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Enron Mail |
Cc: daniel.reck@enron.com, kevin.mcgowan@enron.com, matthew.goering@enron.com,
janel.guerrero@enron.com, michael.terraso@enron.com, richard.shapiro@enron.com, steven.kean@enron.com, joe.hillings@enron.com, stacey.bolton@enron.com, mary.schoen@enron.com, joe.hartsoe@enron.com, christi.nicolay@enron.com, lisa.yoho@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: daniel.reck@enron.com, kevin.mcgowan@enron.com, matthew.goering@enron.com, janel.guerrero@enron.com, michael.terraso@enron.com, richard.shapiro@enron.com, steven.kean@enron.com, joe.hillings@enron.com, stacey.bolton@enron.com, mary.schoen@enron.com, joe.hartsoe@enron.com, christi.nicolay@enron.com, lisa.yoho@enron.com X-From: Jeffrey Keeler X-To: Cynthia Sandherr X-cc: Daniel Reck, Kevin McGowan, Matthew Goering, Janel Guerrero, Michael Terraso, Richard Shapiro, Steven J Kean, Joe Hillings, Stacey Bolton, Mary Schoen, Joe Hartsoe, Christi L Nicolay, Lisa Yoho X-bcc: X-Folder: \Steven_Kean_Dec2000_1\Notes Folders\Federal legislation X-Origin: KEAN-S X-FileName: skean.nsf Cynthia: here is the comment I would forward to Senators Gramm and Schumer concerning their provision on "Environmental Conditionality". Sorry this was thrown together very quickly on short notice, but I hope it is helpful. Section 154: Environmental Conditionality In general, as this provision attempts to close the loophole for grandfathered (pre 1977) coal plants, there would be an negative impact on coal trading (particularly high-sulfur) and our equity positions in coal mines. However, there are opportunities to still profit by shorting/hedging our positions -- if we have enough knowledge and information about when these changes are going to take place, we will likely be able to seize opportunities from the resulting volatility. The question in your e-mail asked only about coal markets, but on the whole, Enron could find some benefits from this kind of provision because of our ability to trade more gas, transport more gas, and build merchant gas/combined cycle capacity, renewables, etc. I have not had the chance to get any analysis on electricity prices, but I would suspect that our view would be that there may be some volatility due to the shift in fuels but it would level out with the right risk management in the longer term -- I can try to get more for you as this legislation evolves. Specific comments on the drafting, section-by-section: (a) the only comment I would raise is that how the term "electric generating unit (EGU)" is defined is controversial right now. The EPA wants to make sure EGU includes industrial boilers -- this point is being litigated in the NOx SIP Call and Section 126 cases right now. Unless it was the intent to also capture industrial coal boilers in this Section, it may be wise to clarify that you are targeting utilities. Industrials will raise a great deal of opposition if this provision is construed to include them. (b) It probably does not make a great deal of difference whether you are taking the average capacity factor for "coal fired" vs. "fossil" -- averaging all fossil units will create an average capacity factor that makes it a little harder for coal to meet environmental performance standards. I believe the 1990-1999 average capacity factor for all fossil/coal plants would be around 65%. Large, heavily-loaded coal plants are probably in the 70-80% range, so they would have to cut back substantially. However, some of the older interim load coal plants may only run at about 65% or less, in which case they may still emit a substantial amount of pollution but not be captured under this provision. So in effect, this section may not limit all grandfathered coal plants, just the big ones. © I don't know if this is a drafting oversight, or an attempt to set the bar unreasonably high for coal, but including the word ALL in the phrase "average emission performance achieved by ALL electric generating units" would mean including gas and other clean sources in looking at emissions averages -- which no coal unit could ever meet. In the name of workability, hopefully they will include something like "achieved by all COAL FIRED electric generating units" From: Cynthia Sandherr 06/29/2000 12:31 PM To: Jeffrey Keeler/Corp/Enron@ENRON cc: Michael Terraso/OTS/Enron@ENRON, Richard Shapiro/HOU/EES@EES, Steven J Kean/HOU/EES@EES, Joe Hillings/Corp/Enron@ENRON, Stacey Bolton/HOU/EES@EES, Jim Fallon/Enron Communications@Enron Communications, Joe Hartsoe/Corp/Enron@ENRON, dwatkiss@bracepatt.com, Lisa Yoho/HOU/EES@EES Subject: Gramm/Schumer federal Electricity Legislation: URGENT REQUEST FOR COMMENT Jeff: As we have discussed for some time now, Senators Gramm (R-TX) and Schumer (D-NY) have been drafting federal electricity restructuring legislation with a date-certain approach. The one hold-up has been the environmental conditionality provision which we have also discussed at length in the past. Just late last evening the two Senators reached initial agreement on this section, and, as such, just late this morning, both offices sent the language to us for our immediate comment and review. Specifically, they would like Enron's read on the practical impact of this language by 4:00 p.m. EST as they intend to introduce the bill this evening before the Senate breaks for the July 4th holiday. I'm sorry for the short turn around, but as you know, this is the typical situation in D.C. The language in parenthesis indicates Gramm's edits to substitute "coal-fired" vs. Shumer's (NRDC's) preference for "fossil." What is our preference based upon what his means to coal markets and the ability for coal to ramp up or not to ramp up? Please provide any written comments as soon as possible. Many thanks and please let me know if you have any questions. Section 154: Environmental Conditionality (a) In this section a noncompliant unit means a (coal-fired) electric energy generation unit for which construction was commenced prior to August 7,1977 that does not comply with requirements relating to emissions of air pollutants as determined in subparagraph ©. (b) It shall be unlawful for the owner of noncompliant unit to operate such unit in any year at a capacity factor that exceeds the lesser of the average capacity (factor) for fossil (coal-fired) electric energy generation units in operation in the United States or the average capacity factor for such unit, based on information reported to the Commission for the years 1990 through 1999. © Within six months of enactment of this section, the Administrator shall publish emission levels equal to the average emission performance achieved by all electric generating units permitted pursuant to Section 165 and Section 172 of the Clean Air Act and prior to the date of enactment of this section. (d) No later than six months of (after) enactment, the Administrator shall promulgate a list of electric energy generation units for which construction was commenced prior to August 7, 1977. (e) This section takes effect on the date that is 2 years after the date of enactment of this Act.
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