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Enron Mail |
Grid Lock Our energy transport system is horrible. Just the way many
utilities like it. Forbes, 05/11/01 US Sen. Feinstein Urges Hearings On FERC 'Improprieties' Dow Jones Energy Service, 05/11/01 U.S. Physical Gas Cash Prices Fall; No Load Weekend Dow Jones Energy Service, 05/25/01 FOCUS Brazil real to remain pressured due to energy crisis/political concerns AFX News, 05/25/01 Vice Pres Cheney Sees Wood As New FERC Chairman - NYT Dow Jones Energy Service, 05/25/01 INDIA: Enron's woes make Indian power firms anxious. Reuters English News Service, 05/25/01 Enron Unit's Sales, Costs Rise With Power Prices, Paper Says Bloomberg, 05/25/01 India Enron Panel Lacks Authority to Solve Dispute, Expert Says Bloomberg, 05/25/01 Companies People Ideas Grid Lock Our energy transport system is horrible. Just the way many utilities like it. BY Daniel Fisher and Lynn Cook 06/11/2001 Forbes 080 Copyright 2001 Forbes Inc. Our energy transport system is balkanized and horribly inefficient. Unfortunately, many of the incumbent utilities want to keep it that way. The Bush energy plan hits hard on increasing production. That alone won't solve the nation's power crunch. "Supply is not the only issue," says Michelle Michot Soss, director of the Energy Institute at the University of Houston. "The issue is bottlenecks." Some of these bottlenecks are political. A lot of them are created by incumbent utilities that do not welcome competition. Florida, for example, whose demand for electricity is growing at about 3.7% a year, is a net importer of energy. It generates around 24% of its power in aging oil-fired plants that should be replaced with more efficient combined-cycle generators. These burn natural gas in a turbine and use the hot exhaust gases to create steam, which spins a second turbine; they spew out less particulate and consume about a third less energy. So why doesn't Florida get efficient power plants? First, the state has only one main gas pipeline, though others are working their way through the regulatory process. More vexing is a state law, zealously defended by Florida utilities, that bans outside competitors from building combined-cycle plants larger than 75 megawatts--enough to juice 75,000 households--on the dubious theory that they waste water. Duke Energy tried to challenge the law with a 500-megawatt plant in New Smyrna Beach. FPL Corp. (parent of Florida Power & Light) fought the plant all the way to the Florida Supreme Court and won. Florida's screwy power-plant law is just one example of the byzantine regulations that stymie efforts to make the nation's energy grid more efficient and prices more competitive. From laws that protect utilities against more efficient rivals to outdated state regulations that discourage the construction of transmission lines, these choke points either waste energy or make it impossible for energy to get where it should go. A series of state laws in the 1920s laid down the monopolies on grids. They were codified in the Public Utility Holding Company Act of 1935, a populist law that identified bigness with badness in the electricity business: To avoid federal scrutiny and regulation, most utilities decided not to operate outside their own state boundaries; rate setting fell to the states. But even as wholesale electricity markets have been deregulated, utilities can still bat away outsiders by reserving their own transmission lines for "native load." This allows them to keep an open lane on the energy highway, as it were, to rush electricity to certain customers when their demand suddenly spikes. In such areas as the Southeast, the owner of a transmission line has a pretty free hand in calculating what its native load is. So Southern Co., which owns utilities in Georgia and four neighboring states, can determine how much power to let into its territory. Southern Co. defends the rule, saying its primary job is ensuring customers get all the power they need. "The marketers would like to schedule another 10,000 megawatts of power to go across our lines tomorrow," says William Newman, a senior vice president. "It's not going to happen. The system wasn't designed for it." Enron disagrees. Utilization of its natural gas pipeline system increased 50% in the five years after the gas market was deregulated. Steven Kean, head of government regulations at the Houston-based giant, thinks similar gains are possible in electricity if companies like Southern are forced to hand over control of the grid to independent regional boards that will determine how to allocate power flows and where to build new lines. The utilities "don't want to accept the economically pure solution," he says. "Once utilities have been adequately compensated for their stranded costs, then it's time for them to shut up, sit in the corner and let the economists and lawyers work out the details." Lawyers and economists making decisions for us? That doesn't sound like deregulation. But there is a case to be made for separating control of power lines from control of other utility assets. Phillip G. Harris is chief executive of PJM (it stood for Pennsylvania-Jersey-Maryland), a regional power line organization. Since this independent system operator was formed in April 1997 and six local utilities ceded control over transmission lines, reliability has gone up and prices down, he says. Where Southern Co. will only add transmission capacity if it has a