Message-ID: <16205181.1075860395186.JavaMail.evans@thyme> Date: Mon, 19 Mar 2001 01:24:00 -0800 (PST) From: rcarroll@bracepatt.com To: gfergus@brobeck.com, acomnes@enron.com, dfulton@enron.com, jdasovic@enron.com, jhartso@enron.com, jsteffe@enron.com, mary.hain@enron.com, smara@enron.com, snovose@enron.com, sbishop@gibbs-bruns.com Subject: Fwd: New York Times - U.S. Orders Power Suppliers to Justify Prices in California Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: "Ronald Carroll" X-To: , , , , , , , , , X-cc: X-bcc: X-Folder: \Mary_Hain_Aug2000_Jul2001\Notes Folders\Discussion threads X-Origin: Hain-M X-FileName: mary-hain.nsf Date: Mon, 19 Mar 2001 08:25:49 -0600 From: "Tracey Bradley" To: "Paul Fox" Cc: "Andrea Settanni" , "Charles Shoneman"=20 , "Jeffrey Watkiss" , "Nan= cy=20 Pickover" , "Ronald Carroll" Subject: New York Times - U.S. Orders Power Suppliers to Justify Prices in= =20 California Mime-Version: 1.0 Content-Type: multipart/mixed; boundary=3D"=3D_005B81C0.533259AD" A copy of FERC's March 16 Notice regarding the proxy price for Feb. 2001 is= =20 attached. This refund notice requires Duke Energy Trading and Marketing,= =20 Dynegy Power Marketing, Portland General Electric Company, Reliant Energy= =20 Services, the Mirant Corporation and Williams Energy Services to either=20 provide the identified refund amounts ($55 million) or defend the prices=20 charged. Below is the New York Times article about this latest action by FERC. March 17, 2001 U.S. Orders Power Suppliers to Justify Prices in California By JOSEPH KAHN WASHINGTON, March 16 =02=05 Federal regulators told power suppliers in=20 California's volatile electricity market today to refund $55 million to sta= te=20 utilities unless they could justify prices that regulators called excessive= . The Federal Energy Regulatory Commission issued the refund notice, which=20 affected six leading electricity generators, to cover the month of February= .=20 Last Friday, it issued a similar order reviewing sales in January. In that= =20 action, the agency asked generators either to justify or refund $69 million= =20 in sales. The refund mandates are part of a new push by the commission to intervene i= n=20 California's troubled electricity market. State and national political=20 leaders have put pressure on the agency to use its authority =02=05 it has = the=20 obligation to insure just and reasonable electricity rates nationwide =02= =05 to=20 limit skyrocketing prices while the state tries to unravel its failed effor= t=20 at deregulation. The agency has indicated that it will also scrutinize electricity=20 transactions in March and April, possibly forcing refunds if it finds that= =20 generators have charged rates above what the agency determines to be their= =20 highest costs of production. While the intervention has won support from some California officials and t= he=20 Bush administration, the agency's orders have been criticized as too narrow= =20 by some California market watchers and one of the federal agency's=20 commissioners. The agency decided to apply a so- called rate screen, effectively a price= =20 cap, to electricity transactions that occur during California's Stage 3=20 emergencies. Emergencies are declared when electricity supplies fall to=20 within 1.5 percent of demand. The agency has said that generators are most= =20 likely to charge excessive prices when supplies are tightest. But California has seen similarly high prices even when it is not forced to= =20 declare a Stage 3 emergency, California officials say. They have criticized= =20 the agency for effectively blessing the profits generators have made during= =20 those nonemergency periods by excluding them from the universe of potential= =20 refunds. The agency has also imposed a relatively high rate screen =02=05 a proxy nu= mber=20 intended to simulate the operating costs of the state's most inefficient=20 generating plants =02=05 on all sellers of electricity during crisis hours.= =20 California officials had urged the agency to investigate the actual costs o= f=20 individual generators and compare them to the prices they charged, tailorin= g=20 penalties to the behavior of each generator. In January, the commission set the rate screen at $273 per megawatt- hour. = In=20 February, the screen rose to $430 per megawatt-hour. The commission said in= a=20 statement that higher natural gas prices accounted for some of the increase= . "This sounds like a step backward instead of the aggressive action we need= =20 from FERC," said Senator Dianne Feinstein, Democrat of California, referrin= g=20 to the agency. "Before the energy crisis started in California, electricity was selling at= =20 an average wholesale cost of $30 a megawatt-hour," Senator Feinstein said.= =20 "And now, FERC is saying a baseline of $430 a megawatt-hour is a reasonable= =20 cost. Something is really wrong here." Agency officials declined to comment on the rationale behind their order. The refunds to date are a small fraction of total electricity sales in the= =20 state. California officials, using a different methodology and a different= =20 time frame to calculate price abuses, had asked the agency to force refunds= =20 of $550 million for December and January. California utility executives have estimated that unless prices are abated= =20 much more aggressively in coming months, the state could end up paying a $7= 0=20 billion electricity bill in 2001, compared with $28 billion last year. The latest refund notice named Duke Energy Trading and Marketing, Dynegy=20 Power Marketing, Portland General Electric Company, Reliant Energy Services= ,=20 the Mirant Corporation and Williams Energy Services, six of the country's= =20 largest power marketers. Dynegy was asked to justify or refund $20.1 millio= n=20 in sales, and Williams was asked to defend or rebate $21.5 million. Spokesmen for the companies named have said that their companies operated= =20 legally and ethically in California. Most of the companies said they planne= d=20 to accept the agency's invitation to defend their prices. - febproxy.pdf