From: foothill@lmi.net
To: charlotte@wptf.org
Date: 2001-02-02 03:08:00+00:00
Subject: WPTF Friday More on That Later Burrito

THE FRIDAY BURRITO 

Plan to be spontaneous - tomorrow. 

No Burrito next week.? I'll be in Phoenix with the other WPTF geeks enjoying 
perfect weather, a little golf, and party time.? Those of you not attending 
our general meeting in Old Town Scottsdale (shame on you), please hold down 
the fort in California while we are gone.? Be sure to turn out all the lights 
before you go to bed.? At 11:00 p.m., every night, check to see that 
legislators are still in session debating another mind-numbing emergency 
session bill. Pray for our Governor, and our State-Appointed ISO Governing 
Board, for they know not what they do. Give an amen to direct access 
customers, all snug and safe in the utilities' bosom as default customers. 

We really have done a bang up job, here in California.? Who do we get to bail 
out next?? It is the favorite topic of the day.? A utility bailout, that is 
what today's newly approved legislation, ABX 1-1 is being called.? Society 
makes choices, the utilities do what they are told at a reasonable rate of 
return, and investments that might have been made in new electric generation 
facilities were deferred, and deferred.? It's not a utility bailout that we 
are witnessing, but, rather, a California bailout.? We are bailing out our 
own dirty mess for not providing sufficient generating capacity. 

Have you wondered in these last few weeks why everything went south at the 
same time?? I have thought about this a lot, and have determined there are no 
good explanations.? What are the odds that a capacity shortage, a draught, 
and ultra-high natural gas prices would occur at the same time?? Well, just 
as the utilities like to say with each missed payment, these are forces 
beyond our control.? Let the waves hit the beach, and what survives the 
storm, survives.? Everything else must perish.? There is no electric tooth 
fairy to bring back the California PX, or the tens-of-thousands of direct 
access customers returned to default service this week. 

The Western Governors, the US Congress, and the President's cabinet have all 
taken photo op shots at the issues.? I don't think those meetings will add 
much to the pile of solutions to our thorny problems.? Who knows, maybe the 
WSCC will get a mandated price cap.? Would we endorse a price cap, even at 
$2,500? I don't know.? Some of you might support that, whereas others would 
stay the course.? No price caps.? Of course, I don't understand how a price 
cap of $1,000, say, the same cap used in other regions of the country, can 
help us in the West.? The economic impact we have witnessed has come about 
from prices well below $1,000/MWH. 

Here is this week's line up. 

The People's Republic of California 
?@@@ Stop the Bleeding Bill 
?@@@ They Wrote to Me 

Things National 
?@@@ California seeks to be a party in our DC Circuit Court Case against FERC 

Letters 
?@@@ A Few Thoughts by George Sladoje 
?@@@ More Tributes to Kent Wheatland 

Odds & Ends (_!_) 
================== 
The People's Republic of California 
?@@@ Stop the Bleeding Bill 

ABX 1-1 was signed into law today.? It is the most curious piece of 
legislation.? Legislate in haste, and repent in leisure.? The Governor 
claimed in his press release, "This measure offers our best hope of avoiding 
electricity rate increases in future years. We will now put together a 
portfolio of low-cost contracts. With new contracts for alternative and 
renewable energy sources, it is my hope and expectation that we can live 
within the existing rate structure."? I have read the bill several times, and 
I don't see how it is even remotely possible to avoid electricity rate 
increases.? Someday, I want to be Governor.? Then, I will have the freedom to 
make up the truth as I go along, and voters in the State will blindly believe 
me.? That's the job I want. 

Here is the gist of the bill.? First, that DWR will enter into long term 
contracts to cover PG&E's and SCE's net short position.? The first round of 
bids yielded less than 2.500 MW of power.? Hardly enough, by a factor of 
four, I reckon, to cover the net short positions of both utilities..? Next, 
the power delivered by those contracts will be delivered to California's end 
use customers utilizing the poles and wires of the utility distribution 
companies (UDC). Each utility's? cost for the delivered power (own 
generation, QFs, bilateral deals, DWR purchases, and ancillary services) in 
excess of the generation component of the UDC's rate will be called the 
California Procurement Adjustment.? The PUC has the authority to pass on some 
or all of the California Procurement Adjustment to customers for the energy 
consumed in excess of 130% of customers' baseline quantity. 