firm contract in hand, PJM can order lines to be built. Its member companies are spending $311 million over the next three years on new lines to increase the flow from power-rich to energy-poor areas. Last May temperatures hit the highest levels since 1930 at the same time as 15,000 megawatts of PJM's 59,000 megawatts were out of service for maintenance. As the peak load rose to 51,000 megawatts--7,000 more than was available within PJM--power streamed in over a dozen entry points. Prices topped out at $432 a megawatt hour. That's about four times what you are probably paying for residential service, but it stands in contrast to spikes in the thousands of dollars in California and the Midwest during similar crises. Unfortunately, what works inside PJM doesn't transfer to Los Angeles, much less to Manhattan. Different rules regarding electricity transactions and a shortage of transmission lines make it difficult to export electricity across the Hudson River. When Hydro-Quebec tried to build a power line across Long Island Sound in 1999, Connecticut nixed the idea. Ostensible reason: the possibility of harm to oyster beds. Real reason: Folks in New Haven asked, what's in it for us--and didn't see any clear benefit to them. There is, unfortunately, no mechanism for buying off losers in these deals, such as property owners near, but not under, the power line. So they hire lawyers and talk solemnly about oysters. California's bottleneck is on Path 15, a 500,000-volt transmission line that links the northern and southern halves of the state. Path 15 can't accommodate the flows of power needed when the weather is cool in San Francisco and hot in L.A. But the legal and financial chaos in California, with the state on the verge of taking over much of the transmission system, discourages investors from backing an increase in capacity. "If we put in good rules on how to operate transmission systems, you would see investment," says Lawrence Makovich, an analyst with Cambridge Energy Research Associates. "The problem is right now there is no such plan." Enron is trying to force the Federal Energy Regulatory Commission to take charge, so far to little avail. In a case pending before the U.S. Supreme Court, Enron accuses FERC of abdicating its responsibility to do for interstate trading of electricity what it did for trading of gas. But forcing FERC down that path will be difficult. Natural gas producers needed interstate pipelines to get to big markets in the North, which needed the gas. But incumbent (and politically connected) electric companies have no such incentive to stimulate a national market in electricity. "There's not a single incentive in the entire U.S. to relieve congestion," states Jeanine Hull, president of Strategic Energy Advisors and a former power-company lawyer. "Ask yourself this question: If you had a chance today to retain your monopoly or compete, which would you choose?" Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. US Sen. Feinstein Urges Hearings On FERC 'Improprieties' 05/25/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) WASHINGTON -(Dow Jones)- U.S. Sen. Dianne Feinstein, D-Calif., called Friday for Senate hearings to investigate "possible improprieties" involving the Federal Energy Regulatory Commission's relations with the industry it regulates. "Despite evidence of manipulation and price gouging in both the electricity and natural gas markets in California and the West, and a finding by FERC last November of 'unjust and unreasonable' (electricity) rates, the commission has failed to take the actions necessary to bring reliability and stability to the marketplace," Feinstein said in a letter to Sen. Joe Lieberman, D-Conn., seeking hearings by the Senate Governmental Affairs Committee. Feinstein cited a report in The New York Times Friday in which FERC Chairman Curt Hebert related a phone conversation with Ken Lay, chairman of Enron Corp. (ENE). Hebert alleged that Lay offered to bring his influence to bear with the Bush administration to maintain Hebert as chairman if the regulator would adopt policy positions favored by Enron. Hebert is quoted as saying he was "offended" by the conversation. Lay disputed Hebert's account. The Times article also quoted Vice President Dick Cheney as saying Texas utility regulator Pat Wood has "got to be the next chairman of the FERC" to address problems in electricity markets. Cheney's remark is slated for broadcast by the public television program "Frontline." "While Mr. Lay's account (of the conversation) differs, it is clear that the citizens of the United States, especially the people of California, who are suffering from FERC's failure to do its job, deserve an investigation and full public hearing into what happened," Feinstein said in the letter to Lieberman. "FERC is a $175 million-a-year agency charged with regulating the energy industry, and it would be unconscionable if any of the nation's electricity traders or generators were in a position to be able to determine who chairs or becomes a member of the commission," Feinstein wrote. "Since FERC has refused to fulfill its legally mandated function under the Federal Power Act to restore 'just and reasonable' electricity rates, we need to ask whether undue influence by the companies that FERC regulates has resulted in its failure to act," the letter said. Feinstein seeks a broad investigation into FERC, and not just an airing of the Lay-Hebert exchange, which Feinstein said she sees as an example of "a definite problem," the senator's spokesman, Howard Gantman, said. "There are very close relationships between FERC and the industry it regulates. Some of those relationships could be improper," Gantman said. Lieberman, who has requested that the General Accounting Office investigate FERC's response to the California electricity crisis, will become chairman of the Governmental Affairs Committee when Democrats assume the Senate majority in about two weeks. There was no immediate response from Lieberman's office regarding Feinstein's letter. -By Bryan Lee, Dow Jones Newswires, 202-862-6647, bryan.lee@dowjones.