Message-ID: <30970202.1075842567173.JavaMail.evans@thyme> Date: Thu, 1 Feb 2001 07:15:00 -0800 (PST) From: drew.fossum@enron.com To: steven.harris@enron.com Subject: Re: Daily California Update..... Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Drew Fossum X-To: Steven Harris X-cc: X-bcc: X-Folder: \Drew_Fossum_Dec2000_June2001_2\Notes Folders\'sent mail X-Origin: FOSSUM-D X-FileName: dfossum.nsf I feel awful about that--particularly since PGT did the same thing! df Steven Harris 02/01/2001 11:58 AM To: Drew Fossum/ET&S/Enron@ENRON cc: Subject: Daily California Update..... FYI. You should be ashamed asking PG&E to pay us up front for demand charges. Apparently, California feels we are "predators"! ---------------------- Forwarded by Steven Harris/ET&S/Enron on 02/01/2001 11:57 AM --------------------------- From: Lorna Brennan/ENRON@enronXgate on 02/01/2001 10:16 AM To: Lindy Donoho/ET&S/Enron@ENRON, Jeffery Fawcett/ET&S/Enron@ENRON, Kevin Hyatt/ET&S/Enron@Enron, Lorraine Lindberg/ET&S/Enron@ENRON, TK Lohman/ET&S/Enron@ENRON, Michelle Lokay/ET&S/Enron@Enron, Lee Huber/ET&S/Enron@ENRON, Susan Scott/ET&S/Enron@ENRON, Steven Harris/ET&S/Enron@ENRON cc: Subject: Daily California Update..... CPUC Votes to Keep Gas Flowing A special session yesterday of California's regulators gave PG&E's utility authority to amend its gas supply deals to keep supplies flowing to the state past Feb. 7 when the current federal DOE emergency order expires, but it postponed action on another PG&E request that Southern California Gas Co. --- which has strongly objected --- be compelled to provide emergency supplies to the PG&E utility's residential and small business customers. Loretta Lynch, president of the California Public Utilities Commission, said PG&E's utility is a "victim --- a victim of circumstances and a victim of predatory practices by natural gas suppliers," now demanding payment for future supplies up front --- not because the utility has failed to pay its past gas bills, but because the electricity crisis has sapped its credit-worthiness. The CPUC action allows PG&E's utility to offer suppliers the option of securitization or, in effect, a lien, in the utility's retail customers' bills which cover the full cost of the wholesale gas prices as an incentive to have the suppliers extend contracts with PG&E's gas utility operations while the credit-worthiness of the company itself is dubious. It won't be until next week when the utility begins negotiating new contracts, that it will know if the CPUC action will overcome the suppliers reluctance to extend contracts in the current situation, according to PG&E gas utility spokesperson Staci Homrig. On the operational side, PG&E on Wednesday declared a low-inventory OFO because of a cold snap causing more supplies to be burned then pipeline shippers were bringing into the system. The action was thought to help cause the PG&E citygate price to jump from $11 to $17 on Wednesday. As for reports of low storage, Homrig said that while the utility's supplies are very low, they are adequate for the next week. They are not dipping into cushion or base gas at this point, Homrig said. Lynch said that PG&E has not defaulted on any payments, but nevertheless, in what she considers predatory practices, the suppliers have required advance payments or payment at the time supplies are provided. "These gas suppliers are taking advantage of an emergency situation to extract another pound of flesh," Lynch said in voting for the securitization measure. "Suppliers who have been paid when due, are now saying regardless of existing agreements 'pay us today.' They are doing this in the coldest time of the year, so the commissioners have to take these difficult steps to allow PG&E amend these agreements in order to keep the gas flowing." Part of the CPUC's action places a 90-day limit on the securitization option, so with the way gas contracts work, in effect, it only provides about another 30 days' worth of supplies, said Homrig, who noted that almost all of PG&E's 25 to 30 suppliers have asked for special payment arrangements (advances, cash-on-delivery or letters of credit) that the company cannot accommodate because of its cash-flow crisis.~ Out of ongoing negotiations, the parties came up with the securitization proposal in the customer account receivables, thus, assuring them they will get paid. On the gas side, PG&E has had sufficient revenues --- unlike its electric business --- but the suppliers have not wanted to let the utility stick to a normal payment arrangement because of the severe credit-rating decline in the past weeks. The CPUC met in San Francisco late Wednesday afternoon in the midst of a whirlwind day of public announcements from the governor, state legislature, consumer groups, regulators and utilities. A key piece was missing, however. California state legislative leaders called off a morning briefing that was to have offered the latest legislative proposals for dealing with the energy crisis. Reportedly sticking points remain centered on the key questions of who pays for the solutions and how deeply the state gets into the energy business. A spokesman for the assembly speaker's office said he had no idea when the briefing would be re-scheduled. One piece of legislation that got through the state Senate (SB 1X) yesterday authorizes another $500 million in emergency funds to purchase power. It also would allow the state water resources department to be the utilities' wholesale power supplier under long-term contracts at least through 2002. The measure drew a protest from CPUC Commissioner Richard Bilas, who argued that the state agency be "removed from that role as quickly as possible." The bill, which was first passed by the state Assembly, was returned to assembly committees last night to iron out changes made in the senate. It then would have to be ratified again by the Assembly. Meanwhile, consumer activists held rallies around the state protesting the state bail-out of the private-sector utilities. This prompted at least one of the utilities, Southern California Edison, to come out swinging, saying that the recently released results of utility financial audits do not show any "windfall profits" or diversion of monies from the utilities to the parent company. A letter surfaced in Washington from Gov. Gray Davis to the Senate Energy and Natural Resources Committee, dated Jan. 30 and outlining measures the state is taking to increase energy supply and decrease demand, sign long-term contracts and maintain the financial viability of the state's public utilities. The letter, a catalogue of recent initiatives already reported here, contained no specifics on any long-term contracts nor legislation signed that would address the immediate problem. Davis outlined measures being taken to speed up siting of new power plants, saying an additional 2,000 MW would be online by the end of the year. Responding to questions on another arena, Edison International's senior vice president Tom Higgins said "everything is on the table" in the ongoing negotiations between Davis' three-person negotiating team and the two utilities, including dropping the pending lawsuit in federal court in Los Angeles and crediting excess revenues from the utilities' own generation against the whopping wholesale power cost under-collections. The state remained under a power watch for the 16th day as the California independent grid operator (Cal-ISO) urged conservation because "reserves remain very low."