX/ECT@ECT, Leslie Lawner/NA/Enron@Enron, Rebecca W Cantrell/HOU/ECT@ECT, Donna Fulton/Corp/Enron@ENRON, Jeff Dasovich/NA/Enron@Enron, Christi L Nicolay/HOU/ECT@ECT, James D Steffes/NA/Enron@Enron, jalexander@gibbs-bruns.com, Phillip K Allen/HOU/ECT@ECT, Tim Belden/HOU/ECT@ECT, Christopher F Calger/PDX/ECT@ECT cc: Subject: House and Senate Energy Hearings Today on California/Western Electric Situation I was at the Senate hearing today on FERC's market Monitoring and Mitigation order, and I would add only a few additional and interesting regulatory-related details to John's fine summary: The hearing was contentious- among the Senators themselves, among the FERC Commissioners themselves, and the interchanges between them. Gas prices were controversial. Commissioner Massey kicked off the discussion on this issue citing a transport basis differential into CA of $10, when it was less than a dollar in other areas. He then noted that the high gas cost would adversely affect the power price under the auction, and that FERC must act regarding the high transport differentials- "We will never get a handle on electric prices unless we get a handle on gas prices". That opened the floodgates of discussion, culminating with the announcement by Commissioner Breathitt of FERC's technical conference (notice of which issued today) on the topic of current and projected interstate pipeline capacity, and adequacy of infrastructure within CA. She said that this would shed light on basis differentials and gas prices. Freudian slip? Chairman Hebert was heard to say by various attendees that price mitigation in the WSCC would apply at all times (in contrast to the order, which proposes mitigation only during times when reserves reach/fall below 7%). Whether he mis-spoke, or not, remains to be seen. Regarding the issue of how often mitigation would be invoked in CA (i.e., Stages 1, 2 or 3): Hebert opined "Most of the time". Breathitt said "Likely 80-85% of the time". Massey was unconvinced. Several Senators railed at the Commission for "not doing its job" and threatened that if the Commission did not act, Congress would act. If you have any questions or need additional detail, please feel free to call. Ray ---------------------- Forwarded by Ray Alvarez/NA/Enron on 05/03/2001 06:09 PM --------------------------- John Shelk 05/03/2001 05:49 PM To: Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, James D Steffes/NA/Enron@Enron, Mark Palmer/Corp/Enron@ENRON, Linda Robertson/NA/Enron@ENRON cc: Tom Briggs/NA/Enron@Enron, Ray Alvarez/NA/Enron@ENRON, Joe Hartsoe/Corp/Enron@ENRON, Phillip K Allen/HOU/ECT@ECT, Tim Belden/HOU/ECT@ECT, Chris Long/Corp/Enron@ENRON Subject: House and Senate Energy Hearings Today on California/Western Electric Situation I attended both the House and Senate energy committee hearings today. House hearing was in the Barton Subcommittee (Energy & Air Quality). Senate hearing was on last week's FERC order on a "soft price cap" and related issues. The House witnesses were dominated by California officials: Cal Energy Commission, Cal Air Resources Board, Chairman of Gov Davis Generation Implementation Task Force. In addition, there were witnesses from the Western Area Power Admin and Bonneville PA. The Senate witnesses were the three FERC commissioners. HIghlights Chairman Barton said it is still his intention to try to mark up the Barton bill, H.R. 1647 next week (many on and off the Subcommittee doubt this will happen; we are gathering political intelligence on those prospects and will report back with more information and conclusions once that is done); Chairman Barton also said he may go to California next week. There was considerable emphasis at both hearings about the alleged role that higher natural gas prices into California play in the electric power rate increases; several witnesses focused on difference in alleged transportation costs for similar differences between California and non-CA states; FERC at the Senate hearing said that today the commission announced a staff technical conference for later this month on all aspects of the natural gas market as it relates to California; a House member from Southern Illinois coal country attacked California for using only natural gas in its new power plants. The House witnesses, primarily BPA but also the California witnesses, attacked the negawatt provision in sec. 102 of the Barton bill; the criticism was that BPA would be forced to purchase power on the open market at a high price since it is short, sell it to the DSIs under contract; let the DSI sell it at market rates and capture the difference; BPA witness said that thus sec. 102 would make it difficult if not impossible to implement their strategy to avoid as much as a 200 percent rate increase on 10/1/01; BPA testimony will make it tough for Members of Congress from that service region to support sec. 102. Both hearings also touched on how difficult it would be to actually devise a price cap; at the House hearing, none of those advocating a price cap among the witnesses could answer excellent questions about exactly how this could be done; the witnesses just said "cost plus a reasonable profit" and said leave the details to FERC; at afternoon Senate hearing, Chairman Hebert had the staff bring in 15 boxes from one FP&L case to show how a price cap would take too long to bring any relief to California this summer; he said last week's soft price cap is much better. Also on the price cap, Rep. Walden (R-OR) got the Cal Energy Comm chair to admit that if the price caps had been in place earlier, California would NOT have taken the conservation and new generation steps that it has taken recently. The interplay among the FERC commissioners was much more contentious than it was a House hearing on Tuesday, although it could have been worse; when Senate Chairman Murkowski (R-AK) said that "help is on the way" in the form of the nominees for the two vacancies, Sen. Dorgan (D-ND) made a comment that suggested that the confirmation process will not be smooth; the same concern came from the interplay among the Senators, which was also somewhat contentious at times. Please advise if you have any questions or would like further details.
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