Message-ID: <22167025.1075860463560.JavaMail.evans@thyme>
Date: Thu, 15 Mar 2001 07:59:00 -0800 (PST)
From: james.steffes@enron.com
To: jeff.dasovich@enron.com, paul.kaufman@enron.com, mary.hain@enron.com, 
	alan.comnes@enron.com, susan.mara@enron.com, steve.walton@enron.com
Subject: Senators Dianne Feinstein and Gordon Smith Announce Partnership in
 Response to the Western Energy Crisis
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----- Forwarded by James D Steffes/NA/Enron on 03/15/2001 03:58 PM -----

=09Linda Robertson
=0903/15/2001 02:53 PM
=09=09=20
=09=09 To: Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, Ja=
mes D=20
Steffes/NA/Enron@Enron, Janel Guerrero/Corp/Enron@Enron
=09=09 cc:=20
=09=09 Subject: Senators Dianne Feinstein and Gordon Smith Announce Partner=
ship in=20
Response to the Western Energy Crisis

Bad development.  We are trying to get Steve an appointment with Smith next=
=20
Tuesday. =20
----- Forwarded by Linda Robertson/NA/Enron on 03/15/2001 03:51 PM -----

=09Allison Navin
=0903/15/2001 03:46 PM
=09=09=20
=09=09 To: Linda Robertson/NA/Enron@ENRON
=09=09 cc:=20
=09=09 Subject: Senators Dianne Feinstein and Gordon Smith Announce Partner=
ship in=20
Response to the Western Energy Crisis


Senators Dianne Feinstein and Gordon Smith
Announce Partnership in Response to the Western Energy Crisis
March 15, 2001
Washington, DC - Senators Dianne Feinstein (D-CA) and Gordon Smith (R-OR)=
=20
today announced an agreement to introduce bipartisan legislation to restore=
=20
stability and reliability to the Western energy market by directing the=20
Federal Energy Regulatory Commission (FERC) to impose a temporary =01&just =
and=20
reasonable=018 wholesale rate cap or cost-of-service based rates.
The legislation will also require the states involved in this effort to pas=
s=20
on the cost of the electricity to retail customers. However, the states wou=
ld=20
be able to determine how and when this would be done. In other words,=20
California could choose to use tiered-pricing, real-time pricing or set a=
=20
baseline rate above which prices would be passed through.
=01&We now have a piece of legislation that can fix the broken electricity=
=20
market and provide a period of reliability and stability in wholesale energ=
y=20
costs,=018 Senator Feinstein said.
=01&FERC has found the wholesale prices being charged in California to be u=
njust=20
and unreasonable. This legislation essentially will mandate that once FERC=
=20
makes such a finding, the agency will carry out its regulatory role. This i=
s=20
a $175 million a year agency. It is there to regulate the energy marketplac=
e,=20
and it should. What the Federal government can do is to provide a period of=
=20
reliability and stability at a time of crisis. Unfortunately FERC has refus=
ed=20
to do so.=018
=01&California=01,s broken electricity market is a result of a flawed 1996=
=20
California law that deregulated wholesale costs, but left in place caps on=
=20
retail prices. This was coupled with a requirement that the utilities dives=
t=20
themselves of their generating capacity and buy most of their electricity o=
n=20
the spot market, where prices have escalated dramatically. In hindsight all=
=20
of this came together in a catastrophic scenario, so that today, California=
=20
buys electricity at astronomical prices. We believe that FERC needs to act =
to=20
help restore reasonable costs and stability to this marketplace.=018
=01&Additionally, this agreement addresses the escalation of natural gas=20
transportation costs. Last February, FERC began a two-year experiment to li=
ft=20
the cap on these costs and since that time we have seen the price of natura=
l=20
gas climb 400 percent higher in Southern California.=018 Senator Feinstein=
=20
added.=20
Specifically, the compromise legislation would accomplish the following goa=
ls:
Directs FERC to impose a just and reasonable wholesale rate cap, which can =
be=20
load-differentiated based on supply and demand, or cost-of-service-based=20
rates in the Western energy market (Western Systems Coordinating Council,=
=20
including Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico=
,=20
Oregon, Utah, Washington, and Wyoming.)=20
Addresses the issue of high natural gas transmission costs by reimposing FE=
RC=20
tariffs for natural gas transportation into California (FERC Order 637) and=
=20
requiring natural gas sellers to declare separately the transportation and=
=20
commodity components of the bundled rate for gray market transactions.=20
Stipulates that the wholesale price cap or cost-of-service based rate will=
=20
not apply to wholesale sales for delivery in a state that imposes a price=
=20
limit on the sale of electric energy at retail that: precludes a regulated=
=20
utility from recovering costs under the price cap or on a cost-of service=
=20
based rate; or precludes a regulated utility from paying its bills.=20
Establishes that the rate-making body of a state can determine how and when=
=20
the wholesale rates will be passed on to ratepayers, including the setting =
of=20
tiered pricing, real time pricing, and baseline rates. (With respect to the=
=20
Bonneville Power Administration, BPA will be encouraged to seek to reduce=
=20
rate spikes to economically distressed communities, while ensuring costs ar=
e=20
recovered by the end of the next contract period in 2006.)=20
Directs that after the date of enactment, utilities cannot be ordered to se=
ll=20
electricity or natural gas into a state without a determination by the=20
Federal Energy Regulatory Commission that the seller will be paid.=20
Directs that in the event that a state in the Western energy market does no=
t=20
meet the criteria described in this agreement, state public utilities=20
commissions in the Western energy market can ensure that regulated utilitie=
s=20
within their jurisdiction meet demand for electric energy in the utility=01=
,s=20
service area before making sales into any such state.=20
Establishes that the wholesale rate cap or cost-of-service based rates shal=
l=20
remain in effect until such time as the market for electric energy in the=
=20
western energy market reflects just and reasonable rates, as determined by=
=20
the Commission or until March 1, 2003, whichever is earlier.=20