From: rcarroll@bracepatt.com
To: jdasovic@enron.com
Date: 2000-09-13 11:21:00+00:00
Subject: Fwd: Reuters Article on Tuesday's FERC Meeting in California

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Date: Wed, 13 Sep 2000 07:42:32 -0500
From: "Tracey Bradley" <tbradley@bracepatt.com>
To: "Deanna King" <dking@bracepatt.com>, "Jeffrey Watkiss" 
<dwatkiss@bracepatt.com>, "Paul Fox" <pfox@bracepatt.com>, "Ronald Carroll" 
<rcarroll@bracepatt.com>
Subject: Reuters Article on Tuesday's FERC Meeting in California
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FYI.  This article reflects more power marketer-bashing than the Dow Jones 
write up on this meeting.

Calif. free market power experiment under fire


     SAN DIEGO, Sept 12 (Reuters) - California lawmakers and regulators 
sought a temporary halt on Tuesday to the state's trailblazing free market 
electricity experiment at a hearing called by the Federal Energy Regulatory 
Commission.

     "It (the free market) is simply a structure for extortion as we have 
seen this summer," said Carl Wood, a commissioner with state regulator the 
California Public Utilities Commission, seeking a return to cost-based rather 
than market-based rates for customers.

     FERC, which regulates the wholesale power market, has launched an 
investigation into price spikes in California this summer. It is due to 
report its finding by November 1.

     Under the terms of the deregulation of California's electric utility 
industry, customers of Sempra Energy subsidiary San Diego Gas and Electric 
became the first in the nation to pay market-based rates without a safety net.

     There was a public outcry in the city this summer when a rise in 
wholesale prices to record levels led to a tripling in their electricity 
bills.

     "I think many thought because we had deregulation, we had competition. 
We don't," San Diego mayor Susan Golding told FERC commissioners. "There is 
no public confidence right now about the movement to a competitive energy 
market."

     Companies profiting from the high prices have included independent power 
producers and also marketers who have purchased the output of plants under 
long-term contracts and been able to extract much higher prices from the spot 
and day-ahead markets.

     "I have no sympathy for suppliers right now. They are fat and happy," 
Golding said.

     Many local and national lawmakers have called for FERC to declare that 
rates set by suppliers this summer were not "just and reasonable" as required 
under U.S. law. Such a declaration could be followed by action to impose 
market restrictions such as price caps across the western U.S.

     Stephen Baum, chief executive officer of SDG&E parent Sempra Energy, 
said the utility favors selective "interim bid caps" for generators who have 
been shown to have sufficient market power to influence prices.

     These caps would run through next summer and if the market was not then 
operating competitively could be followed by a return to cost-based 
ratemaking.

     Such a move could lead to the demise of the California Power Exchange, 
which was set up as part of the deregulation of the state's power industry. 
CalPX is where the high-priced power has been bought this summer and its 
trading mechanisms have been heavily criticized.

     "That (the demise of CalPX) could be a result that comes out of 
structural reform," Baum said.

     Many are also calling on FERC to retroactively void trades at prices 
that were deemed not "just and reasonable" and order that profits from 
generators and marketers be returned to the "victims."

     These are reported to include single mothers forced to choose between 
paying their "exorbitant" electricity bill and buying new school uniforms for 
their children or fixed income pensioners who have been turning off their 
refrigerators in a bid to avoid massive bills.

     "If there was ever a case for you to use your remedial powers, including 
refunds of excessive charges, this is it," Baum of Sempra Energy told the 
commissioners.

     Terry Winters, head of the California Independent System Operator (ISO), 
which operates most of the state's power grid, said the higher prices in 
California largely reflected lower available imports from surrounding states.

     California has traditionally been a significant importer of power from 
states such as Nevada and Arizona but rapid economic growth in those areas 
has increased their own needs and reduced the amount of electricity they are 
able to sell elsewhere.

     The state's power problems are also linked to the absence of any new 
in-state generation, with no significant plants build during the last 10 
years. Many are now planned but few will come on line before 2002 at the 
earliest.

     There have also been growing calls from some for San Diego to create its 
own municipal utility, with the city's residents casting envious eyes toward 
near neighbors in Los Angeles where the country's largest municipal utility 
has been able to keep prices steady and even promise further price cuts.

     Those calls have gained the support of two of the area's Congressmen 
Duncan Hunter and Bob Filner although only one community in the area, San 
Marcos, has so far begun the long and complicated process required.

     Some 24 states and the District of Columbia have enacted laws to open 
retail electricity markets to competition. Most consumers, however, continue 
to be shielded by protective measures during the rocky transition to 
competitive markets.