From: karen.denne@enron.com
To: kenneth.lay@enron.com, jeff.skilling@enron.com, jeff.dasovich@enron.com, susan.mara@enron.com, alan.comnes@enron.com, richard.shapiro@enron.com, james.steffes@enron.com, harry.kingerski@enron.com, ken@kdscommunications.com, elizabeth.tilney@enron.com, paula.rieker@enron.com, mark.koenig@enron.com, janel.guerrero@enron.com, paul.kaufman@enron.com, leslie.lawner@enron.com, hgovenar@govadv.com, sgovenar@govadv.com, robert.frank@enron.com, janet.dietrich@enron.com, john.lavorato@enron.com, greg.whalley@enron.com, david.delainey@enron.com, steven.kean@enron.com
Cc: mark.palmer@enron.com
Date: 2001-07-10 08:52:00+00:00
Subject: LA Times Article

This is the Los Angeles Times article Mark has been working on...

California; Metro Desk
Electricity Cost Data Spread the Blame Power: Many suppliers charged more 
than the firms that Davis has pilloried, records show.
RICH CONNELL; ROBERT J. LOPEZ; DOUG SMITH
TIMES STAFF WRITERS

07/10/2001
Los Angeles Times
Home Edition
B-1
Copyright 2001 / The Times Mirror Company

SACRAMENTO -- California's energy meltdown involves a far more diverse group 
of wholesale electricity merchants than suggested by Gov. Gray Davis, who has 
aggressively blamed a handful of Texas companies, state records show. 
During the first three months of this year--one of the worst stretches of 
power shortages during the crisis--an assortment of public and private 
entities charged the state prices averaging well above some of those paid to 
Texas firms, according to documents released to The Times on Monday by the 
Department of Water Resources, which now buys power for California.
Among those setting and collecting some of the highest average prices per 
megawatt-hour were a Canadian public utility, a subsidiary of San Diego Gas & 
Electric's parent company, and the Los Angeles Department of Water and Power, 
the report shows. Their average prices ranged from $498 a megawatt-hour 
charged by Powerex, the trading arm of British Columbia's BC Hydro, to $292 
an hour by the DWP. 
In fact, some of the biggest private power companies singled out for 
criticism by Davis and other state officials--Dynegy Inc., Duke Energy and 
Mirant--charged less than the average prices the state paid for the period. 
Those companies' average prices ranged from $146 to $240 per megawatt-hour, 
according to an analysis of the documents. 
The figures cover the various types of spot and longer-term power purchased 
by the state during three months that included rolling blackouts and more 
than a month of razor-thin reserves, leading to continuous power emergencies. 
Davis spokesman Steve Maviglio said the governor has directed his sharpest 
barbs at private out-of-state generators because, in general, they have 
reaped the highest profits over the longest period. 
"You have to look at the whole picture," Maviglio said. 
"The governor was expressing his displeasure with the arrogance of the 
generators who wear cowboy hats," he said. "Their profits were 100% to 400% 
above last year. . . . Just because there are other entities who are charging 
us more [per megawatt-hour] doesn't change the fact that we are getting 
ripped off by companies from Houston, Tulsa, Atlanta or Charlotte." 
The report by the Department of Water Resources was provided to The Times on 
the same day the state released 1,700 pages of documents on California's 
electricity purchases on the volatile spot market for the year's first 
quarter. 
The records detail how the state spent nearly $8 billion buying power in the 
first five months of the year, and underscore the complexity of the state's 
energy problem. They also show that patterns of high prices are not limited 
to a few generators. 
Oscar Hidalgo, a spokesman for the water resources agency, said that the 
reports together show that prices were extremely volatile early in the year. 
"All the prices were high," he said, noting the downward trend in costs since 
his agency began buying power in mid-January. 
The average price per megawatt-hour for all state purchases went from $316 in 
January to $243 in May. Spot prices fell from an average of $321 per hour to 
$271, the reports show. 
In the first quarter of the year, some public entities' prices far exceeded 
those of the biggest private companies. For example, Houston-based Enron, one 
of the nation's biggest power traders, charged an average of $181 per 
megawatt-hour. And Atlanta-based Mirant, which sold the most to the state, a 
total of $706 million, charged an average of $225 per megawatt-hour. 
By contrast, a Calgary, Canada, firm, TransAlta Energy, averaged $335 a 
megawatt-hour, and the Sacramento Municipal Utility District had average 
charges of $330 per megawatt-hour. 
A spokesman for Enron, Mark Palmer, said recently that the "vilification of 
Enron was based on politics, not facts." Spokesmen for BC Hydro could not be 
reached late Monday to comment on its huge sales to the state. In the past, 
the utility has defended its pricing practices, saying it has offered 
last-minute hydroelectric power that helped keep California's lights on. 
A spokeswoman for Sempra, the parent company of San Diego Gas & Electric, 
said late Monday the company was unable to comment because it had yet to see 
the figures released by the state. Officials at DWP, who could not be reached 
Monday evening, have defended their pricing, saying the costs of producing 
the power needed by the state were extremely high. 
More Power Bought Than Projected 
Hidalgo, of the Department of Water Resources, said his agency's efforts, 
coupled with conservation by business and consumers and falling natural gas 
prices, have begun to tame the state's market. 
Still, the state had to purchase $321 million in power in April and May, 
about 10% more than Davis' analysts had projected. 
Hidlago said that was because of hot weather in May and other supply problems 
in April. He said reports will show that power purchases fell short of state 
projections in June and early July. 
The reports also will show that prices paid by the state were down in June 
and July, partly because spot prices have fallen sharply, often to well under 
$100 a megawatt-hour. 
A summary Department of Water Resources report released Monday credited 
Davis' program of nurturing new power generation and establishing long-term 
power contracts with with "moving the California electric energy industry 
closer to normalcy."

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