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Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: Linda Robertson X-To: Steven J Kean, Richard Shapiro, James D Steffes, Janel Guerrero X-cc: X-bcc: X-Folder: \Steven_Kean_June2001_4\Notes Folders\Discussion threads X-Origin: KEAN-S X-FileName: skean.nsf Bad development. We are trying to get Steve an appointment with Smith next= =20 Tuesday. =20 ----- Forwarded by Linda Robertson/NA/Enron on 03/15/2001 03:51 PM ----- =09Allison Navin =0903/15/2001 03:46 PM =09=09=20 =09=09 To: Linda Robertson/NA/Enron@ENRON =09=09 cc:=20 =09=09 Subject: Senators Dianne Feinstein and Gordon Smith Announce Partner= ship in=20 Response to the Western Energy Crisis Senators Dianne Feinstein and Gordon Smith Announce Partnership in Response to the Western Energy Crisis March 15, 2001 Washington, DC - Senators Dianne Feinstein (D-CA) and Gordon Smith (R-OR)= =20 today announced an agreement to introduce bipartisan legislation to restore= =20 stability and reliability to the Western energy market by directing the=20 Federal Energy Regulatory Commission (FERC) to impose a temporary =01&just = and=20 reasonable=018 wholesale rate cap or cost-of-service based rates. The legislation will also require the states involved in this effort to pas= s=20 on the cost of the electricity to retail customers. However, the states wou= ld=20 be able to determine how and when this would be done. In other words,=20 California could choose to use tiered-pricing, real-time pricing or set a= =20 baseline rate above which prices would be passed through. =01&We now have a piece of legislation that can fix the broken electricity= =20 market and provide a period of reliability and stability in wholesale energ= y=20 costs,=018 Senator Feinstein said. =01&FERC has found the wholesale prices being charged in California to be u= njust=20 and unreasonable. This legislation essentially will mandate that once FERC= =20 makes such a finding, the agency will carry out its regulatory role. This i= s=20 a $175 million a year agency. It is there to regulate the energy marketplac= e,=20 and it should. What the Federal government can do is to provide a period of= =20 reliability and stability at a time of crisis. Unfortunately FERC has refus= ed=20 to do so.=018 =01&California=01,s broken electricity market is a result of a flawed 1996= =20 California law that deregulated wholesale costs, but left in place caps on= =20 retail prices. This was coupled with a requirement that the utilities dives= t=20 themselves of their generating capacity and buy most of their electricity o= n=20 the spot market, where prices have escalated dramatically. In hindsight all= =20 of this came together in a catastrophic scenario, so that today, California= =20 buys electricity at astronomical prices. We believe that FERC needs to act = to=20 help restore reasonable costs and stability to this marketplace.=018 =01&Additionally, this agreement addresses the escalation of natural gas=20 transportation costs. Last February, FERC began a two-year experiment to li= ft=20 the cap on these costs and since that time we have seen the price of natura= l=20 gas climb 400 percent higher in Southern California.=018 Senator Feinstein= =20 added.=20 Specifically, the compromise legislation would accomplish the following goa= ls: Directs FERC to impose a just and reasonable wholesale rate cap, which can = be=20 load-differentiated based on supply and demand, or cost-of-service-based=20 rates in the Western energy market (Western Systems Coordinating Council,= =20 including Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico= ,=20 Oregon, Utah, Washington, and Wyoming.)=20 Addresses the issue of high natural gas transmission costs by reimposing FE= RC=20 tariffs for natural gas transportation into California (FERC Order 637) and= =20 requiring natural gas sellers to declare separately the transportation and= =20 commodity components of the bundled rate for gray market transactions.=20 Stipulates that the wholesale price cap or cost-of-service based rate will= =20 not apply to wholesale sales for delivery in a state that imposes a price= =20 limit on the sale of electric energy at retail that: precludes a regulated= =20 utility from recovering costs under the price cap or on a cost-of service= =20 based rate; or precludes a regulated utility from paying its bills.=20 Establishes that the rate-making body of a state can determine how and when= =20 the wholesale rates will be passed on to ratepayers, including the setting = of=20 tiered pricing, real time pricing, and baseline rates. (With respect to the= =20 Bonneville Power Administration, BPA will be encouraged to seek to reduce= =20 rate spikes to economically distressed communities, while ensuring costs ar= e=20 recovered by the end of the next contract period in 2006.)=20 Directs that after the date of enactment, utilities cannot be ordered to se= ll=20 electricity or natural gas into a state without a determination by the=20 Federal Energy Regulatory Commission that the seller will be paid.=20 Directs that in the event that a state in the Western energy market does no= t=20 meet the criteria described in this agreement, state public utilities=20 commissions in the Western energy market can ensure that regulated utilitie= s=20 within their jurisdiction meet demand for electric energy in the utility=01= ,s=20 service area before making sales into any such state.=20 Establishes that the wholesale rate cap or cost-of-service based rates shal= l=20 remain in effect until such time as the market for electric energy in the= =20 western energy market reflects just and reasonable rates, as determined by= =20 the Commission or until March 1, 2003, whichever is earlier.
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