English-language Media Coverage of Enron-Brattle Paper/Conference

----- Forwarded by Mika Watanabe/AP/Enron on 05/16/2001 10:34 AM -----

Mika Watanabe
05/16/2001 10:29 AM

To: Enron Japan, Steven J Kean/HOU/EES@EES
cc: Jackie Gentle/LON/ECT@ECT, Eva Hoeffelman/LON/ECT@ECT
Subject: English-language Media Coverage of Enron-Brattle Paper/Conference

Enron urges more electric power reform

05/16/2001
The Yomiuri Shimbun / Daily Yomiuri

Copyright (C) 2001 The Yomiuri Shimbun; Source: World Reporter (TM) - Asia
Intelligence Wire
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Enron Japan Corp., a Japanese subsidiary of United States energy giant Enron
Corp., published a reform proposal for the Japanese electricity market
Tuesday.
The proposal urged the government to implement the suggested reforms over a
two-year period beginning at the start of 2002, following deregulation of the
Japanese retail electric power market, which began in March this year.
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Japan has allowed nonutility companies to supply power to industrial and
commercial users since March.
Enron is seeking to enter the Japanese energy market on a large-scale basis
following the deregulation efforts.
In the reform proposal, Enron Japan argued that the present liberalization of
the electricity market was insufficient by presenting original data showing
that Japanese electricity charges were 46 percent higher than average when
compared with those of other member countries in the Organization of Economic
Cooperation and Development.
Enron's reform proposal includes 10 measures to promote competitiveness in
the Japanese market, such as a separation of conventional power companies'
supply operations from the generation, transmission and distribution of
electricity.
The proposal also contends that conventional power companies are monopolies
that should be prohibited from constructing new electricity-generating
facilities within the areas they currently supply. It also urges the
privatizing of operations for the development of power sources. These measure
are meant to make it easier for those newly entering the business to gain a
competitive foothold.
In March Enron applied for approval from Aomori Prefecture to build a large
thermal power plant in Rokkashomura.
Copyright 2001 The Daily Yomiuri

Enron Urges Reforms In Japan Electricity Market-Nikkei

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05/15/2001
Dow Jones International News

(Copyright © 2001, Dow Jones & Company, Inc.)
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TOKYO (Nikkei)--Asserting that cuts in electricity prices will help Japanese
companies save as much as Y4 trillion, major U.S. energy firm Enron Corp.
(ENE) on Tuesday urged Japanese power firms to revamp the electricity market
by separating operations such as power generation, transmission and
distribution, The Nihon Keizai Shimbun reported.
Enron's 10-point proposal also calls for the construction of more power
plants and full-scale deregulation of retail electricity, including sales to
households. If such measures are carried out and electricity prices fall to
match the levels of other industrialized nations, Japan's industrial sector
could trim its costs by Y4 trillion, Enron said.
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At a seminar on power industry deregulation hosted by Enron, the company
asserted that Japan's deregulation in such areas as wholesale electricity
auctions in 1996 and bulk retail sales last year has not brought significant
benefits to end-users.
New suppliers entering the market only account for a combined 0.4% of the
entire electricity sector, Enron said, criticizing the fact that power plant
facilities are mainly concentrated among electric power companies.
Regarding prices, an official representing operators of power generation
facilities asserted that "industrial-use electricity prices in Japan are
stuck at a high level at around Y13 per kilowatt, compared with Y5 in the
U.S., Y3 in Canada, Y9 in Germany and Y4-Y8 in Southeast Asia."
In fact, department store operator Takashimaya Co. (8233 or J.TKA), which
last November switched to new market entrants for part of its electricity
supply, was able to cut costs by Y450 million in the first year, said a
company official.
Enron hopes to generate competition by urging Japanese electric utilities to
spin off different operations, analysts say. If the number of power
generation facility operators increases, this will help bolster Japan's
electricity trading market, an area in which Enron has a strong business
interest.
Splitting electricity operations into generation, transmission and
distribution is expected to open the electric utility network to new
entrants. This will boost transparency in the fees that electric power
companies charge for transmitting power on behalf of the operators of power
generation facilities, Enron says.
Citing the power shortage in California, however, Japan's electricity sector
has strongly opposed such spin-offs, stating that generation and distribution
must be part of a single continuum to ensure a stable supply.

Japan could cut 4 tril. yen a year in energy costs - Enron.

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05/15/2001
Kyodo News

Copyright Kyodo News International Inc. 2001
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Japanese industries could save 4 trillion yen a year in energy costs if
electricity charges were lowered to European and U.S. levels, a senior
executive of U.S. energy firm Enron Corp. said Tuesday.
At a business gathering in Tokyo, Steven Kean, an executive vice president of
Enron, said electricity charges are still rising in Japan despite progress in
cost reductions in Europe and the U.S.
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Japan needs to remove regulations on power transmission lines and let users
choose suppliers freely, he said.
Establishing an independent supervising body for the industry and mapping out
transparent rules for information disclosure are also necessary, he said.
Enron is seeking to enter the Japanese energy market on a full-fledged basis
following Japan's deregulation in March of its retail electric power market.
In March, it applied for approval from Aomori Prefecture, northern Japan, for
a plan to build a large thermal power plant in the village of Rokkasho.

JAPAN: Enron says high power rates costing Japan.