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. U.S. Physical Gas Cash Prices Fall; No Load Weekend 05/25/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) HOUSTON -(Dow Jones)- U.S. natural gas physical prices fell Friday ahead of a no-load holiday weekend, widening considerably the differential to the New York Mercantile Exchange futures board. Traders saw storage buying providing the only hint of demand. Also, several pipelines in Texas, along with El Paso's Tennessee Gas and PG&E Citygate, held system-wide operational flow orders on the high inventory resulting from storage. Those orders also sent prices downward, traders said. Demand remains slight with only hints of sustained hot weather sighted in the next two weeks,traders said. With few demand fundamentals in place, traders saw few utilities in the market. The Nymex June futures contract settled at $3.973/MMBtu, down 8.1 cents, the first time the front contract has fallen below $4/MMBtu in nearly 10 months. Traders pointed to 17,000 option puts at $4/MMBtu supporting the June contract. Options expired Friday; the June contract expires Tuesday after the Memorial Day weekend. Traders expect a $3.80-$4/MMBtu range on Tuesday for expiration. Also, Enron Online will keep its trading boards open for the holiday. Prices for the June contract are in the same range as they were a year ago, when driving heat and competition for gas during May pushed prices upward. At the benchmark Henry Hub in south Louisiana, prices were in a $3.76-$3.90/MMBtu range, down 25 cents-35 cents. Deals at Transcontinental Gas Pipe Line Station No. 65 were done at $3.82-$3.94/MMBtu, down 25 cents-32 cents. At the Arizona-California border, El Paso's prices fell $1.40-$2.55/MMBtu to a $9.80-$11.50 closing range. Western electricity prices weakened again Friday for the holiday, and traders said pipelines into California were showing high inventories. At the PG&E Citygate, prices fell $4.25-$5.50 to a $3.90-$4.40/MMBtu closing range on the reported operational flow order. Buyers paid $3.74-$3.90/MMBtu at the Katy hub in East Texas, down 23 cents-32 cents. At Waha in West Texas, buyers paid $3.59-$3.75, down 30 cents-39 cents. -By John Edmiston, Dow Jones Newswires,713-547-9209; john.edmiston@dowjones.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. FOCUS Brazil real to remain pressured due to energy crisis/political concerns 05/25/2001 AFX News © 2001 by AFP-Extel News Ltd SAO PAULO (AFX) - The real is likely to remain under pressure in the short-to-medium term due to concerns about the impact of the energy shortage crisis on the economy and ongoing political worries, analysts said. They said the energy shortage problems are scaring away direct foreign investment, while political concerns ahead of the presidential elections next year are expected to come much more to the forefront once the Argentine debt swap operation is completed at the start of next month. The real was at 2.3480 against the dollar in afternoon trade, down about 20 pct from the end of last year. Analysts said the weakness of the real combined with a generally-accepted slowdown in GDP growth as a result of the energy crisis has complicated the task of the central bank's monetary policy committee Copom. The Copom raised its base interbank Selic rate to 16.75 pct from 16.25 pct earlier this week, in what was regarded by many analysts as a preventive move against the inflationary impact of the real's depreciation. In a recent report, Banco Santander Central Hispano SA said it has revised its forecast for Brazil's 2001 GDP growth to 2.2 pct from 4.1 pct previously due to the possible impact of the government's energy rationing plan. BSCH said it is also cutting its 2002 GDP growth estimate to 3.0 pct from 4.5 pct previously. BSCH also revised its forecast for the real's level against the dollar to 2.30 by end-2001 from 2.13. "Argentina's problems and their effects on the flow of capital to Brazil... added to energy rationing and stronger perceptions of political risk hinder a significant appreciation of the real, although we consider a possible gradual solution to the Argentine crisis," BSCH said. Analysts said central bank intervention yesterday and today in the foreign currency market in an effort to stem the real's depreciation is clear evidence of the central bank's concerns about the local unit. The central bank today sold 2.0 mln dollar linked-bonds maturing on March 14, 2002 after selling 1.0 mln dollar-linked bonds yesterday. "We don't know how far the real will go. Everything points to a situation in which the dollar will move to the 2.45 level against the real in the short term and never return to the 2.0 level it was at at the start of the year," Brazilian Institute of the Economy (IBRE) director Renier Garcma said. Direct foreign investment has