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Enron Mail |
Jeff,
Thanks for this analysis. I think we would all agree that the solution to put power 100% in the hand of the state is an extremely frightening proposition. Unfortunately, it falls in-line with what Gov. Davis likes to do, which is to control all of the process himself. I know John will not be able to digest all of this, but will brief him over the phone on the excellent arguments you make here against support for AB1X. I will give you all feedback from the meetings tomorrow. Thanks for all your help. Laura At 10:02 AM 2/14/2001 -0600, Jeff.Dasovich@enron.com wrote: <Hi Laura: I've attached three things, but first wanted to give you a bit <of an update on events transpiring in Sacramento and at the Public <Utilities Commission. < <Move to Prohibit Customer Choice <As you may know, AB1X, the bill that the Legislature recently passed and <the Governor signed, gives the California Department of Water Resources the <authority to buy power on behalf of the utilities. Included in that bill, <however, is a provision that prohibits "Direct Access," California's term <for customer choice. < <In sum, the bill, in its current form, prohibits businesses and consumers <from chosing an alternative energy service provider, like Enron. Our <understanding is that the Department of Finance called for the prohibition. <Their reasoning is that they need a "captive" customer base to pay for the <bonds that the State will issue in order to finance DWR's power purchases. < <Customer choice was of course the foundation of California's restructuring <law, AB 1890, and is arguably the only bright spot in an otherwise fatally <flawed plan. For example, the only businesses and consumers that were <protected in San Diego when rates were deregulated last year were those <businesses and consumers that had signed fixed price power deals with <competitive service providers. Ironically, the recently passed legislation <takes choices away from consumers and diminishes their ability to manage <their energy costs. Before AB 1890, consumers and businesses had one <choice--the monopoly utility. With the passage of AB 1X, they again will <have one choice. But this time their only choice will be to buy from a <government agency DWR. < <A broad coalition of consumer groups has expressed its opposition to the <prohibition and Senator Debra Bowen (a key player on the Senate side), and <Fred Keeley (a key player on the Assembly side), have promised to "fix" the <prohibition in another bill "SB27X." I'll forward in another email the <language that the coalition has drafted and hopes Bowen and Keeley will <carry. < <Unfortunately, we are now hearing rumors that the Governor intends to <direct the California Public Utilities to immediately implement the <provisions of AB1X prohibiting Direct Access, despite the fact that a large <coalition of consumers and service providers are actively working with Bown <and Keeley to amend the prohibition language. < <It would be extremely useful if the folks participating in the meeting on <Thursday with the Governor let him know that taking choices away from <businesses and customers is the wrong way to go and that he and the <legislative leaders need to work with the coalition to fix it. You'll note <in the language developed by the coalition that the proposal strikes a <reasonable balance between the Dept of Finance's concerns about recouping <DWR's costs of buying power, and the need to give consumers and businesses <maximum flexible in managing their energy costs. < <Move to Have the State Take Over the Electric Industry in California < <John Burton, the Democratic leader of the Senate, insists that, "if <California is going to 'bail out' the utilities, the State needs to get <something in return." Burton wants the state to buy and operate PG&E's and <Edison's transmission system and create a state power authority that would <get in the business of (among other things) developing, financing, <constructing and operating power plants and natural gas pipelines. Burton <got both of these bills designed to take over the industry passd out of his <committee yesterday (SB6X and SB33X). It is unclear how much support he <has in the full Senate or in the Assembly, but the possibility of passage <is certainly greater than zero at this juncture. < <Others experts are offering a better alternative. When the federal <government helped Chrysler out of its financial difficulties 20 years ago, <the federal government received stock warrants in return. Until recently, <the Governor favored warrants, but more recently he has waivered in his <statements regarding a state take over. Burton appears to have negotiating <leverage with the Governor and appears to be using it. < <Again, it would be extremely useful for folks to let the Govenor know in <the meetings on Thursday that a State take over of the industry is an <extreme move and bad public policy. I will forward to you in a separate <email letters that we sent to Burton expressing our opposition to his bills <and the reasons for our opposition. In brief, there is no shortage of <private capital ready and willing to invest in California's energy <infrastructure (i.e., power plants, electric transmission lines, gas <pipelines). All California needs to do is create the investment climate <necessary to attract the capital. In addition, history shows that the <State is extremely ill-equipped to become California's mega-utility. < <Here are the attachments: < < A demand buy-down proposal. We made this proposal to the Governor (and < continue to propose it to policymakers in Sacramento, Washington D.C. < and just about everywhere else). In short, the notion is that, if the < market is willing to pay power producers, say, 7 cents/kwh to "produce" < power, then the market ought to be willing to pay businesses and < consumers 7 cents/kwh to "reduce" power consumption. < < This approach is critical for two reasons: first, it provides < businesses and consumers the financial incentives necessary (and that < California currently lacks) to conserve energy and use energy more < efficiently. Second, because California delayed identifying and < implementing a solution to California's energy crisis, its options for < addressing the severe shortages that are likely occur this summer are < very limited. Reducing demand represents one of the few options that < can help to immediately reduce the gap between supply and demand. < Putting financial incentives in place now to reduce demand and "free up" < electrons is an investment with significant payback. < < A "manifesto" recently released by a group of Berkeley and Stanford < economists and industry experts urging the Govenor to pursue a < "market-oriented" solution to California's energy crisis. < < An editorial in yesterday's Wall Street Journal by Dan McFadden, a nobel < prize-winning economist from Berkeley echoing the proposal advanced in < the "manifesto." McFadden was one of the manifesto's signatories. < <Finally, we are working on "model Legislation" proposing a market-based <solution that we will share with you soon and that we hope the business <community--and the Valley in particular--can embrace and advocate. < <I realize that this is a lot of information and I apologize for the length <of this note, but I wanted to try to make sure that you're up-to-date. <Please don't hesitate to give me a call if you'd like to discuss further. < <Best, <Jeff < < <(See attached file: Manifesto-final version.doc)(See attached file: <McFadden Editorial in WSJ.doc)(See attached file: Demand buy-down <proposal.doc) < <
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