That sounds to me like a rate increase.? The first block of monthly 
consumption, and 30% above that will not be charged for the new Adjustment.? 
All monthly consumption above that level will get a pro rata share of the 
Adjustment.? The DWR purchases will be backed by state-issued bonds, the 
maximum of which can not be "an aggregate amount greater than the amount 
calculated by multiplying by a factor of four the annual revenues generated 
by the California Procurement Adjustment, as determined by the [PUC] pursuant 
to Section 360.5."? The media was reporting a $10 billion bond bailout for 
the utilities, but I don't see how they derived that number. 

Currently, PG&E and SCE are accumulating a bill for their net short position 
of $1.2 billion per month.? The average system load is 30,000 to 33,000 MWs, 
and the average purchase price for the spot energy being purchased is around 
40?/kWh.? Assuming that long-term contracts would price the power at, say, 8?
/kWh, and at least half the net short position could be covered utilizing 
long-term contracts, the monthly cost for the net short position would be 
around $720 million, and the annual figure would be $8.6 billion.? Let's 
allocate the annual cost of $8.6 billion over the energy consumed above the 
"baseline" quantity.? I have heard that 78% of the energy consumed by 
customers of the three IOUs is above the baseline quantity.? We'll assume 
that 66%, or 2/3, of the energy consumed is above 130% of the baseline 
consumption level.? The annual energy delivered by the ISO is roughly 210 
TWh, and, therefore, 2/3 of that is 140 TWh.? The average cost per 
"applicable" kWh of uplift in a customer's bill would be 6.1?/kWh, thereby 
roughly doubling the current generation component of the current frozen 
rates. 

Of course, the additional revenue collection isn't expected to keep up with 
the cost of the net short position. Electricity costs will fall off as gas 
prices ease, and more supply comes on line.? However, it is breathtaking to 
observe that for the kWh that are bearing the uplift, the ?/kWh rate increase 
for residential customers is about 50%, and blended with the 130% of baseline 
energy, the rate increase is about 35%.? That's a lot of math to get to the 
same percent increase the utilities were claiming they needed to satisfy the 
revenue shortfall!? A thirty- percent increase in my PG&E electric bill would 
add between $50 to $80 to the monthly tab.? I am beginning to wonder why we 
Californians are making such a fuss.? Falling interest rates on my 
variable-rate home mortgage will probably boost my after-tax income $300 to 
$400 per month. Hell, I gladly would pay a higher electric bill plus an 
additional $5 to $8 per month to assist those consumers on fixed income or 
otherwise unable to absorb the cost increase. 

Are we properly focused on the right problem? 

Another flea on this legislation is the suspension of new direct access 
customers during the time that DWR is procuring energy.? The bill states, " ( 
the right of retail end use customers ( to acquire service from other 
providers shall be suspended until the department no longer supplies power 
hereunder."? Voila.? Not only do we get a rate increase, but our ability to 
choose an alternative energy supplier is hereby waived.? I would think the 
average Californian would be outraged by that dictate.? Of course, most 
Californians didn't know that they had a choice.? Therefore, the legislation 
made a grand leap forward by lowering our opportunity set to be in line with? 
expectations. 

I wonder what the Legislature will do next week? 

The People's Republic of California 
?@@@ They Wrote to Me 

On Monday, the LA Times published my first Op Ed.? I attempted in that piece 
to compare our role as electricity marketers and producers to lending 
institutions that offer home-loan mortgages in various risk-adjusted 
instruments - variable-rate loans, fixed rate loans, etc.? The comparison is 
less accurate than apt.? However, I think we, as an industry, get too focused 
on things about which the public cares little.? Does the public need to 
understand how banks arbitrage loans in order for a consumer to obtain a home 
loan?? Does the public need to understand the workings of the internal 
combustion engine to drive a car? So, I tried my level best to describe how 
the consumer should view our side of the demand-supply interaction. 