slowed down this year as a result of the concerns surrounding Brazil. The government has already revised its estimate of direct foreign investment in Brazil this year to 19 bln usd from 24 bln previously. Direct foreign investment in the four months to April was 6.6 bln usd, about half the levels posted a year earlier. Enron Corp recently suspend investments of 600 mln usd in the Brazilian energy sector, citing regulatory concerns, while the government decided to postpone indefinitely the privatisation of Cia Energetica earlier this month due to the energy crisis. The minimum price for the sale of Cesp Parana was set at 1.7 bln reals, with a number of foreign companies lined up to bid. "Investors are shying away from carrying out operations in the country. The energy crisis has had a disastrous impact on Brazil's image; the country risk has risen and companies are opting for saver markets," IBRE's Garcma said. Analysts said the energy crisis has strongly affected the image of President Fernando Henrique Cardoso and has therefore strengthened the opposition's position ahead of next year's presidential elections. They said corruption allegations involving former and current senior officials in the government and the alleged breach of vote secrecy rules at the Senate resulting in proceedings for the dismissal of former Senate chairman Antonio Carlos Magalhaes and senator Jose Roberto Arruda have complicated the political scenario. Yesterday, Senator Arruda resigned from the Senate, while a local TV news channel reported Magalhaes will resign next week and attack Cardoso. "The government seems to have lost direction," one analyst said. Earlier this month, Congress rejected a petition presented by the left-wing Workers Party (PT) to set up a joint Congress-Senate commission to investigate corruption in the private and public sectors after 20 parliamentarians belonging to parties within the ruling coalition withdrew their support for the motion. Opposition deputy Aloizio Mercadante at the time said the PT was preparing legal action against the government and the deputies who withdrew their support for the petition, alleging they were offered financial incentives to do so. Analysts said fears remain that the opposition will attempt to revive the corruption commission issue, further complicating the governability of the country in an already delicate moment. bl/cdo/lbc/as For more information and to contact AFX: www.afxnews.com and www.afxpress.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Vice Pres Cheney Sees Wood As New FERC Chairman - NYT 05/25/2001 Dow Jones Energy Service (Copyright © 2001, Dow Jones & Company, Inc.) WASHINGTON -(Dow Jones)- Vice President Richard Cheney expects Texas Public Utilities Commission Chairman Pat Wood to become chairman of the Federal Energy Regulatory Commission, according to Friday's New York Times. In an interview for an upcoming episode of the PBS series Frontline, Cheney says, "Pat Wood's got to be the new chairman of the FERC, and he'll have to address" various problems in electricity markets, according to the Times article, part of a joint effort with the Frontline program. The article says current Republican FERC Chairman Curtis Hebert received a call from Enron Corp. (ENE) Chairman Kenneth Lay this year prodding him to back a national push for retail electricity competition and faster access to the power transmission grid in exchange for Enron's support of Hebert in his new job. It quotes Hebert as saying, "I was offended." Lay, one of President George W. Bush's largest campaign contributors, provided the White House with a list of preferred candidates for FERC posts and had access to the White House energy policy task force chaired by Cheney, the article says. Wednesday the Senate Energy and Natural Resources Committee approved Wood and Nora Brownwell of the Pennsylvania Public Utilities Commission, Bush's nominees to fill two empty seats on FERC's five-member board. The full Senate has yet to approve them. It would be up to the president whether to replace Hebert as chairman. In the Times article, Hebert said no one has told him he would be replaced. -By Campion Walsh, Dow Jones Newswires; 1-202-862-9291; campion.walsh@dowjones.com Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. INDIA: Enron's woes make Indian power firms anxious. By Himangshu Watts 05/25/2001 Reuters English News Service (C) Reuters Limited 2001. NEW DELHI, May 25 (Reuters) - India's private power producers demanded on Friday that the federal government intervene in Enron Corp's bitter row with a local utility and state clearly if it wants the U.S. energy giant to stay in India or quit. "The government needs to decide whether we want Enron or not. In case they don't want Enron, they should spell out the reasons for it," Harry Dhaul, director-general of the Independent Power Producers' Association of India, told Reuters. But Federal Power Secretary A.K. Basu said Enron and the Maharashtra State Electricity Board (MSEB) had to resolve their differences over the $2.9 billion project themselves. "Basically the Maharashtra government and Dabhol have to sort it out," Basu told reporters after a meeting with Wade Cline, the chief executive officer of Enron India. Basu stuck to the federal government's stand that it would help implement any proposal emerging from negotiations between the Dabhol Power Co, 65-percent owned by Enron, and the MSEB. Dhaul said the fate of Dabhol, India's largest