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Enron Mail |
Below is the weekly western issues update sent to Tim earlier. If you have=
any questions, please feel free to Kristin Walsh (x39510). EXECUTIVE SUMMARY FERC Multi-Party Refund Negotiations BPA Financials & Smelter Agreements BC Hydro Rate Freeze Power Refunds The big event that happened last week in Washington DC, in regards to Calif= ornia and the rest of the Western energy markets, was that multi-party nego= tiations that flopped - apparently the difference between $8.9 billion and = $703.6 million between parties could not be settled. Below is a rough brea= kdown corporate offerings: Williams, Duke, Reliant, Dynegy, & Mirant: =09 =09 $510 million combined PowerEx (BC Hydro):=09=09=09 =09 $125 million 15 Power Marketers including Enron:=09=09 $49.6 million 7 California Municipal Utilities:=09=09=09 $6.5 million Load-serving entities outside CA:=09=09=09 $12.5 million Northwest utilities submitted their calculations of overcharges, however, J= udge Curtis Wagner has virtually ignored Northwest claims of $611 million i= n overcharges, stating "There was little time to address the issues raised = by the Pacific Northwest parties. They did not have data on what they are = owed, nor an amount of refunds due them." Contrary to the judge's claim, a= number of Northwest utilities did submit claim amounts at the settlement c= onference, although the problem is each utility has its own methodology for= calculating these amounts. Wagner was probably frustrated that there was = no standard methodology for these calculations and appears to be leaning ag= ainst giving NW utilities the same fast-track status as California. FERC h= ad originally not even wanted to consider NW claims in this conference unti= l a group of NW senators got together and applied some pressure - the resul= t was there was not much time to get the overcharge data together. Below i= s another rough breakdown of the claims: PacificCorp:=09=09$6.7 million Snohomish PUD:=09=09$229 million Tacoma Power:=09=09$71.9 million Seattle City Light:=09=09$222 million Port of Seattle:=09=09$11.1 million BPA:=09=09=09$70 million* BPA BPA Borrowing: Sen. Patty Murray (D-WA) has been leading the fight for BPA= 's request of $2B in additional borrowing authority and was pleased the Sen= ate voted to increase access to additional funds, however, Sen. Murray has= promised to fight the re-authorization caveat. Murray's spokesman said the= Committee may have been concerned about 'bumping up against spending caps'= when it added the mandate for annual re-authorization. Bonneville has war= ned it could exhaust its borrowing authority by the end of 2003 unless the = amount was boosted from the current limit of $3.75 billion -- the increase = got through the Senate Energy & Water Development Subcommittee, but had the= caveat added when it reached the full Appropriations Committee. Increased= borrowing authority would be used to update transmission infrastructure, r= etrofit Columbia River hydropower projects to boost efficiency and continue= conservation programs. We can expect to see more action coming out of Sen= . Murray's office. Refunds: Recent media reports have hinted to the possibility of Northwest = utilities (including BPA) seeking refunds for the overpriced power Californ= ia is currently fighting. This information seems supported by fears that ea= rlier settlements reached between Northwest utilities and California State = may be challenged by bankruptcy proceedings. If a bankruptcy court were to= issue a ruling that significantly altered agreements between BPA and PG&E = (& potentially bankrupt SoCal. Ed.), it is possible that BPA could press a = refund request in the range of $70M to $100M. However, while BPA's refund = request may be an option to stabilize their finances, they are also careful= about voicing their opinion because of the $167 million in gross sales the= y made from California BPA Administration: The Bush Administration reportedly has no current plan= s to replace the BPA's administrator. The entire Northwest delegation (Dem= ocrats and Republicans from the BPA region) has asked that he be made the f= ull-time administrator. However, since many of the decision-makers at DOE = are conservative Republicans, they're not comfortable with him because he i= s a Democrat. At this time, DOE people are unsure of how to handle this ma= tter and appear to be in a state of limbo. DSI/Aluminum Smelter - Load Reduction Agreements: BPA is in the hot seat r= ight now, realizing that falling electricity prices is making it possible f= or smelters under load reduction agreements to begin shopping around for ot= her sources. Few believe that these current market prices will be sustaina= ble, considering the fact that the West will see a significant supply incre= ase within the next year. Consequently, DSI's will be very concerned about= signing long term price contracts given the current downward pressure on p= rices (which are still historically very high, but dropping). Currently, t= here are two Northwest smelters seeking to restart plant operations. Alco= a is in preliminary talks with BC Hydro to secure additional power to resta= rt its Intalco smelter, and Kaiser, free from the money and the constraints= of a load-reduction agreement, is also attempting to restart plants. We w= ill continuing monitoring of this situation and will update as the story de= velops. =20 BC HYDRO Rate Freeze: The current rate freeze was imposed by the former NDP governm= ent, and it ends 30 September 2001. It is up to the government to direct t= he BCUC to lift the rate freeze, and before it can do that, it has to sched= ule a rate hearing and decide to put the utility back under the BCUC's purv= iew. It has been a number of years since there was a rate hearing, and peo= ple are not looking forward to it because it begs all sorts of questions ab= out overall energy policy. A rate hearing will be delayed until the new go= vernment has completed its administrative "core review" and decided on a br= oader energy policy, including its goals for BC Hydro. Lifting the rate fr= eeze partly depends on how much regulators believe should be held in the ra= te stabilization account - this money has been redirected elsewhere over th= e past few years, leaving the utility unprepared for the sort of low-water = conditions that have surfaced this year. BC Hydro wants the freeze lifted,= and the new government will have an ideological bias against continuing th= e rate freeze given that it was put in place by the NDP and flouts free ent= erprise principles. This suggests the rate freeze is on the way out, but i= t may persist beyond the original 30 September deadline for the reasons out= lined above. How long it persists depends on how long it takes the new gove= rnment to complete the core review.=20
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