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----- Forwarded by Elizabeth Sager/HOU/ECT on 04/25/2001 11:23 AM -----
=09Christi L Nicolay =0904/25/2001 10:54 AM =09=09=20 =09=09 To: Jeffrey T Hodge/HOU/ECT@ECT, Elizabeth Sager/HOU/ECT@ECT =09=09 cc: James D Steffes/NA/Enron@Enron =09=09 Subject: =01+Three strikes=01, bill hits California, et al Jeff is going to forward this to the commercial group. Regulatory will kee= p=20 you both informed on the "three strikes" bill and Enron efforts regarding i= t. ---------------------- Forwarded by Christi L Nicolay/HOU/ECT on 04/25/2001= =20 10:43 AM --------------------------- =20 =09 =09 =09From: Rebecca W Cantrell 04/25/2001 10:21 AM =09 To: Leslie Lawner/NA/Enron@Enron, James D Steffes/NA/Enron@Enron, Steve=20 Walton/HOU/ECT@ECT, Susan J Mara/NA/Enron@ENRON, Alan Comnes/PDX/ECT@ECT, R= ay=20 Alvarez/NA/Enron@ENRON, Donna Fulton/Corp/Enron@ENRON, Jeff=20 Dasovich/NA/Enron@Enron, Christi L Nicolay/HOU/ECT@ECT, Linda=20 Robertson/NA/Enron@ENRON, Richard Shapiro/NA/Enron@Enron cc: =20 Subject: =01+Three strikes=01, bill hits California, et al From today's Gas Daily: =01+Three strikes=01, bill hits California California Assemblyman Dennis Cardoza, a Democrat, will introduce a bill today that will make it a felony for any energy supplier in California to engage in a conspiracy to drive up prices or manipulate the market. The bill would apply to any company selling gas or electricity into the state or to any of the state=01,s utilities, said a spokesman for Cardoza. Under terms of the proposed legislation, offenders would be subject to California=01,s "three strikes" law, which sentences convicted felons to jail for life after three offenses. Directors, officers or any other employees associated with market manipulation of a company would be subject to this bill, the spokesman said. Cardoza will introduce the bill at a press conference today at 2 p.m. Pacific time. CD ______________________________________________________________________ No easy solutions to crisis The crisis in California is far beyond short-term fixes parading as potential solutions, and there is no turning back for deregulation in the state, according to a report released yesterday by consulting firm Andersen. California has no choice but to forge ahead in repairing the damage that ill-planned deregulation measures have caused, the Energy Crisis in the Western U.S.: Lessons for navigating regulatory and market minefields report says. "There=01,s a common wisdom that knows you can=01,t unscramble the egg," said Matt Smith, head of Andersen=01,s North American energy consulting practice. All that can be done is correct the mistakes, he added. In addition, steps must be implemented to prevent the spread of the California "virus" to other states=01, electricity marketplaces, Smith said. "To begin, in our view, the energy crisis in the western U.S. has produced formidable challenges for utility industry regulators, state and federal policymakers, and industry executives," Smith said. "The virus spawned in California requires new strategies to contain and reverse the damage. "The implications for the development of competitive energy markets go far beyond the western United States. Unfortunately, California has taught the nation that regulatory and political barriers can create and sustain an energy crisis." The proposed solutions put in motion by federal and state regulators, as well as California policymakers, have only led to an increasingly uncertain market and tension among those working for a viable resolution, the report says. "In reaction to the breakdown, many of California=01,s political leaders now prefer to abandon deregulation," the report says. The report concludes that power shortages and blackouts are inevitable this summer. The deregulated marketplace, which took a year to throw off track, will more than likely take a number of years to put right, the report says. MCM ________________________________________________________ Competing evidence clouds Calif. investigation Prompted in part by the California Public Utilities Commission, the=20 California Assembly has been scrutinizing the role that interstate pipelines have played in the= =20 state=01,s current energy crisis. In the efforts to find a smoking gun, legislators have leane= d=20 heavily on a report prepared by The Brattle Group, a consultancy commissioned by utility= =20 Southern California Edison to dig up evidence of market power abuse. But the state=01,s biggest transporter of gas to California -- El Paso Natu= ral=20 Gas -- is