From: bounce-app-ippexecs-33275@listserver.eei.org
To: app-ippexecs@listserver.eei.org
Date: 2001-04-25 11:34:00+00:00
Subject: Alliance Info Alert

Dear Generation/Power Marketing Executive:

The following is this week's Alliance Express newsletter, and a special 
announcement regarding a proposed action by the Financial Accounting 
Standards Board (FASB).

FASB 133
FASB is considering an exception to Statement of Financial Accounting 
Standards (SFAS) No. 133 that will exempt energy companies from the 
requirement to account for capacity contracts as derivatives.  A vote against 
the exception would result in a significant increase in earnings volatility, 
and raises other important concerns for energy suppliers.  (Attached is a 
summary of this issue.)  The Board is expected to vote on this issue during 
May 2001.  EEI will be taking steps to appraise FASB of our concerns.  If 
you, or company CFO would like more information about this effort, please 
contact Richard McMahon, Executive Director of the Alliance of Energy 
Suppliers, at rmcmahon@eei.org, or at 202-508-5571.


                             Alliance of Energy Suppliers ExpressApril 25, 
2001
INSIDE WASHINGTON

FEDERAL AFFAIRS

***Bill Repealing PUHCA Is Approved By Senate Committee***
The Senate Banking Committee today approved S 206, a bill that repeals the 
Public Utility Holding Company Act of 1935.  The bill would repeal PUHCA and 
transfer oversight of public utility holding companies from the Securities 
and Exchange Commission to the Federal Energy Regulatory Commission and 
appropriate state agencies.
S.206 was approved with two amendments.  Offered by Sen. Mike Enzi (R-WY), 
the first amendment would establish the Electric Energy Market Competition 
Task Force to study competition in the wholesale and retail market for 
electric energy in the United States. The task force would be made up of 
representatives of FERC, the Department of Justice and the Federal Trade 
Commission, as well as non-voting representatives from the Department of 
Agriculture and the Securities and Exchange Commission. The amendment also 
contained a provision, co-sponsored by Sen. Paul Sarbanes (D-MD), that would 
preserve FERC's authority to require that energy rates are reasonable and do 
not include the pass-through of holding company costs that are unrelated to 
energy.
Another amendment, offered by Sen. Jon Corzine (D-NJ), initiated a study by 
the General Accounting Office of the success of federal and state governments 
in preventing anticompetitive practices by public utility holding companies 
and in promoting competition and efficient energy markets.

 ***Institutes Tax Agreement With Public Power Again Introduced on Hill***

The tax agreement EEI reached with the American Public Power Association 
(APPA) and the Large Public Power Council (LPPC) again has been introduced in 
the House.  The bill (HR 1459) contains the same provisions as were in a 
measure (HR 4971), with technical corrections, introduced during the 106th 
Congress.  HR 1459 was introduced by Rep. J.D. Hayworth (R-AZ) and nine 
original co-sponsors from the Ways and Means Committee.

HR 1459 contains four key provisions with tax code changes:  1) The tax-free 
sale or spin-off of transmission assets into an RTO is allowed, 2) Nuclear 
decommissioning laws are adapted to a competitive market by allowing 
deductions to a trust fund no longer subject to cost-of service ratemaking, 
3) The contributions in aid of construction (CIAC) tax on interconnections to 
transmission and distribution facilities is eliminated, and 4) Private use 
tax rules are changed to permit open access to transmission and distribution 
facilities.

The measure was referred to the House Ways and Means Committee, and EEI has 
urged Congress to act without delay in moving it forward.  Enactment will 
help encourage a vigorous but fair competitive environment, the Institute 
noted.  The same legislation has been incorporated into S 389, Senate Energy 
Committee Chairman Frank Murkowski's (R-AK) energy security bill, and 
stand-alone legislation could also be introduced.  Hearings are expected to 
be held in both the Senate Finance and House Ways and Means Committees, 
probably after consideration of President Bush's individual tax proposal.

 ADMINISTRATION/FERC

***White House Seeks $2 Trillion Budget In Fiscal Year 2002***

President Bush last week transmitted a $2 trillion fiscal year 2002 budget 
request to Capitol Hill.  The Administration noted that its proposal 
*moderates recent explosive growth in discretionary spending to four percent 
in 2002,* an increase of $26 billion over the preceding fiscal year.  The 
budget bid contains a $231 billion total surplus in 2002, and projects a $5.6 
trillion surplus over the next ten years.

