From: ralph@censtrat.com
To: mpalmer@enron.com, skean@enron.com
Date: 2001-06-20 18:58:00+00:00
Subject: DOE Releases Price Controls Study; CA Blackouts May Worsen

i assume you saw this but this is a great message for whatever we undertake
in CA. see you friday.  if you need to chat before that, just buzz me in the
office or on the cell.




NEWS MEDIA CONTACTS:                                      FOR
IMMEDIATE RELEASE
Jill Schroeder 202/586-4940     Wednesday, June 20,
2001
Tom Welch 202/586-5806

Energy Department Study Warns
Price Controls Will Cause
California Blackouts to Worsen



(WASHINGTON, DC) -- The Department of Energy released a report today that
indicates that proposed wholesale electricity price controls in California
could double the number of rolling blackouts from 113 to 235 hours and
increase the number of households in the dark to about 1.575 million.

The report, The Impact of Wholesale Electricity Price Controls on California
Summer Reliability, was prepared by the Department's Office of Policy at the
request of U.S. Senator Frank Murkowski (R-Alaska).  It evaluates the
probable effect of two alternative price cap proposals and concludes that
they "are likely to increase the number of hours and the magnitude of the
outages that California will experience."

Energy Secretary Spencer Abraham said the study confirms the federal
government's concern regarding price controls.  "The findings of this report
are a clear warning that price controls will not help, but only hurt the
situation in California," Secretary Abraham said.  "Minimizing the number of
blackouts ought to be our principal goal because more intense blackouts
would greatly imperil the health and safety of California's citizens and
would undermine the state's economy at least as much as high prices. Our
analysis is that blackouts will be worse and last longer if price controls
are established."

The two proposals analyzed by the Energy Department are the $150 Hard Cap
and the Cost-Plus-$25 Price Cap advocated by California Governor Gray Davis
and some Western lawmakers.  The report concludes a $150 Hard Cap "could
force as much as 3,600 megawatts of generating capacity in the State to shut
down."  Likewise, a Cost-Plus-$25 price cap results in the delay or
abandonment of about 1,300 megawatts of capacity scheduled to be constructed
in the state.

(MORE)

R-01-099


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"The problem with many of the price control proposals made so far is that
they either make it uneconomic for some of the highest cost plants to
operate, or they provide a strong disincentive for adding the type of
peaking capacity California hopes to bring on line this summer through their
expedited siting process," Secretary Abraham said.  "This report confirms
the President's statement made in California that 'Price caps do nothing to
reduce demand and they do nothing to increase supply."

The report also concludes that the price control proposals it analyzed
"could significantly increase blackouts this summer, threatening public
health and safety."  Both proposals directly translate into additional hours
of outages and households affected.  The analysis of the $150 Hard Cap
proposal concludes that the number of hours of blackouts is projected to
more than double to about 235 hours, with the average outage size increasing
about 230 megawatts.  Approximately 175,000 additional households would be
affected.  Similarly, the report projects that the Cost-Plus-$25 Price Cap
proposal will increase the number of hours of expected outages by about 25
percent this summer, with the average outage size increasing about 120
megawatts.  Approximately 90,000 additional households could be affected.

Under current conditions the department expects that California will
experience between 113 hours of rolling blackouts this summer with an
average outage size of about 1,900 megawatts, effecting roughly 1.4
households.  One megawatt is roughly enough energy to power 750 households.

The Impact of Wholesale Electricity Price Controls on California Summer
Reliability, can be found on the Department of Energy's web site at

-DOE-

R-01-099






 - CA-0615.pdf