I included in the article my e-mail address.? I wanted to get a feel for the 
thoughts of people who would make the effort to write.? Even though there 
were only a handful of responses, I was pretty much taken aback by the tone 
of the letters.? The edge in their language was sharp.? They generally 
distrust our industry, sometimes confusing us with utilities.? I would 
characterize their thinking as "first assume you suppliers and marketers are 
crooks (", and everything else flows from there. Here are some excerpts. ? 
"I read your article in today,s L.A. Times in which you make out that your 
members (the electrical power generators) are completely innocent of any harm 
and were only trying to help.? Oh, yeah?? Where did that 12 billion dollars 
go?? It did not go to the utility companies, they are on the verge of 
bankruptcy.? It went to your members who are laughing all the way to the bank 
at our predicament." 

"As a consumer in the SCE service area, I was disappointed with your analogy 
or comparison of variable-rate home loans with the current high cost of 
energy.? Variable-rate home loans offer more disclosure to consumers than the 
information that was provided to residential consumers and possibly the 
legislature that weighed in on AB1890." 

"? exactly how stupid do you think we are. you assholes buy the politicians, 
rig the bidding process and then say we should quit calling you names after 
you have stolen billions from people who work for a living." [Ed. - This 
response won the Miller Brewing Co.Writer's Guide Award for Keen Articulation 
Under Dim Light] 

"I don't mind paying for a service that I use and makes my life comfortable, 
but BIG BUSINESS is playing with us once again and this is NOT RIGHT.? The 
State of California has grown 13% in the last decade and no new power 
plants?? They were warned about their lack of future vision for not allowing 
new power plants to be built and now we're paying the price as usual."

" This boom to bust cycle in oil, natural gas and now electric energy is well 
chronicled and almost? always precipitated by gaming on the supply side of 
the equation (namely OPEC)(? Personally, I think it is high time the Federal 
Government (or the State of? California) started investing in, and? building, 
nuclear power plants with? a vengeance again."
?Things National 
?@@@ California seeks to be a party in our DC Circuit Court Case against FERC 

I attended the Electric Power Supply Association (EPSA) annual meeting in 
Palm Desert this week.? It was a really nice event, and the speakers were 
excellent.? Among the guests was former FERC Chairman, Jim Hoecker.? I 
chatted with him about our dilemma in California regarding the 
State-appointed ISO Governing Board, and he admitted that we must do all we 
can to give the FERC Staff more spine.? I was thinking about a steel rod, and 
the FERC staff in a compromising position, but more on that later. 

I asked Citizen Jim what he was going to do for a living, now that he is rid 
of his Commission robe.? He said he was thinking about hanging a sign around 
his neck "Will Regulate for Food", but he wasn't quite sure. 

Mr. Lockyer, California's Attorney General, who did not attend the EPSA 
conference, filed in our case against FERC to appear as Amicus Curiae (I am 
not a Latin scholar, but that means Strange Friend) before the DC Circuit 
Court of Appeals. For cases involving high-voltage electricity, I think there 
should be an AC Circuit Court.? But more on that later.? The petition states, 
"In the event that the Court concludes that the new California legislation 
[ABX 5] does not moot this appeal, [we] respectfully request the opportunity 
to submit a brief on the preemption issues inherent in this litigation, 
within a reasonable period of time as determined by the Court." 

Yeah, come on in.? I want this case to get a little wider.? Last Friday, our 
attorney, Bracewell & Patterson, and FERC's counsel made oral arguments 
before the Court.? The ordeal took 30 minutes, and the judges asked pretty 
tough questions. 

The new State-Appointed Governing Board is doing its best to gum up the 
works.? Yesterday they met for a second time, had a completely revised 
agenda, and proposed to meet in executive session to discuss how the 
transmission system works.? Further, in executive session, individual members 
of the ISO executive team were called in one by one to appear before the 
Board.? My guess is that each had to take a secret oath, swearing allegiance 
to the Governor, Chairman Kahn, and the Dark Side. But more on that later. 

Letters 
?@@@ A Few Thoughts by George Sladoje 

I asked California PX CEO George Sladoje to write a letter to the Burrito 
expressing his thoughts at this difficult time.? Here is what George wrote. 
? "Dear Gary, 

"As you know the California Power Exchange has begun to wind up its affairs 
with the intention of closing its doors soon. In fact, our last Day-Ahead 
auction will probably take place in the coming week. [Note - it closed last 
Wednesday.] 

