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Enron Mail |
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EXECUTIVE SUMMARY
?=09Davis Swaps Refunds for Costly Power Contracts=20 ?=09SoCal Bailout --- Bypass ?=09Windfall Profits Tax In Debate Refunds and Long Term Contracts The FERC settlement talks are scheduled to end on Monday, 9 July. However,= as early as today, Judge Wagner could issue a preliminary finding and if a= settlement has not been reached by Monday, Judge Wagner is expected to iss= ue a ruling as soon as possible. Judge Wagner has made a public statement = regarding the level of refund stating that $2B was reasonable to him. By m= aking this comment Wagner was probably trying to manage expectations on the= amount of a refund. He is viewed as being very savvy and would certainly = have had "reasons" to make such a public statement (since he is not suppose= d to comment on cases under review -- and has since, ironically, issued a g= ag order). Additionally, since FERC only has jurisdiction over about 20% o= f the electricity flowing through California, the $2 - 3 B level could be a= ccurate from FERC's point of view (if you use the Governor's $9 - 15 B esti= mates as the gross amount). The assumption is that FERC can't order refunds= from suppliers over whom they have no jurisdiction (LA Water, munis, Bonne= ville, etc.), and that any ruling will be limited to that percentage over w= hich they can exert some force. Governor Davis also wants to renegotiate $43B worth of long-term powers con= tracts in exchange for reducing his demand that generators refund billions = for alleged price gouging. Speculation on what power generators and market= ers would agree to refund vary, with lobbyists for California and other sta= tes predicting Wagner would recommend a refund of $3-5B and those represent= ing power companies saying it would fall well under $2B. Wagner has indica= ted that a refund around $2 B might be acceptable, however, given Davis's n= ew proposal, Wagner may sweeten the pot by recommending to FERC that power= providers renegotiate long-term contracts and possibly take additional mea= sures to prevent future energy price spikes. While Wagner lacks the author= ity to order the renegotiations of long term power contracts, his recommend= ation to FERC could lead FERC to issues such an order. SoCal Bailout At this time it appears that efforts in Sacramento to work on a SoCal bailo= ut have essentially ceased. No one is working on a bailout and as we have b= een saying, it appears that a bankruptcy is a question of "when," and not = "if." Legislators are cautious in pursuing meaningful discussions on the M= OU until the results of the FERC settlement talks and the amount of the gen= erator give-back's are known. Even the CPUC has considered the ramificatio= ns of current events at FERC and has gone as far as delaying their decision= on direct access (until August) at the request of FERC Commissioner Pat Wo= od.=20 Windfall Profits Tax There are currently two bills that deal with windfall profits on generators= . Of the two bills, SB 1XX appears to have more momentum because it is furt= her along in the process and does not make any exemptions for those entitie= s contracting with the state for long-term contracts.=20 SB 1XX (Soto) - Windfall Profits=20 This bill imposes an Electric Windfall Profits Tax on sellers of energy in = California if the sales price exceeds $80 per MWh or another amount determi= ned by the CPUC. Revenue generated from this tax would be distributed, in = equal amounts, to personal income taxpayers in the form of a refundable inc= ome tax credit.=20 * This bill was set for hearing on 2 July Assembly Revenue and Taxation, = but the hearing was postponed until next week due to budget deliberations.= =20 * This bill passed the Senate Floor on May 17, 2001 on a 23-12 vote. The = "nay" votes were cast by Republicans.=20 * This bill is supported by consumer groups and opposed by several genera= tors including Duke, Dynegy, Reliant, and Mirant. While this bill does not = provide an exemption for long-term contract holders however, many of the lo= ng-term contracts have provisions exemption them from any such tax.=20 AB 2X (Corbett) - Tax on Excess Gross Receipts=20 This bill would create an excess gross receipts received by sellers of elec= tricity and authorizes the CPUC to set the base price above which the gross= receipts tax would apply and establishes an initial base price of $60 per = MWh. This bill includes provisions that the bill would not apply to any con= tracts entered into between the state and an energy generator. This bill ha= s opposition from the energy generators and is currently pending on the Ass= embly Floor.
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