In the energy area, the Administration noted the federal governments 
*longstanding and evolving role* in the sector, pointing out that most 
federal energy programs and agencies have no state or private counterparts.  
It proposed about $2.8 billion in discretionary spending for energy programs, 
and about $2.1 billion in tax benefits, *mainly to encourage development of 
traditional and alternative energy sources.*  DOEs budget request was $19.2 
billion, including $2.3 billion for energy resources programs.  This later 
figure represents a decrease of $196 million, or 7.9 percent, from fiscal 
year 2001.

In the environmental sector, the Administration sought some $7.3 billion in 
discretionary funding for EPA, including a $3.7 billion operating program 
focused on implementation of most federal pollution control laws.

 ***Success of Restructuring Tied to Energy Strategy, FERCs Massey Asserts***

Electric restructuring may be in jeopardy, and its success *is in the hands 
of regulators and policymakers,* FERC Commissioner William Massey has 
asserted.  Speaking at a recent National Governors Association policy forum 
in Philadelphia, Commissioner Massey urged officials to pay attention to the 
key elements of a national energy strategy.

First, he specified, there is a need for an adequate supply of the energy 
commodity.  Turning to a second element, Commissioner Massey told forum 
attendees that *all the supply in the world wont help unless it can be 
delivered over an adequate, efficient, non-discriminatory network.*  
Commissioner Massey identified market structure as the third essential 
element of a national energy strategy, while citing an inherent difficulty: 
that *good structure cannot be easily parsed between wholesale and retail 
jurisdictions.*  Accordingly, he said, FERC and the states must work together 
on market structure.

The final element of a successful energy strategy, the commissioner 
specified, is the need for aggressive FERC intervention when markets fail to 
do their job.  *If the states cannot depend on the wholesale market regulator 
to ensure reasonable prices for consumers,* he cautioned, they *will surely 
think twice before heading down the restructuring path.*

NEW GENERATION

***Dynegy To Build Second Plant in Kentucky***

Dynegy has announced plans to construct a new 330 megawatt plant adjacent to 
the Riverside Generating project in Lawrence County, Kentucky.  Dynegy will 
sell the power generated at the plant in the wholesale market.  Commercial 
operation is expected to begin first quarter of 2002.

***PPL To Expand Generation Capacity***

PPL Corporation this week said it would build a 540 megawatt power plant near 
Chicago and would increase the capacity of its Susquehanna nuclear plant by 
100 megawatts.  CEO William Hecht said the Illinois plant is expected to be 
in service by the summer of 2002.

***Constellation Energy Group Announces Eight New Plants***

Constellation Energy Group  this week announced that the company is scheduled 
to bring four peaking power plants on line this summer.  Additionally, four 
larger power plants are scheduled to enter service in the following two 
summers.   The four peaking plants are located in Illinois, Pennsylvania, 
Virginia and West Virginia.  The larger power plants are under construction 
in California, Florida, Illinois, and Texas.

*Were building in these seven states because they serve regions where 
wholesale electricity is needed and where we can provide energy to support 
our national power marketing business,* said Constellation Energy Group 
Chairman and CEO Christian Poindexter.

***California Energy Commission Approves Construction of Otay Mesa Generating 
Plant***

PG&E Corporations National Energy Group (NEG) last week announced that the 
California Energy Commission (CEC) has approved construction of the Otay Mesa 
Generating Plant in San Diego County, which the NEG has developed.  The 500 
megawatt project will produce enough electricity to power about 1,000 homes.  
After the development process is completed, Calpine Corporation will assume 
ownership of the project and will construct and operate the plant.  NEG will 
contract for up to half the plants output.

ENERGY DATA

*** Weekly Electric Output (Week 15)***

Electric output reached 63,528 GWh for the week ending April 14 (Week 15), 
with the highest increase over 2000 levels in the South Central states, which 
both had a 12.6 percent increase over 2000 for week 15.  Year-to-date, the 
Rocky Mountain region experienced the greatest increase in output (7.6 
percent) over 2000. For more information, email alliance@eei.org.

The Alliance Express is a free news service sponsored by the Alliance of 
Energy Suppliers.  This document can be redistributed.  Please send 
questions, comments, or requests to alliance@eei.org, or telephone 
202/508-5680.




Nancy Tarr
Manager, Business Development
EEI Alliance of Energy Suppliers
701 Pennsylvania Ave., N.W.
Washington, D.C.  20004
Telephone:  202-508-5680
FAX:  202-508-5600
www.eei.org/alliance


ntarr@eei.org
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