"While I believe that our leaving the power scene will ultimately hurt the 
consumers and businesses of this state, I am most disappointed that the 
outstanding efforts of nearly 200 dedicated, hard working and innovative 
employees and contractors ultimately could not withstand the environment we 
find ourselves in today. In my working career of nearly 40 years (it can,t 
be) I have never witnessed an effort of the magnitude that our group has 
given. 

"CalPX began with much opposition and really no passionate support. In the 
end, we still had no real advocates though everyone claimed to support the 
concept of a transparent, fair and honest price under rules that did not 
discriminate and that everyone could follow. 

"The final indignity was our attempt to fight the arbitrary, discriminatory 
and unconstitutional aspects of the December 15, 2000 FERC order as it 
pertained to CalPX. The Governor,s office, the EOB and the CPUC declined to 
support us even though the order was, in effect, directed largely at those 
bodies. They were content to let CalPX be the scapegoat for high prices in 
the West. Only the WPTF stepped forward and your group is to be commended for 
taking a stand. 

"Our major operational setback was our inability to persuade users to 
participate in our forward market which would have spared California much of 
the current chaos we are now experiencing. In January 1999 at our first 
meeting to develop these contracts, I told our management group that these 
forward contracts would establish us as a major financial institution, and 
that they would become the springboard to a successful deregulated market. 
Instead, when we introduced them in the summer, they were greeted with a yawn 
and only grudgingly utilized. Suddenly, in June of 2000 every "expert" from 
Washington, D. C. to Berkeley began proclaiming the value of forward 
contracting. 

"Today the IOUs continue to obscure their reluctance to participate in this 
market, claiming they were victims of a forced spot market. Generators, on 
the other hand, have apparently never supported exchange based forwards for 
their own reasons. Our goal of developing the first real futures products in 
this business will not be achieved. I find it ironic that today we are in 
court over guess what d forward contracts that the IOUs didn,t really embrace 
anyway. Just imagine if they saved $1.2 billion in seven months without 
really trying . . . . . . . . . . . . . . 

"Anyway, the Burrito has consistently been one of the few of hundreds of 
e-mails that I receive each week that I look forward to. Keep up the good 
work! 

"To all of your readers d good luck and keep plugging away. There are 
tremendous possibilities ahead. 

"Finally, the concept of exchange based power products is a good one and is 
the right way to go. It has worked in other countries and will work in other 
areas of this country. Unfortunately, it can,t be done in California at this 
time.

"Thanks and good luck."


Letters 
?@@@ More Tributes to Kent Wheatland 

This Sunday at 1 p.m., the family of our friend and colleague, Kent 
Wheatland, who passed away on January 22, will hold a memorial service.? 
Information about the service is posted on a web site managed by Kent's 
brother.? The address is? http://www.query.com/kent/ .? If you are in the Bay 
Area on Sunday afternoon, please consider attending. 

Here are some more notes I received from fellow WPTF members about Kent. 

Jimmy Thomas, who is recently retired from Dynegy 
? "Although I did not work with Kent closely, the few personal encounters 
were memorable.? His zest for life is what sticks with me.? No matter the 
conversation, his smile was infectious.? You could feel the joy he had in all 
he did.? When we discussed business, he smiled as though he was ahead of you 
with your thoughts.? When we discussed pleasure, he smiled as though to say 
I've done that and would like you to join me next time.? It was my pleasure 
to know Kent.? We should all learn the lesson of his attitude and how it 
impacts everyone who comes into contact. 

"I pray in earnest for his family.? I pray that they will find peace and calm 
and reconciliation in the loss of Kent at such a young age.? I pray that his 
family will find the meaning and reasons for God wanting Kent to come home.? 
I pray that God will reveal His truths to Kent's family so they will 
experience comfort through their sorrow. 

"Kent will be missed, but I know his smile is still infecting all around 
him..........in an eternal way now."


