ALERT: As discussed yesterday, Davis publicly demands nearly $9

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At the IEP meeting yesterday, we heard that the Governor did some polling and
focus groups a few weeks ago that found very good response if he goes after
the refund issue. So, here we go.

Sue Mara
Enron Corp.
Tel: (415) 782-7802
Fax:(415) 782-7854
----- Forwarded by Susan J Mara/NA/Enron on 06/20/2001 12:02 PM -----

"McMorrow, Thomas" <TMcMorrow@manatt.com<
06/20/2001 11:34 AM

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Subject: ALERT: As discussed yesterday, Davis publicly demands nearly $9
billion for electricity overcharges...

WASHINGTON (AP) California Gov. Gray Davis demanded that power
generators refund nearly $9 billion in electricity overcharges and
complained that federal regulators have ``looked the other way
while energy companies bilked our state.''
Davis told a Senate hearing Wednesday that the decision by the
Federal Energy Regulatory Commission to curtail price spikes in
California and 10 other Western states was a step forward.
``But its actions do nothing about the overcharges'' over the
past year, he said.
The governor, a Democrat, has been criticized by Republicans,
who charge he has allowed the California power crisis to get out of
hand.
Davis defended his actions, saying the state has stepped up
approval for new power plants and strengthened conservation
programs. He also said the state has little control over price
gouging by out-of-state power generators.
``The governor once said he could solve California's problems in
15 minutes. ... But it appears that California has continued to try
and hide the true cost of power by having the state pay for it
instead of the utilities,'' putting California taxpayers in
jeopardy, said Sen. Frank Murkowski, R-Alaska.
Murkowski said many of the alleged overcharges are by public
power entities not under FERC jurisdiction
Sen. Joe Lieberman, D-Conn., chairman of the Governmental
Affairs Committee, said the FERC, which regulates wholesale
electricity sales, has been slow to respond and ``surprisingly
reluctant'' to assure that electricity prices are just and
reasonable, as required by the 1934 Federal Power Act.
The agency's response to the Western power problem ``raises
serious questions about whether (FERC) has or will oversee the
newly deregulated energy markets'' not only in the West but across
the rest of the country.
The federal agency, whose commissioners were to testify later in
the day, imposed limited, market-based price caps on Monday in
California and 10 other Western states from Washington to Arizona.
The agency also ordered the parties to attend a conference next
week to try to work out agreements on overcharges and other issues.
Months ago, the FERC singled out $124 million in alleged
overcharges by power generators. The power companies have since
challenged the agency's findings and the matter remains in dispute.
``To date not a single penny in refunds has been returned to
California,'' complained Davis. He said that between May 2000 and
the beginning of this month power generators are believed to have
overcharged California $8.9 billion.
``They must be required to give us back our money,'' said Davis.
``It is unconscionable that FERC looked the other way while energy
companies bilked our state for up to $9 billion.''
The state spent $7 billion for electricity in 1999 and $27
billion in 2000 and is projected to pay nearly $50 billion this
year, said Davis.
``Power generators have been able to exert extreme power over
our energy market,'' he said.
Davis rejected Republican criticism that the state is not
addressing the problem. He said newly approved power plants will
provide 20,000 additional megawatts of electricity by 2003,
including 4,000 megawatts by the end of this summer.
``Everything that can be done to bring reliable, affordable
energy to California is being done ... except wholesale price
relief,'' he said.
``This administration has minimized this crisis (for) more
months,'' said Sen. Patty Murray, D-Wash., alluding to President
Bush's repeated refusal to urge the FERC to mitigate electricity
prices. Bush has strongly opposed price controls, although he
indicated support for FERC's limited price mitigation effort this
week.
Murray said the government should issue a disaster declaration
so that businesses can get low-income loans, and require that FERC
press its investigation into price gouging and demand refunds not
only in California but in the Pacific Northwest, where electricity
prices have also skyrocketed.
Republicans continued their opposition to more stringent price
caps based on the cost of generation at individual power plants.
``Having a federal agency try to determine what is a just and
reasonable price is laughable,'' said Sen. Fred Thompson of
Tennessee, the committee's ranking Republican. Hard price caps
``don't work when supply is the problem. ... They make a bad
situation worse,'' he said.
After FERC issued its limited price control order this week,
Senate Democrats on Tuesday said they would drop legislation to
require more stringent cost-based price caps on Western electricity
sales.
Democrats in the House, however, said they would continue to
pursue a bill requiring the FERC to take more aggressive action.