From: linda.robertson@enron.com
To: steven.kean@enron.com, richard.shapiro@enron.com, james.steffes@enron.com, janel.guerrero@enron.com
Date: 2001-03-15 15:53:00+00:00
Subject: Senators Dianne Feinstein and Gordon Smith Announce Partnership in
 Response to the Western Energy Crisis

Bad development.  We are trying to get Steve an appointment with Smith next 
Tuesday.  
----- Forwarded by Linda Robertson/NA/Enron on 03/15/2001 03:51 PM -----

	Allison Navin
	03/15/2001 03:46 PM
		 
		 To: Linda Robertson/NA/Enron@ENRON
		 cc: 
		 Subject: Senators Dianne Feinstein and Gordon Smith Announce Partnership in 
Response to the Western Energy Crisis


Senators Dianne Feinstein and Gordon Smith
Announce Partnership in Response to the Western Energy Crisis
March 15, 2001
Washington, DC - Senators Dianne Feinstein (D-CA) and Gordon Smith (R-OR) 
today announced an agreement to introduce bipartisan legislation to restore 
stability and reliability to the Western energy market by directing the 
Federal Energy Regulatory Commission (FERC) to impose a temporary &just and 
reasonable8 wholesale rate cap or cost-of-service based rates.
The legislation will also require the states involved in this effort to pass 
on the cost of the electricity to retail customers. However, the states would 
be able to determine how and when this would be done. In other words, 
California could choose to use tiered-pricing, real-time pricing or set a 
baseline rate above which prices would be passed through.
&We now have a piece of legislation that can fix the broken electricity 
market and provide a period of reliability and stability in wholesale energy 
costs,8 Senator Feinstein said.
&FERC has found the wholesale prices being charged in California to be unjust 
and unreasonable. This legislation essentially will mandate that once FERC 
makes such a finding, the agency will carry out its regulatory role. This is 
a $175 million a year agency. It is there to regulate the energy marketplace, 
and it should. What the Federal government can do is to provide a period of 
reliability and stability at a time of crisis. Unfortunately FERC has refused 
to do so.8
&California,s broken electricity market is a result of a flawed 1996 
California law that deregulated wholesale costs, but left in place caps on 
retail prices. This was coupled with a requirement that the utilities divest 
themselves of their generating capacity and buy most of their electricity on 
the spot market, where prices have escalated dramatically. In hindsight all 
of this came together in a catastrophic scenario, so that today, California 
buys electricity at astronomical prices. We believe that FERC needs to act to 
help restore reasonable costs and stability to this marketplace.8
&Additionally, this agreement addresses the escalation of natural gas 
transportation costs. Last February, FERC began a two-year experiment to lift 
the cap on these costs and since that time we have seen the price of natural 
gas climb 400 percent higher in Southern California.8 Senator Feinstein 
added. 
Specifically, the compromise legislation would accomplish the following goals:
Directs FERC to impose a just and reasonable wholesale rate cap, which can be 
load-differentiated based on supply and demand, or cost-of-service-based 
rates in the Western energy market (Western Systems Coordinating Council, 
including Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico, 
Oregon, Utah, Washington, and Wyoming.) 
Addresses the issue of high natural gas transmission costs by reimposing FERC 
tariffs for natural gas transportation into California (FERC Order 637) and 
requiring natural gas sellers to declare separately the transportation and 
commodity components of the bundled rate for gray market transactions. 
Stipulates that the wholesale price cap or cost-of-service based rate will 
not apply to wholesale sales for delivery in a state that imposes a price 
limit on the sale of electric energy at retail that: precludes a regulated 
utility from recovering costs under the price cap or on a cost-of service 
based rate; or precludes a regulated utility from paying its bills. 
Establishes that the rate-making body of a state can determine how and when 
the wholesale rates will be passed on to ratepayers, including the setting of 
tiered pricing, real time pricing, and baseline rates. (With respect to the 
Bonneville Power Administration, BPA will be encouraged to seek to reduce 
rate spikes to economically distressed communities, while ensuring costs are 
recovered by the end of the next contract period in 2006.) 
Directs that after the date of enactment, utilities cannot be ordered to sell 
electricity or natural gas into a state without a determination by the 
Federal Energy Regulatory Commission that the seller will be paid. 
Directs that in the event that a state in the Western energy market does not 
meet the criteria described in this agreement, state public utilities 
commissions in the Western energy market can ensure that regulated utilities 
within their jurisdiction meet demand for electric energy in the utility,s 
service area before making sales into any such state. 
Establishes that the wholesale rate cap or cost-of-service based rates shall 
remain in effect until such time as the market for electric energy in the 
western energy market reflects just and reasonable rates, as determined by 
the Commission or until March 1, 2003, whichever is earlier.