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Enron Mail |
Cc: jeffrey.hodge@enron.com, robert.williams@enron.com,
richard.shapiro@enron.com, linda.robertson@enron.com, alan.comnes@enron.com, jeff.dasovich@enron.com, susan.mara@enron.com, robert.frank@enron.com, ray.alvarez@enron.com, sarah.novosel@enron.com, dwatkiss@bracepatt.com Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable Bcc: jeffrey.hodge@enron.com, robert.williams@enron.com, richard.shapiro@enron.com, linda.robertson@enron.com, alan.comnes@enron.com, jeff.dasovich@enron.com, susan.mara@enron.com, robert.frank@enron.com, ray.alvarez@enron.com, sarah.novosel@enron.com, dwatkiss@bracepatt.com X-From: Steven J Kean X-To: James D Steffes <James D Steffes/NA/Enron@Enron< X-cc: Jeffrey T Hodge <Jeffrey T Hodge/Enron@EnronXGate<, Robert C Williams <Robert C Williams/Enron@EnronXGate<, Richard Shapiro <Richard Shapiro/NA/Enron@Enron<, Linda Robertson <Linda Robertson/NA/Enron@ENRON<, Alan Comnes <Alan Comnes/Enron@EnronXGate<, Jeff Dasovich <Jeff Dasovich/NA/Enron@Enron<, Susan J Mara <Susan J Mara/NA/Enron@ENRON<, Robert Frank <Robert Frank/NA/Enron@Enron<, Ray Alvarez <Ray Alvarez/NA/Enron@ENRON<, Sarah Novosel <Sarah Novosel/Corp/Enron@ENRON<, dwatkiss <dwatkiss@bracepatt.com< X-bcc: X-Folder: \SKEAN (Non-Privileged)\Kean, Steven J.\Sent Items X-Origin: Kean-S X-FileName: SKEAN (Non-Privileged).pst see below. Federal price limits backfire=20 Some generators withhold power rather than abide by rate caps=20 David Lazarus, Chronicle Staff Writer=20 Wednesday, July 4, 2001=20 ?2001 San Francisco Chronicle =20 URL: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/20= 01/07/04/MN186091.DTL =20 Officials in California and Nevada, after months of lobbying for federal re= gulators to cap Western power prices, warned yesterday that the newly impos= ed limits have had the unintended consequence of increasing a threat of bla= ckouts in the two states.=20 The warnings were issued as California came within minutes of rolling black= outs yesterday afternoon, and one day after the first-ever rolling blackout= s in Las Vegas forced energy-hungry casinos to shut off fountains and reduc= e air conditioning.=20 The two states are asking the Federal Energy Regulatory Commission to take = a closer look at the so-called price mitigation plan and come up with revis= ions that would deter power companies from withholding electricity during s= hortages.=20 "We need some clarity to this order," said Oscar Hidalgo, a spokesman for t= he California Department of Water Resources, which is spending billions of = dollars to keep the state's lights on.=20 "Generators need to be held accountable," he said.=20 The crux of the problem is that price limits kick in during shortages, yet = power companies say these caps force them to sell power at below-market rat= es during periods of high demand.=20 Some companies have responded by holding back power rather than face the ex= pense of shipping electricity from state to state. Each mile that electrici= ty must be transmitted adds to the overall cost.=20 "No one's going to pay for transmission if the cost is near the caps," said= Gary Ackerman, executive director of the Western Power Trading Forum, an e= nergy-industry association in Menlo Park.=20 Ackerman said several companies in his organization decided that there was = no economic advantage to offering power in regional markets when price cont= rols are in effect.=20 "This means individual regions like California or Las Vegas could end up no= t having enough," Ackerman said. "It increases the threat of blackouts."=20 BLACKOUT ALERT CANCELED California authorities issued a blackout alert at 1:45 p.m. yesterday when = power reserves dipped to dangerously low levels. They canceled the alert ab= out an hour later, after finding additional supplies.=20 "Everyone in the West is fighting for megawatts," said Stephanie McCorkle, = a spokeswoman for the California Independent System Operator, which oversee= s the state's power network.=20 The Golden State's latest brush with lights-out conditions came a day after= Nevada experienced its own rolling blackouts for the first time, prompting= heavy power users such as the MGM Grand and Caesars Palace to dim their li= ghts.=20 Don Soderberg, chairman of the Nevada Public Utilities Commission, said tha= t the sudden power emergency took state authorities by surprise and that th= ey are investigating to see what role the federal price limits may have had= in exacerbating Monday's shortage.=20 "We're looking very closely at this," he said. "There seems to be a potenti= al for unintended consequences."=20 Specifically, Soderberg said Nevada is focusing on operators of older, less= - efficient plants who would find profit margins shrinking, if not vanishin= g, under capped prices.=20 "We're going to see how the caps might have played into this," he said.