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Enron Mail |
Cc: nailia.dindarova@enron.com
Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: nailia.dindarova@enron.com X-From: Peter Styles X-To: Steven J Kean, Maureen McVicker, Mark Palmer, Richard Shapiro, James D Steffes X-cc: Nailia Dindarova X-bcc: X-Folder: \Steven_Kean_June2001_4\Notes Folders\Discussion threads X-Origin: KEAN-S X-FileName: skean.nsf Not a bad wire story - relevant for our conference call later today. Reuters in London called me at breakfast yesterday, then Mark gave them some on the record comments later. See quote. I had pointed them at lessons to be learnt in relation to Spain and Netherlands, and you will see there are a couple of mentions of those countries (though only in context of interconnection capacity) towards the end of the piece. I think other relevant lessons would be related to perils of allowing retail and wholesale (esp. pools for residual capacity) markets to be divorced in regulatory terms one from the other. Difference from California, however, is that the divorce in Spain and Netherlands works currently to detriment of new entrants and to the benefit of vertically integrated incumbents. ---------------------- Forwarded by Peter Styles/LON/ECT on 01/12/2001 10:59 AM --------------------------- Iona Maclean 01/12/2001 08:24 AM To: Jackie Gentle/LON/ECT@ECT, Mark Schroeder/LON/ECT@ECT, Alex Parsons/EU/Enron@Enron, Peter Styles/LON/ECT@ECT, John Sherriff/LON/ECT@ECT, Michael R Brown/LON/ECT@ECT, Joe Gold/LON/ECT@ECT, Richard Lewis/LON/ECT@ECT, Matthew Scrimshaw/LON/ECT@ECT, Mark Palmer/Corp/Enron@ENRON, Julie Green/LON/ECT@ECT, Eva Hoeffelman/LON/ECT@ECT, Andrew Morrison/LON/ECT@ECT, Fiona Grant/LON/ECT@ECT cc: Subject: Europe seen shrugging off California power crisis- Reuters- Enron mention ---------------------- Forwarded by Iona Maclean/LON/ECT on 12/01/2001 07:25 --------------------------- djcustomclips@djinteractive.com on 11/01/2001 18:14:54 Please respond to nobody@mail1.djnr.com To: 216668@mailman.enron.com cc: Subject: Enron Reuters folder: UK: ANALYSIS-Europe seen shrugging off California power crisis. UK: ANALYSIS-Europe seen shrugging off California power crisis. By Stuart Penson 01/11/2001 Reuters English News Service (C) Reuters Limited 2001. LONDON, Jan 11 (Reuters) - California's electricity crisis has sent jitters through the European power industry but the continent, better supplied than the U.S. state, will continue down the path of liberalisation, analysts said on Thursday. "California is definitely going to help us recognise that there are potential problems in Europe," said Katharina Gassner, power analyst at the UK's Oxford Economic Research Associates (OXERA). "But we would certainly expect those problems to be ironed out as (liberalised) markets evolve in Europe." Acute power shortages in California have triggered a surge in wholesale prices, causing the state's two biggest utilities - Pacific Gas & Electric and Southern California Edison - to run up costs of $12 billion which cannot be passed on to customers because prices are capped under state law. The meltdown of California's flawed experiment in power deregulation has alerted European regulators to the pitfalls of opening up energy markets to competition. But analysts say Europe's ample supplies of electricity mean it will make the switch to competitive markets without the threat of utility bankruptcies and blackouts now faced by America's richest state. The European Union's power markets are opening up to competition under a European Union Directive which came into force in 1999. California's crisis, which is sending ripples through financial markets and topping the agenda of U.S. Energy Secretary Bill Richardson, is rooted in a shortage of power and an apparently unbalanced deregulation model, analysts say. Electricity consumption, fuelled by California's high-tech industrial base, is far outstripping local supply which has not grown significantly for years. New power projects were a rarity in the 1990s as environmental constraints, bureaucratic delays and regulatory uncertainty put off investors. EUROPE HAS POWER SURPLUS By contrast, most European markets have a significant surplus of power. This is most evident in Germany, mainland Europe's biggest market, where power prices crashed after liberalisation in 1998. "Anyone who assumes what is happening in California is going to happen in Europe is really not understanding the situation," said Nigel Evans, managing director in Europe for Energy consulting company Caminus. "The supply/demand fundamentals in Europe are vastly different to California." Supply is tighter in Europe's fastest growing markets, like Spain and Ireland. But unlike in California, there is no shortage of companies prepared to build new generation. "I don't think there is any evidence of the system coming under real stress in any European markets," said David Smol of UK-based consultants Ilex. "There is lots of new investment on the block." CALIFORNIA POWER PRICES ROCKET The Californian price increases, mainly seen on the California Power Exchange, have been higher than fundamentals justify, said Mark Schroeder, a vice president of European government and regulatory affairs at U.S. energy group Enron . "Prices on the exchange reflect the need to recoup stranded costs rather than true market fundamentals," he said. The utilities cannot pass the costs on to retail customers because retail rates, unlike liberalised wholesale prices, are frozen under state deregulation laws. Europe's deregulation plan contains a staggered timetable of market opening that brings competition ultimately to all consumers, from big industrial consumers down to private households. But European liberalisation is not problem free. Transmission bottlenecks are restricting supply on the borders of France, Spain, Italy and the Netherlands. Prices in Spain and the Netherlands have been forced higher recently as a result of constraints on interconnection, much of which is used under long-term supply deals arranged prior to liberalisation. "Interconnection is a problem but it's more about freeing up existing capacity taken up by long term contracts than about building new interconnection," said Gassner at OXERA. The development of efficient, free markets across Europe would enable companies to enter into swaps deals, removing the need for physical interconnection, Gassner added. Folder Name: Enron Reuters folder Relevance Score on Scale of 100: 85 ______________________________________________________________________ To review or revise your folder, visit http://www.djinteractive.com or contact Dow Jones Customer Service by e-mail at custom.news@bis.dowjones.com or by phone at 800-369-7466. 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