not ready to take the rap. The pipeline has commissioned its own study, which i= t=20 recently presented as evidence that it has not circumvented any laws or regulation. As reported in both the trade press and national media, SoCal Ed and the CP= UC=20 are pointing the finger of blame at El Paso for alleged manipulation of California borde= r=20 prices through affiliate deals and capacity hoarding. And exhibit A in their case against = El=20 Paso is The Brattle Group=01,s study of the California market. Richard Zeiger, a spokesman for Assembly Member Darrell Steinberg, chairman= =20 of the California Assembly Judiciary Committee, told Gas Daily that The Brattle=20 Group=01,s market study proved that the surge in gas prices at the California border was not= =20 caused by normal market forces (GD 4/20). His remarks followed an oversight hearing during= =20 which Assembly members questioned Dynegy and El Paso officials about their involvement in= =20 the California market. El Paso presented a different version of events to the Assembly. In a repor= t=20 presented to legislators, a research group hired by El Paso concluded that a convergence= =20 of factors, not a conspiracy, caused the price run-up. Lukens Consulting Group, a Houston-based consultancy, was retained by El Pa= so=20 to conduct work on several fronts. In its study of the California market, Lukens=20 concluded that the increasing convergence of the gas and electricity businesses was one of the= =20 main culprits in the California gas price imbroglio. Assemblyman John Campbell, a Republican member of the oversight committee,= =20 said he "didn=01,t see any smoking gun" in either report. "We had our committee hearing, and we certainly had a lot on the Brattle=20 Study and a little on the Lukens study. To some degree, I=01,m not sure that the California=20 legislature is the best place to adjudicate the differences between these two studies," Campbell=20 said. "I believe FERC is looking at this situation " and it would seem to me that that=01,s the= =20 appropriate place." Campbell said that the CPUC had been prodding the California legislature to= =20 give support to its claims of market power abuse by pipelines. "It=01,s being pushed=20 basically by the Public Utilities Commission here, which believes that there was collusion" by=20 pipeline companies to push up gas prices in California, he said. The CPUC, Campbell suggested, sought satisfaction before the California=20 assembly when it had failed on the federal level: "There=01,s a concerted effort, not jus= t on=20 natural gas but on other things here in California, for entities and organizations here to point the= =20 finger elsewhere for the problems that we=01,re having in this state and I think you=01,re seein= g some=20 of that with the public utilities commission." Whether either report wins over the public incensed by high natural gas=20 prices is a different matter entirely. In the meanwhile, the dueling California market studies se= em=20 to have taken on a life of their own. The Brattle Group Study, for instance, has become the center of a heavily= =20 litigated effort to force FERC to compel the release of market data by California market=20 participants. Following on a request by SoCal Ed, which said it needed additional data to round out= =20 The Brattle Group report, FERC Chief ALJ Curtis Wagner issued subpoenas to the other three=20 major pipelines that serve the state as well as to Sempra Energy Trading. Several parties resisted FERC=01,s call for market information, saying the= =20 requested data contained commercially sensitive information. FERC allowed the discovery=20 process to move forward but only after attaching strict data protection rules restricting= =20 access to evidence (GD 4/23). Critics of the pipeline industry have already suffered one setback in their= =20 case. The commission recently dismissed the CPUC=01,s claim that El Paso rigged the auction of a= =20 large block of pipeline capacity in favor of affiliate El Paso Merchant Energy. In=20 addressing the California Assembly, representatives of Dynegy said that FERC=01,s recent ruling on th= e=20 California border controversy obviated the need for more investigation. The controversy, however, is far from over. FERC last month also ordered a= =20 hearing into whether El Paso Natural Gas and its affiliates manipulated capacity to driv= e=20 up the price of gas delivered into California (GD 3/29). That hearing is likely to take place= =20 this summer. (RP00- 241, et al.) NH
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