=20 The federal ceiling in 10 Western states, excluding California, is about $9= 2 per megawatt hour. In California, a 10 percent surcharge is added because= of the state's credit risk, bringing the price to just over $101.=20 Ackerman at the Western Power Trading Forum said regional price controls ha= ve extended California's power crisis to neighboring states.=20 "California sneezed and the rest of the region caught the virus," he said.= =20 'LAWYERS LOOKING FOR LOOPHOLES'=20 California and Nevada officials, however, said that they still have faith t= hat price limits can stabilize Western electricity markets but that federal= regulators may have to tweak the system so that power companies cannot wit= hhold output.=20 "The generators have banks of lawyers looking for loopholes (in the plan),"= said Hidalgo at the Department of Water Resources.=20 Unfortunately, it may take some time for the regulators to revisit an issue= that they took up only with the greatest reluctance. For months, federal r= egulators refused to impose price controls, preferring instead to let suppl= y and demand determine costs.=20 Hidalgo said that when it appeared that power companies were throttling bac= k on output Monday, California officials immediately dialed the hot line nu= mber provided by the Federal Energy Regulatory Commission in case of emerge= ncies.=20 "No one answered," he said. "They were closed."=20 State officials tried again yesterday, and this time were told that the com= mission would look into the matter. They were not given a time frame for wh= en the commission might come up with a response.=20 E-mail David Lazarus at dlazarus@sfchronicle.com .=20 ?2001 San Francisco Chronicle Page A - 1=20 Out-of-state generators pull plug over uncertainty on price controls By Dale Kasler Bee Staff Writer (Published July 3, 2001)=20 Confused by the federal government's new controls on electricity prices, ge= nerators withheld so much power from California on Monday that the state wa= s nearly plunged into rolling blackouts, state officials said.=20 The confusion began when the state's electric grid operators declared a Sta= ge 1 power alert in the early afternoon, triggering the price caps for the = first time since they went into effect June 21.=20 Out-of-state generators pulled about 1,500 megawatts of electricity off the= table at midafternoon, enough to power about 1.1 million homes, because of= uncertainty about how much they could charge under the new Federal Energy = Regulatory Commission pricing system, said Oscar Hidalgo, spokesperson for = the state Department of Water Resources. The department buys electricity fo= r the state's financially distressed utilities.=20 "They didn't understand what they were going to be paid; there was confusio= n over the FERC order," Hidalgo said. "We saw 1,500 megawatts disappear."= =20 The problem was exacerbated by a heat wave across the West, which forced Ca= lifornia to compete with other states for scarce electricity, he said. Roll= ing blackouts hit southern Nevada.=20 Most California officials credit the FERC system, which is based on a varia= ble price cap, with reining in what had been a runaway wholesale power mark= et. But power generators have complained that the price caps, by limiting p= rofits, could discourage the production of critically needed electricity. A= nd as Monday's episode suggested, even the uncertainty about where the cap = will fall could lead to unexpected shortages.=20 "That's the risk that you run (with price controls)," said Arthur O'Donnell= , editor of the newsletter California Energy Markets. "People want any kind= of certainty at all."=20 Hidalgo said the state avoided blackouts only because of last-minute import= s from the Bonne=07ville Power Administration, the federal agency that mark= ets government-produced hydroelectric power in the Pacific Northwest. The s= tate went into a Stage 2 power alert, the next-to-last level before blackou= ts are ordered. The alert was canceled in late afternoon.=20 The blackouts would have been the first in California since May 8.=20 FERC imposed a round-the-clock ceiling on power throughout the West. The pr= ice fluctuates and is tied to the production costs of the least-efficient p= lant operating in California during a "power alert" declared by the Indepen= dent System Operator, which runs the state's power-transmission grid. When = there's no alert, prices can't exceed 85 percent of the cap that was establ= ished during the latest alert.=20 Until Monday, the maximum price held steady at about $101 a megawatt-hour i= n California. But when the ISO declared a Stage 1 power alert in early afte= rnoon, signifying that reserve supplies had dwindled to less than 7 percent= of demand, confusion set in, Hidalgo and others said.=20 Because of a steep drop in the price of natural gas, which fuels many Calif= ornia power plants, suppliers knew the cap would fall. But no one knew by h= ow much until the price was posted by the ISO.