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05/15/2001
Reuters English News Service

(C) Reuters Limited 2001.
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TOKYO, May 15 (Reuters) - A senior executive of U.S. energy giant Enron Corp
said on Tuesday that Japan could save an estimated four trillion yen ($32.45
billion) in annual costs if electricity rates were cut to the average of
members of the Organisation for Economic Cooperation and Development (OECD).
"If you were to pare Japanese industrial electric rates to the OECD
average...savings to all...customers would be about four trillion yen per
year," Enron Corp Vice President Steven Kean told a seminar in Tokyo.
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Speaking at a seminar on electric power deregulation, Kean said that
indigenous factors such as steep land prices and a lack of natural energy
resources were often blamed for Japan's high electricity rates.
But he said these factors were not sufficient to explain Japan's high
electricity rates.
A report commissioned by Enron Japan Corp showed that in 1998 Japan's
electricity rates for industrial users were 16.81 yen per kilowatt hour (kWh)
compared to a second highest rate of 12.44 yen in Italy.
Japan's business sector has expressed concern at the nation's high
electricity rates, saying that it blunts their competitive edge on the
international market.
Kean also drew parallels between Japan, in the midst of deregulation, and
California which has been suffering from a power shortage since deregulating
its market in 1998.
These included the length of time that authorities in Japan took to issue
permits to allow the construction of new power plants, he said.
"The regulatory structure in Japan is very strict...just like in California,"
Kean said.
North America's biggest buyer and seller of electricity, Enron gained its
first foothold in Japan in 1999 when it established affiliate E Power Corp.
In April of last year, it set up subsidiary Enron Japan Corp.
Kean urged Japan to step up measures to open up its power market, a process
he said held many benefits.
Japan is in the process of deregulating its power market. Since March last
year, large-lot consumers have been free to chose their suppliers. The
measure liberalised an estimated 30 percent of the power market and ended
Japan's 10 power utilities regional monopoly.
However, industry watchers note that there have been very few new entrants
and that further deregulation measures must be taken for rates to fall. The
Japanese government is due to review the process in 2003.

Japan Must Speed Up Pwr Sector Dereg To Lower Rates-Indus

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05/15/2001
Dow Jones Energy Service

(Copyright © 2001, Dow Jones & Company, Inc.)
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TOKYO -(Dow Jones)- Japan should accelerate the ongoing electric power sector
deregulation to fully liberalize the retail market, in order to bring down
the country's high power rates while ensuring stable power supply, experts
said at an industry seminar Tuesday.
The pressure is mounting for Japan's 10 power utilities, which have long
enjoyed regional monopolies until a year ago, to become cost- effective and
performance-conscious after the government partially liberalized the retail
power market in March 2000.
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However, the current scheme has so far failed to lure a large number of
potential entrants because of the high transmission fees they must pay to
conventional power companies.
"What happened in overseas (power industries) suggest that the liberalization
in Japan wouldn't only lower power rates but would also contribute to stable
power supply significantly," said Tatsuo Hatta, professor of economics at the
University of Tokyo.
Compared with the U.S., Japanese electricity charges are typically twice as
much for households and three times higher for industrial users.
"There is a large discrepancy (in rates), and that is why we should hurriedly
implement the liberalization," Hatta said.
He said Japan's steep seasonal peak-load curve - one of the reasons the power
companies cite as the cause of high power rates in Japan - can be altered
once the prices are liberalized. "If power rates are set higher during those
peak hours following the liberalization, users would refrain from using
electricity."
Steven Kean, executive vice president of the U.S. energy major, Enron Corp.
(ENE), told the same seminar that Japan's power costs remain on the upward
trend despite cost reductions in Europe and the U.S.
He said Japan could achieve a cost-saving of Y4 trillion a year if its power
prices fall to levels in Organization for Economic Cooperation and
Development countries following the liberalization.
Hatta and Kean were speaking at the seminar called "Reassessing Power
Deregulation," which was co-sponsored by the Houston-based Enron.

Hatta of the University of Tokyo said "it's very wise" that Japan has begun
the deregulation with the "bilateral supply, or trade" system under which
suppliers and users clinch deals directly.

Under the current reforms, the sector for high-volume, large-lot industrial
and commercial users - which represents only 30% of the Y15 trillion market -
is opened to free competition. The government is to review the partial
deregulation by 2003 for further deregulation.

Japan should then introduce spot electricity trading such as futures and
derivatives to alleviate risks of complicated price volatility for power
providers, Hatta said.

Hatta and other experts attending the seminar said further deregulation
should destroy the systems that have supported the country's high power rates
- regional monopolies and the fair rate return method, under which all costs
are levied on prices.

"There is absolutely no need to set the same (power) prices" nationwide,
Hatta said. Power companies should make the opaque transmission fees
transparent and set them accordingly with regional demand, he said.

Yoshinori Omuro, vice president of Takashimaya Co.'s (J.TKA or 8233)
management department, acknowledged the slow progress of the deregulation.

Takashimaya, a major department store operator, has shifted to Diamond Power
Corp., a wholly-owned subsidiary of Mitsubishi Corp. (J.MIB or 8058) as its
power supplier at two of its 18 stores, with "strong back-up" from the
Ministry of Economy, Trade and Industry.

"Despite the deregulation, the situation isn't where we can negotiate with
power utilities to reduce (electricity costs). We have no choice but select
independent power providers," Omuro said.

-By Maki Aoto, Dow Jones Newswires; 813-5255-2929; maki.aoto@dowjones.com