direct foreign investment and biggest power project, would determine the future of domestic and foreign private investment in power and other infrastructure projects. "It is an important issue. It is a benchmark for all future infrastructure investments of $1 billion plus." On Thursday, Enron said the MSEB cancelled a disputed power-buying contract just five days after the Houston-based energy firm moved to pull out of the project. WANT PRO-ACTIVE APPROACH Dhaul said the federal government should intervene in the dispute between Enron and the utility. "We want a pro-active approach in supporting independent power producers." Basu said the government had advised Enron to thrash out the matter with the negotiation committee set up by the Maharashtra government. The committee is due to meet on May 29. Cline refused to answer questions from reporters and only said the company would not renegotiate the power-buying contract on the basis of a committee set up by the state government. "We won't renegotiate on the basis of the Godbole Committee report," he said. The committee, chaired by a former bureaucrat Madhavrao Godbole, has suggested that the tariff be re-negotiated to make it cheaper and to remove the dollar linkage which resulted in a steep increase each time the rupee fell against the dollar. Dabhol has come under fire because of the relatively high cost of its power. Critics object to it charging 7.1 rupees per kilowatt hour versus 1.5 rupees charged by other suppliers. Dabhol Power Co is building India's largest power plant with a total capacity of 2,184 MW. The first phase of the $2.9-billion project with a capacity of 740 MW began operating in May 1999. The second phase that will add 1,444 MW of capacity, is expected to be completed this year. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved. Enron Unit's Sales, Costs Rise With Power Prices, Paper Says 2001-05-25 13:00 (New York) Portland, Oregon, May 25 (Bloomberg) -- Enron Corp.'s Portland General Electric reported first-quarter earnings rose 10 percent as high electricity prices pushed up both sales and costs for the Oregon power producer, the Oregonian reported. The company earned $43 million, the paper said. Revenue from wholesale power sales was $480 million, three times the year- earlier period, even as costs to buy electricity almost doubled. PGE's power plants produce less than half the electricity needed to supply its 728,000 Oregon customers, forcing the company to buy power on the same markets into which it sells, the paper said. Dry weather is cutting hydropower resources, and easing wholesale prices could make it more difficult for the company to profit from power sales outside the state, the paper said. Edison International's Southern California Edison, which has filed for bankruptcy, and two California agencies, one of which is now defunct, owe the company $128 million, the paper said. The company is pursuing collection, the paper said, citing Chief Financial Officer James Piro. India Enron Panel Lacks Authority to Solve Dispute, Expert Says 2001-05-25 07:16 (New York) India Enron Panel Lacks Authority to Solve Dispute, Expert Says Mumbai, May 25 (Bloomberg) -- Indian negotiators lack the authority to solve a dispute that has shut down Enron Corp.'s $3 billion power plant, India's single biggest foreign investment, said a former member of the negotiating committee. The negotiators will meet Enron officials on Tuesday next week, though any proposals made will not be binding on either Dabhol Power Co., 65 percent owned by Enron, and the Maharashtra State Electricity Board, the official said. Maharashtra, Dabhol's sole customer, has refused to pay some of its power bills. ``Where is the guarantee Enron and the government will accept what the committee recommends,'' said R.K. Pachauri, director- general at the Tata Energy Research Institute, a research organization. Pachauri said he quit the committee because it was being asked to renegotiate the project, when it was set up to solve the payment dispute. Maharashtra yesterday served Dabhol notice canceling the power purchase contract, six days after Dabhol gave the board notice it was set to pull out of the project in six months. The board has refused to pay Dabhol 3 billion rupees for power supplied in December and January, saying the bills should reflect a 4 billion rupee penalty it imposed on the company Jan. 28 for failing to supply power at full capacity. Meeting Other India officials said the two parties can't afford not to negotiate as there is too much at stake. Mahrashtra and Dabhol serving each other notices is ``simply legal maneuvering,'' said Kirit Parikh, an economist on the prime minister's economic advisory council. ``It won't affect the process of finding a solution because ``the ground reality is neither Enron nor Maharashtra can afford not to find a compromise'' to the dispute, Parikh said. The government needs a solution as it could be left footing the bill. India's federal and state governments, which have guaranteed the board's payments for power and some of the loans to help fund the project, may have to pay Dabhol more than 170 billion rupees ($3.6 billion) if it terminates the 2,184 megawatt power project. ``We are going back to Maharashtra tomorrow to work on the problem.'' Dabhol managing director Wade Cline said. Cline was in New Delhi to meet A. K. Basu, secretary to the ministry of power.
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