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Enron Mail |
Energy Costs Rocket, Handling Consumers Biggest Shock Yet
San Diego Union-Tribune, 12/12/00 Colombia's Medellin Utility Appeals Isagen Ruling, Paper Says Bloomberg, 12/12/00 Energy costs rocket, handing consumers biggest shock yet By Craig D. Rose UNION-TRIBUNE STAFF WRITER December 12, 2000 Power prices in California keep hitting new heights, with prices in the state's main electricity market rising today to nearly $900 per megawatt hour. The rise continues a stunning ascent from a price of about $50 per megawatt hour as recently as last spring. In retail terms, today's prices -- if sustained for a month -- would result in an average residential power bill of more than $450. San Diego ratepayers are temporarily shielded from such high bills by a rate-deferral plan in effect at least until 2002. The latest prices represent a more than tripling in posted prices on the California Power Exchange since Friday, when the operator of the state power grid removed a state-mandated price cap of $250. The latest escalation -- which comes despite improvements yesterday in state power supplies -- is deepening the sense of crisis among state officials, consumer advocates and utility companies. Nonetheless, a spokesman for Gov. Gray Davis, who met yesterday with top energy advisers in Los Angeles, said it was unlikely there would be action to address the crisis at the state level until after federal regulators release their plan for California. The Federal Energy Regulatory Commission is scheduled to issue a final order regarding California's market at its meeting tomorrow. But yesterday the commission made plans for a second meeting Friday to deal with the state's problems, and did not clarify at which session it would issue the California order. Davis and others in the state have been critical of FERC's refusal to halt what they describe as a devastating rise in power prices here or to order refunds for payments made by consumers over the past summer. The governor also has been severely critical of the California Independent System Operator's decision to lift the state price cap last week. The ISO manages most of the state's power supply. Privately, most at the state level remain skeptical that federal action will ease the crisis, saying it will be up to California to fix the problem. Last Friday, FERC quickly approved the ISO's plan to end the price cap. Increasingly, state officials and consumer activists are talking about state-owned power systems, utility takeovers and a likely initiative seeking to overturn deregulation. SDG&E and others also emphasize the need for a price cap for the Western region of the United States, in order to prevent suppliers from migrating to the highest prices and driving prices upward everywhere. The new highs in electricity prices came even as the ISO said the state's supplies had improved, with the start-up of production from a formerly closed nuclear power plant unit. The apparent contradiction between the increase in available power and the continued price escalation was blamed on a number of factors: High prices for natural gas -- which fuels power plants -- continued to drive up the cost of generating electricity. Cold conditions in the Midwest helped push natural gas prices to record highs yesterday. Allegations also persist that energy companies have manipulated the market. Consumers Union and other advocacy groups say deregulating electricity prices has proven to be a costly error for California consumers. At the same time, the controversial removal of price caps in California is allowing prices to rise to levels approaching those in other Western states. "We've now had three days of the Hebert experiment," said state Sen. Steve Peace, D-El Cajon. Peace was referring to Curt Hebert, a FERC commissioner who opposes price caps for wholesale electricity. Peace, who played a prime role in California's deregulation legislation, likened the run-up in electricity prices to the oil embargo of the 1970s and warned that it could devastate the economy. "Someone from (former Gov. Pete) Wilson's administration told me, 'Somebody in the energy business decided it's time for a depression,'?" said Peace, who has also been critical of FERC's failure to rein in prices. "This is not about electricity. It's about the economy." In a letter to FERC yesterday, Peace repeated earlier calls for a federal order returning the state to regulated power prices based on the cost of production. Market watchers said little could help the state over the next few days, except Mother Nature. "The prices will remain at these levels, unless you get a warming trend," said Alex Galatic of Strategic Energy, a Pittsburgh-based energy company with offices in Carlsbad. Market speculators appear to be betting against a break in price any time soon. For example, electricity is selling for $800 per megawatt hour in the Pacific Northwest for delivery in January, Galatic said. "I see no break in the pricing," agreed Arthur O'Donnell, editor of California Energy Markets,? a publication based in San Francisco. A spokesman for Enron Corp., the largest electricity trader in the United States, said the raising of prices in California had improved supplies available to the state. And he added that there was another positive aspect to the higher commodity prices. "You are starting to see some demand response," said Mark Palmer, the Enron spokesman, referring to cutbacks in power use as prices soar. "Some companies are shutting down because it makes more sense to sell their gas (rather than using it as fuel to continue their manufacturing operations)." That's not an option for the state's utility companies, which continue to report growing losses from buying electricity at higher costs than they can collect from their customers. They have covered the shortfall by borrowing money. Dow Jones Newswires reported that Pacific Gas & Electric was only "weeks" away from being unable to cover its power costs if prices continue at recent levels. A spokesman for the Bay Area utility's parent company declined to comment directly on the report. "It's up to the decision of creditors to make that call," said Greg Pruett, vice president of communications for PG&E. "We have already borrowed $2.6 billion to cover undercollections that have totaled $4.6 billion. "It can't continue forever." Colombia's Medellin Utility Appeals Isagen Ruling, Paper Says 12/12/0 9:14 (New York) Bogota, Dec. 12 (Bloomberg) -- Colombia's largest municipal utility, Empresas Publicas de Medellin, said it will appeal a high court decision barring it from buying a majority stake in state- run generator Isagen, the daily El Espectador reported. EPM general manager Ramiro Valencia said government plans to sell its 76 percent stake in Isagen could not go ahead until the appeal and other lawsuits filed by EPM are resolved, the report said. Colombia in September suspended the Isagen sale, which it hoped would raise $340 million, pending a Council of State ruling on an EPM suit filed alleging bias in the sales process. The Council of State, which oversees state agencies, ruled Friday that the energy regulator was in its rights when it ruled earlier this year against any single company taking a majority stake in Isagen to avoid market dominance. EPM is planning to purchase the government's 76 percent stake in Isagen together with Enron Corp. of the U.S. to avoid the anti- monopoly regulations. (12/12 ; P. 1B; to see El Espectador's Web site, type {ESDR <GO<}
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