From: jeff.dasovich@enron.com
To: steven.kean@enron.com, richard.shapiro@enron.com, james.steffes@enron.com, mona.petrochko@enron.com, susan.mara@enron.com, bruno.gaillard@enron.com, sandra.mccubbin@enron.com, mary.hain@enron.com, mpalmer@enron.com, karen.denne@enron.com, joe.hartsoe@enron.com, cynthia.sandherr@enron.com
Date: 2000-09-01 13:56:00+00:00
Subject: Legislative package only delays pain, critics warn

Legislative package only delays pain, critics warn 
By Craig D. Rose 
UNION-TRIBUNE STAFF WRITER 
September 1, 2000 
Consumer and political leaders -- as well as Sempra Energy's chief executive 
-- said yesterday that the three electricity bills before Gov. Gray Davis do 
nothing to fix the fundamental cause of soaring bills. 
The cause, they say, is that power generators can continue to charge what 
most characterize as exorbitant prices for their electricity -- and consumers 
ultimately face the daunting task of paying them. 
No matter if all of the bills are signed, the leaders say California's power 
market will remain a seller's game that gouges overmatched consumers. And 
while San Diego Gas and Electric Co.'s hard-pressed customers may pay less 
now, they will pay back all or nearly all the savings -- plus interest -- 
beginning in 2003. 
"The governor's bill postpones the pain, but the pain is still there," said 
Maureen O'Connor, a former mayor of San Diego who has been active in seeking 
relief from the soaring bills afflicting SDG&E's 1.2 million electricity 
customers. 
The rate bill promoted by Davis and now awaiting his signature will have 
SDG&E's customers pay about 6.5 cents per kilowatt hour for electricity, or 
70 percent more than what they paid as recently as May. 
Power companies, however, will continue to charge the customers as they have; 
presently, they're charging about 21 cents per kilowatt hour for SDG&E 
customers. The difference between 6.5 cents and whatever prices above that 
level emerge from the state's volatile power market will be recorded as IOUs 
for each customer in so-called balancing accounts. 
A second bill before the governor could provide up to $150 million in state 
money to help pay the balancing accounts, but the bulk of the IOUs will 
almost certainly be paid by SDG&E customers themselves when they become due 
in 2003 or 2004. A third bill before the governor would speed the 
construction of power plants. 
So while the rate bill lets customers pay less now than they owe, it 
obligates them to pay the balance with interest later. 
The situation creates the potential for a troublesome compounding effect: The 
higher electricity prices grow, the more is set aside in the balancing 
accounts -- and the greater the wallop to customer wallets when the accounts 
come due. 
Based upon prices now paid for future electric deliveries, Sempra Energy 
estimates customers will owe $664 million by 2003. IOUs of that magnitude, 
said SDG&E, will require that customers pay a surcharge of $40 monthly for a 
year on top of whatever they are already paying for their power bills. 
Keep in mind that typical residential bills at this time last year were about 
$55; they now stand at about $130. Consumer advocates say it's likely power 
prices will remain at levels that will lead to huge debts for customers under 
the Davis proposal. 
"The generators have shown themselves to be unconscionable in extorting 
profits," said Nettie Hoge, executive director of TURN, a San Francisco-based 
consumer group. 
Hoge said the bills that emerged "seemed the best a corrupt system could spit 
out." She added that TURN and other groups will shift their focus to 
pressuring the Federal Energy Regulatory Commission to restrain the electric 
generating companies and wholesale power markets. 
FERC, she said, must legally determine if charges from generating companies 
are reasonable. TURN and other groups will also press for re-regulation of 
the industry and will begin to explore municipally owned generating plants. 
Michael Shames of the Utility Consumers' Action Network supports the Davis 
bill, although he said it won't fix "the almost irreparably broken California 
energy system." 
"The problem is that California's electricity customers have been subjected 
to market prices in a dysfunctional energy market," Shames said. "It's a 
market controlled by the sellers of power and their cronies." 
But Shames said the Davis bill provides at least temporary protection against 
further rate shocks, and he expects taxpayers across the state will 
ultimately assist SDG&E's customers in paying their electricity bills. 
But Jamie Court, executive director of the Foundation for Taxpayer and 
Consumer Rights, which has called for re-regulation of the industry, opposes 
the rate-cap legislation. 
"This keeps ratepayers and taxpayers on the hook for the costs," said Court, 
who added that the bill also locks in near doubling of power rates compared 
to last year. 
Stephen Baum, chief executive officer of Sempra, said the bill puts SDG&E -- 
a Sempra subsidiary -- in the position of financing the difference between 
what power companies charge for their power and what it collect from 
customers over the next three years. 
The balancing accounts, Baum said, could grow so large that they will 
challenge Sempra's ability to borrow to cover them. 
"The problem is with the wholesale markets," said Baum, who today becomes 
chairman as well as chief executive of Sempra. "This legislation does nothing 
but postpone a big bill." 
He added that Sempra believed the bill included ambiguities that could be 
illegal if not later clarified by the California Public Utilities Commission. 
"If (the PUC) can't or won't, then I think the legislation is legally flawed 
and can't stand," Baum said.