=20 The ceiling for California fell to about $77 at 3 p.m. but was back up to $= 98 in two hours, according to the ISO. Those prices include the 10 percent = premium that sellers can charge California because FERC said there's a cred= it risk in selling to the state.=20 O'Donnell said it's likely suppliers will pull back from the market every t= ime the ISO declares a power alert.=20 In-state generators have to operate their plants if summoned by the ISO. Bu= t out-of-state suppliers can withhold supplies, and on Monday it was the ou= t-of-staters that were pulling back, Hidalgo said.=20 The Bee's Dale Kasler can be reached at (916) 321-1066 or dkasler@sacbee.co= m .=20 Power Sales Halted by New Pricing Curbs=20 Electricity: Confused suppliers, unsure what they will be paid, refuse to s= ell to state, which asks FERC for a ruling but doesn't get it.=20 By NANCY VOGEL, Times Staff Writer=20 SACRAMENTO--Confusion over new federal price restrictions prompted sev= eral electricity sellers to back away from sales to California on Monday af= ternoon, pushing the state closer to blackouts, energy officials said. The state lost sales that would have provided enough electricity to su= pply more than 1 million homes, said Ray Hart, deputy director of the Calif= ornia Department of Water Resources, which has been buying much of the stat= e's electricity since January. At least five companies producing or marketing power "are telling us t= hat since they don't know what they're going to get paid, they're not going= to take the risk, and so they're not going to sell the energy," Hart said. The electricity sales fell through after power consumption soared in s= ummer heat and grid operators were forced to declare a Stage 1 emergency, m= eaning reserves had dipped below 7%. It was the first such emergency since = May 31. Under a June 19 order by the Federal Energy Regulatory Commission inte= nded to bring down wholesale electricity markets across the West, a power e= mergency in California triggers the setting of a new price limit that appli= es to power plant owners from Washington to Arizona.=20 The new price is supposed to be based upon whatever it costs to run th= e most inefficient, expensive power plant selling electricity to California= grid operators during the first full hour of a Stage 1 emergency. But much uncertainty remains about exactly how and when the new price = is supposed to be established under the commission's order, and that appare= ntly drove away sellers, Hart said. Shortly after the state issued the Stage 1 alert at 1:30 p.m., putting= the old price limit of $90 per megawatt-hour in question, companies that h= ad committed to provide the state electricity hour by hour Monday afternoon= backed out, Hart said. The companies include TransAlta Energy Marketing of= Oregon, Constellation Power of Baltimore and Sempra Energy Trading, a unit= of the San Diego-based energy conglomerate. Forced to dip even deeper into the state's power reserves and declare = a Stage 2 emergency, water agency officials called the federal energy commi= ssion's hotline for clarification about what the new price should be and wh= en it should take effect. They got no answer. Hart said commission officials reached at home promised to try to clar= ify their order today. One outstanding question is what obligations power s= uppliers have to deliver electricity to California in an emergency. Both buyers and sellers in the market agree that the new price, when i= t is set, will probably be lower than $90 per megawatt-hour because the pri= ce of natural gas, the main fuel in California power plants, has dropped la= tely. Temperatures soared several degrees higher Monday than grid operators = had anticipated. But they said they expected to avoid rolling blackouts in = part because the Bonneville Power Administration in Portland, Ore., had agr= eed to provide several hundred megawatts of Pacific Northwest hydropower ea= ch hour in exchange for a return of electricity from California later this = summer. "Bonneville is giving us emergency power to get us through," Hart said= .=20 Copyright 2001 Los Angeles Times=20 James D Steffes 07/06/2001 10:04 PM To:=09Jeffrey T Hodge/Enron@EnronXGate, Robert C Williams/Enron@EnronXGate cc:=09Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, Linda R= obertson/NA/Enron@ENRON, Alan Comnes/Enron@EnronXGate, Jeff Dasovich/NA/Enr= on@Enron, Susan J Mara/NA/Enron, Robert Frank/NA/Enron@Enron, Ray Alvarez/N= A/Enron@ENRON, Sarah Novosel/Corp/Enron@ENRON, dwatkiss@bracepatt.com=20 Subject:=09ATTORNEY CLIENT PRIVILEGDE - Draft FERC Brief on Settlement Proc= ess The attached is a rough draft of a potential filing Enron would make in to = Judge Wagner in the Settlement process (it is unclear if this would remain = confidential per the gag order). Please provide Ray Alvarez your comments. This would be filed as early as = Monday am. Jim =20
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