From SCUG buddy, and Dynegy friend Jolly Hayden. 
? ".....? I have so many good memories of Kent, his sense of humor, his wit,? 
and his unbelievable intelligence.? I learned so much from him.? He kept me 
on my toes..... he was a blast to argue with.... we could go for days on a 
single topic and often did via phone calls and email.? His passion was 
phenomenal, he loved this stuff.? It was a privilege and honor to have known 
Kent these last few years."


From Max Bulk of the California PX 
? "I was shocked to read about Kent.? While I didn't know him as well as you, 
I highly respected him and thoroughly enjoyed his company.? His ability to 
inject humor into dry and often confrontation situations was wonderful.? His 
passing is truly our loss. 

"One memory to share: It was one of the CMR meetings, towards the end of the 
process I think, where the ISO was introducing subjects willy-nilly with 
almost no forethought.? Kent had been particularly vocal in his condemnation 
of the more ridiculous proposals and when he took the mike ISO staff visibly 
winced.? Kent, never losing his smile, tore into Kellan about the rapid 
timeline and apparent disorganization.? As he neared his crescendo, he said,? 
'I've got one more question for you.? What's up with the ISO logo?? Is that a 
drowning dolphin or what?'"


From Dynegy's Dave Francis 
? "I have often commented that this business is still about people.? While 
our coworkers may come and go, the bonds of friendship carry over time and 
distance.? It warms me to know that my feelings about Kent are shared across 
our industry.? Everytime I am at the Sacramento Sheraton, I distinctly 
remember Dennis Flaherty and I speaking with Kent about the market while 
standing in the courtyard.? I believe that was the beginning of getting him 
here, where he belonged.? Man, he was a good guy.? So to the extent I'm able 
to express it, thank all of you."


Greg Blue, former Chair of WPTF wrote the following. 
? "One of the most cherished moment I had with Kent was in one of his first 
weeks of employment at Dynegy he was able to join us at a Dynegy sponsored 
golf tournament.? Coming from the CPUC they did not get to participate in 
many corporate golf outings.? Kent was all smiles as he came in with a score 
of 135.? He was then told that in order to work at Dynegy he had to take golf 
lessons. 

?"Kent also had one thing that you cannot teach.....enthusiasm!"


Written by Jeff Roarke of Mirant (formerly Southern Energy) 
? "You know, given everything that has been going on in the power markets, 
this just seems to be part of it all.? One more thing.? Kent was always a 
huge presence at the meetings that I went to.? But as we know, those 
stakeholder meetings are gone forever, too.??? Combine it with the death of 
the PX, and it is a very sobering set of circumstances."


Finally, Dennis Flaherty, formerly of Dynegy, and now with Cynergy, wrote a 
long letter, of which a part I have included here. 
? "Over a couple of beers in the Sacramento Hyatt bar one evening, [Kent] and 
I philosophized on life:? [His] conclusion was that we should not be saddened 
by our departure from this world, but instead, we should embrace the 
departure thinking that the person isn,t gone but instead the person,s spirit 
now fills the earth, wind, water and fire.? So now that you, [Kent], have 
departed us I ask all whom you left in this world to remember you, our dear 
friend, colleague and loved one, not for the person you were, but for the 
spirit you share with us all.? So when we feel that brisk breeze dancing on 
our necks or when we see that rare beautiful flower, let us remember to 
embrace your philosophy and to strive to replicate and share the feeling you 
provided to all of us.? We all should consider ourselves the most fortunate 
people in the world for having the opportunity to see all the beautiful 
aspects of the world rolled into one very special human spirit we knew as 
Kent Wheatland." 
?A final note for Burrito readers.? I will be asking the WPTF Board of 
Directors to honor Kent by naming an award in his name. The Kent Wheatland 
Award will be given to special people in our industry who share the passion 
Kent had for doing the right thing, and persisting under any set of 
circumstances, both favorable or unfavorable.? I hope that Gregg Wheatland, 
Kent's surviving brother, will help us select suitable candidates, and in so 
doing, keep our departed friend's name alive. We won't give up that easily. 

Odds & Ends (_!_) 

Responses for the WPTF General Meeting on February 8 and 9 have been 
terrific.? If you haven't made a reservation, the primary hotel, the Old Town 
Marriott in Scottsdale is fully booked.? However, there is an overflow hotel, 
the Scottsdale Courtyard Downtown, one mile South? of Old Town, that is 
available, and at a slightly cheaper rate. 

