Power producers accused of gouging -- Rumored ISO Report Comes out

Gary is the Exec Director of the Western Power Trading Forum -- one of=20
Enron's coalitions. He is often quoted.

Sue Mara
Enron Corp.
Tel: (415) 782-7802
Fax:(415) 782-7854
----- Forwarded by Susan J Mara/NA/Enron on 03/01/2001 08:35 AM -----

=09Gary Ackerman <foothill@lmi.net<
=0903/01/2001 08:24 AM
=09Please respond to foothill
=09=09=20
=09=09 To: Bill Ross <billr@calpine.com<, Bob Anderson <Robert_Anderson@aps=
es.com<,=20
Carolyn Baker <cabaker@duke-energy.com<, CHARLES A MIESSNER=20
<camiessn@newwestenergy.com<, Corby Gardin <jcgardin@newwestenergy.com<, cu=
rt=20
hatton <curt.hatton@neg.pge.com<, Curtis Kebler=20
<Curtis_L_Kebler@reliantenergy.com<, Denice Cazalet Purdum <dpurdum@apx.com=
<,=20
Greg Blue <gtbl@dynegy.com<, Jack Pigott <jackp@calpine.com<, Janie Mollon=
=20
<jsmollon@newwestenergy.com<, "Klemstine, Barbara A(F56661)"=20
<barbara_klemstine@apses.com<, Nam Nguyen <Nam.Nguyen@powersrc.com<, Randy=
=20
Hickok <rjhickok@duke-energy.com<, Rob Lamkin <rllamkin@seiworldwide.com<,=
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- PGSO-5" <dvwolfe@bpa.gov<, John Marchand <jpmarchand@aep.com<, Mark Ward=
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<mward@ladwp.com<, "Morrato, Joe" <Joe.Morrato@xemkt.com<
=09=09 cc:=20
=09=09 Subject: Power producers accused of gouging

Folks,

Here is today's story. John Howard of the OC REgister called me at 8:30
pm last night for the reaction. As usual, I was totally off guard, but
the quote didn't fare badly. I called my insider at the ISO, and she
(is that enough of a clue) told me that this report was discussed in
executive session, but not voted on by the Gov Bd. The report will be
on the ISO's website today. The real issue is DMA wants FERC to keep
open the 60-day window, and they are using a simple model (apparently so
described by the ISO in the report) to provide some evidence, however
simplistic, as to why FERC should listen. Of course, this will do
nothing to help our image. Get our media people ready.

gba

http://www.ocregister.com/news/california/newgouge00301cci.shtml

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Cox!

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california =20
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Power producers accused of gouging=20

ELECTRICITY: State's grid managers plan to ask federal officials today to=
=20
order refunds of up to $562 million.

March 1, 2001

Related stories:
=0F=07 Electricity notebook=20

=0F=07 Power penalties repeal expected=20

By KIMBERLY KINDY, JOHN HOWARD and KATE BERRY
The Orange County Register=20

Power producers overcharged Californians by more than a half-billion dollar=
s=20
for electricity over a two-month period, according to a study to be release=
d=20
today by the managers of the state's electricity grid.

During January alone, the cost of nearly two-thirds of all electricity=20
purchased through the Independent System Operator was found to be=20
"excessive," the ISO said.=20

The ISO, the nonprofit agency responsible for buying and selling emergency=
=20
power for the state, said it will ask federal officials today to order the=
=20
power merchants to grant refunds.

The Federal Energy Regulatory Commission in December found "unjust and=20
unreasonable" electricity pricing in California, but stopped short of=20
ordering penalties or refunds. However, the ISO has detailed $562 million i=
n=20
specific excessive charges and is asking FERC to order refunds, disclose da=
ta=20
about the market and investigate further.

Although California's energy market has been deregulated, FERC has wide=20
latitude to set price caps if it believes rates are excessive.=20

"We did some estimates, based upon the availability and other consideration=
s,=20
of what the electricity should have cost,'' said Anjali Sheffrin, the ISO's=
=20
director of market analysis. "We found a big discrepancy."

Power producers said they would forgo extensive comment until the release o=
f=20
the study. However, Gary Ackerman of the Western Power Trading Forum, which=
=20
represents buyers and sellers of energy, said, "The ISO has the right to as=
k=20
for this review, (but) the costs were what they are. People were bidding at=
=20
the market prices, which are legitimate costs in any electrical market in t=
he=20
nation."

Accusations of pricing misconduct have swirled around California's energy=
=20
crisis, but the ISO's study and its filing with FERC today will represent t=
he=20
first time an agency has said it has evidence of overcharges and then taken=
=20
action to get money returned.

It was unclear late Wednesday who would receive any refunds - the state, th=
e=20
utilities or individual ratepayers.=20

The ISO's Department of Market Analysis alleges that price gouging occurred=
=20
with as much as $247 million, or 21 percent, of the energy it bought in=20
December and $315 million, or 63 percent, of the energy it bought in Januar=
y.

Total energy costs for those two months were more than $11 billion, compare=
d=20
with $7 billion for all of 1999, Sheffrin said.

"This is a wonderful step for the ISO to take,'' said state Sen. Joe Dunn,=
=20
D-Santa Ana, who is on a Senate committee hoping to restructure the=20
electricity market to prevent market manipulation. "There have been many=20
accusations, but none of them have chosen to act."

The new ISO study looked at power production, the prevailing market=20
conditions and the demand for energy and found that the cost of emergency=
=20
electricity was far higher than it should have been, Sheffrin said. Further=
=20
details of the study are expected to be released today.=20

Sheffrin said ISO officials have asked the power producers to supply=20
information that would help them determine whether their estimates are=20
accurate, but the requests have been denied. The power suppliers filed some=
=20
of the documents to FERC, Sheffrin said.

During December and January, power producers had to provide FERC with month=
ly=20
reports if their charges to the state exceeded thresholds.=20

The ISO did not identify the power generators it accuses of improper pricin=
g.=20
Not including the utilities themselves, the major power suppliers in=20
California are Reliant Energy Inc. of Houston, Duke Energy of Charlotte,=20
N.C., Mirant Inc. of Atlanta, Dynegy Inc. of Houston and Calpine Corp. of S=
an=20
Jose.

Also on Wednesday, Bloomberg News reported that Gov. Gray Davis plans to as=
k=20
power generators to accept partial payment for power sold to the state's=20
cash-strapped utilities.

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