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Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Peggy Mahoney X-To: Karen Denne, Jeff Dasovich, Mark Palmer, Steven J Kean, Jeannie Mandelker, James D Steffes X-cc: X-bcc: X-Folder: \Steven_Kean_June2001_4\Notes Folders\Discussion threads X-Origin: KEAN-S X-FileName: skean.nsf Note the quote from Sibley - "California is giving deregulation a bad name......" Peggy ---------------------- Forwarded by Peggy Mahoney/HOU/EES on 08/11/2000 01:31 PM --------------------------- <fyi@mailman.enron.com< on 08/11/2000 10:19:49 AM To: <pmahoney@enron.com<, <meberts@enron.com<, <fwanders@enron.com< cc: Subject: Industry News: Despite Woes In California, Other States Push <B<Electricity</B< <B<De ... ------------------------------------------------------------------- E-mailed by: Dow Jones Interactive (R) Server Software Folder: Industry News ------------------------------------------------------------------- Headlines: Despite Woes In California, Other States Push <B<Electricity</B< <B<Deregulation</B< ------------------------------------------------------------------- Despite Woes In California, Other States Push <B<Electricity</B< <B<Deregulation</B< Aug. 10, 2000 Dow Jones Online News (Copyright © 2000, Dow Jones & Company, Inc.) CHICAGO -(Dow Jones)- <B<Electricity</B< <B<deregulation</B< has suffered a setback in California as the state grapples with short supply and rising prices. But other states are pushing ahead with opening their <B<power</B< markets to competition, saying their approach should avoid the problems plaguing the state which led the nation down the <B<deregulation</B< path four years ago. California has seen its <B<power</B< market roiled by heat waves that left the state scrambling to meet demand, and by soaring prices in San Diego and southern Orange County, the first region of the country to have its <B<power</B< market completely <B<deregulated</B<. "California is giving deregulation a bad name," said Texas state Sen. David Sibley, a Republican who helped craft the bill to deregulate that state's power industry. "But I still feel good about the bill we passed. I feel even better about it." Deregulation backers outside of California said that state's experience has been sullied by two basic shortcomings: insufficient power generation to cover the state's demand and the exposure of retail customers to market rates before a competitive retail market had emerged. By contrast, Texas expects to have plenty of power generation on hand when it opens its retail power markets to competition on Jan. 1, 2002. Unlike California -- where uncertain market conditions, local opposition and, until recently, insufficient power prices have kept power plant developers waiting in the wings -- Texas has attracted billions of dollars in new power-plant investment. More than 10,000 megawatts will be added to the Texas grid before competition begins, according to reports on new power plants. That's an increase of about 20% over the state's current generating capacity. "The bill they passed did not send the right signals to the market," Sibley said of California, a Texas legislators visited before addressing the issue in 1999. "We learned from California what we did not want to do." Like Texas, Michigan hopes its success in attracting power-plant developers to the state will help it avoid California's problems when it allows customers to start choosing their power providers on Jan. 1, 2002. According to Gary Kitts, chief administrative officer at the Michigan Public Service Commission, attracting independent power producers is a key element for creating healthy competition and prices at the retail level. Michigan is only in the early stages of writing the rules that will restructure its power markets, but major developers already have begun to show interest in building new plants in the state. Only days after the state passed its restructuring bills this spring, Dallas-based Panda Energy International Inc., a privately held company, announced plans to build a 1,000-megawatt plant by late 2004. Two new merchant plants already have broken ground, and three more are in the planning stage, Kitts said. Likewise, Ohio regulators are hoping new power plant development will spark healthy competition at the wholesale and retail level when competition debuts Jan. 1, 2001. "We have quite a bit of generation going in the next year," said Ed Hess, chief of the electricity division at the Ohio Public Utility Commission. Ohio companies like Cinergy Corp. (CIN) and FirstEnergy Corp. (FE) are either planning new Ohio generators or have recently brought new plants on line. Like Michigan, Ohio companies won't have to sell off their plants as a condition of deregulation and expose themselves to wholesale price spikes as California utilities have had to do. Also, the state probably won't see wholesale price caps similar to a $250 per megawatt-hour cap approved last week by California's grid operator, Hess said. While caps can protect consumers from bloated wholesale power prices in the short term, they can worsen the problem ultimately by deterring development of the new power plants needed to correct supply shortages, said Sam Rendazzo, a lawyer who represents an Ohio industrial users group. "You're basically damping the pricing that developers are looking for," he said. California is "perhaps the most dramatic evidence of a market that's not functioning." In addition to counting on new generation, deregulation advocates outside California also plan to insulate consumers from wholesale price swings until competitive retail markets exist. Under the Texas restructuring law, utility rates are frozen until the debut of competition. At that time, rates will drop 6% and hold there for three years or until a utility has shed 40% of its customers to competing retail suppliers. "There will be no authority to change rates until competition exists," said a Texas Public Utilities Commission spokeswoman. Michigan will also freeze its rates, Kitts said - for three or five years, depending on the customer, in hopes giving competitive markets time to develop. Nevertheless, California's high-profile woes are making it harder to push deregulation elsewhere. Oklahoma, for example, has set a target of mid-2002 for the start of retail competition. But the state has yet to work out the details in legislation. The Oklahoma House of Representatives defeated a bill in the final hour of this year's session, and a lawmaker said California's problems will make deregulation a tougher sell in 2001. (Compiled from Dow Jones Newswires and other sources) Copyright © 2000 Dow Jones&Company, Inc. All Rights Reserved. DJON0022405400 To view all headlines in the folder Industry News, go to http://eeshou-dowj1/browsearticles.asp?folderid=1 To go to the front page of Dow Jones Interactive Intranet Toolkit Server Software, go to http://eeshou-dowj1/ ------------------------------------------------------------------- For assistance, contact Dow Jones Customer Service by e-mail at djip.itkhelp@dowjones.com or by phone at 800-369-7466. (Outside the U.S. and Canada, call 609-452-1511 or contact your local sales representative.) ------------------------------------------------------------------- Copyright , 2000 Dow Jones Reuters Business Interactive LLC. All Rights Reserved.
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