Dr. Ben Zycher of the RAND Corporation will be our keynote speaker at the 
dinner Thursday evening, February 8.? Ben is widely published, and provides 
very thoughtful and timely insights into the machinations of government 
intervention into our electric power business. He has authored many LA Times 
Op Ed articles (through which I met Ben) entitled, "Don't Blame the Power 
Crisis on Deregulation", "Political Meddling Made This Mess -- and Here They 
Go Again!", and "Politicos Promise Power, and the People Will Pay."? The 
dinner costs $45, and you need to make reservations with Barb Ennis, our 
event coordinator at 402-468-4966. Or e-mail Barb at baennis@earthlink.net 

The all member meeting is also on Thursday, at 3:30 p.m.? We expect at least 
one representative of all 30 members to be present.? Friday morning, February 
9, we will have three guest speakers: John Underhill of SRP, Bill Meroney of 
FERC, and Phil Sharp of the Kennedy School and the Bush Energy Policy 
Transition Team.? Also, the ISO's Don Fuller will brief us on the ISO's 
Demand Side Response program for the summer, and we will all have a chance to 
share with one another what we really would like to do after the ratepayer 
revolt demolishes our clubhouse. 

Lunch on Friday will be provided by WPTF. 

Golf is on the agenda Thursday morning.? We have a reservation at the 
Camelback - Club Course for 12 golfers starting at 09:35 am on Thursday, 
February 08, 2001 under my name. Our confirmation number is 7213430.? The 
cost is $90 which includes the cart and tax, the course is called the Club 
Course and it is 15 minutes North/West from the Scottsdale Marriott Suites 
Old Town.? For additional information, go to their website at 
http://camelbackinn.com or feel free to call them at 800-242-2635 or 
480-596-7050. 

Good fortune for Sister Kendra, formerly of the California PX.? She writes, 
? " Thank for the PX epitaph, I agree, it is sad, but on the good side, we 
will all go out into the industry and promote the market.? We have a story to 
tell about government interference....... 

"I have accepted a position with Deloitte and Touche, but you can always 
reach me at k.heinicke@att.net or 818-236-2133.? Please feel free to pass 
this along to anyone who is interested in staying in touch." 

"I think the one thing I have learned in the last couple of months is that I 
am a Republican.? Also, I have given up swearing for New Years.? I decided to 
take a systematic approach so I started with the f-word.? I have decided to 
replace it with other words.? So now I am debating whether it is worse to be 
FERC'd or PUC'd.? What do you think?"


To tell you the truth, Sis, I haven't had the pleasure. 

Well, Sheryl Lambertson sent us a little theme music to take us out.? Listen 
to this. 

The Rolling Blackout theme song sung to the tune from "Rawhide" 

? Rollin', rollin', rollin', 
? Though the state is golden, 
? Keep them blackouts rollin', statewide. 
? A little colder weather, 
? And we all freeze together, 
? Wishin' more plants were on the line. 

? All the things I'm missin', 
? Like lights and television, 
? Are waiting 'til we can pay the price. 
? Turn 'em on, turn 'em off, 
? Shut 'em down, block 'em out, 
? Turn 'em on, turn 'em off, statewide! 
? Brown 'em out, black 'em out, 
? Charge 'em more, give 'em less, 
? Let the pols fix the mess, statewide! 

? Keep movin', movin', movin', 
? Though they're disapprovin', 
? Keep them rates a-movin', statewide. 
? Don't try to understand 'em, 
? Just raise, charge, and collect 'em. 
? Soon we'll be livin' high and wide. 

? My heart's calculatin', 
? Nuclear plants will be waitin', 
? Be waitin' at the end of my ride. 
? Turn 'em on, turn 'em off, 
? Shut 'em down, block 'em out, 
? Turn 'em on, turn 'em off, statewide! 
? Brown 'em out, black 'em out, 
? Charge 'em more, give 'em less, 
? Let the pols fix the mess, statewide! 
? STATEWIDE!!! 

Have a great weekend.? I'll see you in two. 
gba 
?