Message-ID: <30966492.1075848030490.JavaMail.evans@thyme>
Date: Tue, 24 Apr 2001 11:57:00 -0700 (PDT)
From: jeff.dasovich@enron.com
To: richard.shapiro@enron.com, skean@enron.com, james.steffes@enron.com, 
	paul.kaufman@enron.com, leslie.lawner@enron.com, 
	joe.hartsoe@enron.com, rob.bradley@enron.com, 
	janel.guerrero@enron.com, karen.denne@enron.com, 
	alan.comnes@enron.com, sandra.mccubbin@enron.com, 
	susan.mara@enron.com
Subject: Some Background on California Gas Price Spikes--The Other Side of
 the Story
Mime-Version: 1.0
Content-Type: text/plain; charset=us-ascii
Content-Transfer-Encoding: 7bit
X-From: Jeff Dasovich
X-To: Richard Shapiro, skean@enron.com, James D Steffes, Paul Kaufman, Leslie Lawner, Joe Hartsoe, Rob Bradley, Janel Guerrero, Karen Denne, Alan Comnes, Sandra McCubbin, Susan J Mara
X-cc: 
X-bcc: 
X-Folder: \Steven_Kean_June2001_3\Notes Folders\California
X-Origin: KEAN-S
X-FileName: skean.nsf

Last week, I distributed a presentation that the Brattle Group gave before 
the California Inquisition (i.e., legislative gas oversight committee looking 
into the gas price spikes at the Cal border).  

The Brattle Group is a consulting firm that Edison has long used to beat up 
on SoCalGas (recall that Edison used to be a big gas customer when it owned 
power plants).  Edison "arranged" for the Brattle Group to be the star 
witness at the Cal Leg gas hearing.  Their job was to set up El Paso and 
Dynegy for the hit at hearings that took place the following day.  Their 
message was simple (and simplistic):

El Paso and Dynegy have market power.
They have used the market power to drive up basis and thus the price of gas 
at the border (to "obscene" levels).
That, in turn, has driven up electricity prices.

Ken Lay is giving a gas talk tomorrow, and Rob Bradley asked that I provide 
the alternative view to the Edison/Brattle rant, in the event that he gets 
any questions on the topic.  It's attached.  Apologies, it's quick and dirty, 
but it provides the basics.

Obviously no need for us to defend El Paso or Dynegy, but might be useful to 
offer a more rationale explanation than the one that the California 
Legislature is peddling.

Finally, we were also fingered somewhat as culprits at the hearing (the 
California PUC FERC lawyer claimed that ENA and TW colluded to drive up basis 
when ENA controlled a portion of  the capacity), but the overriding goal of 
the hearing was to go after EP and Dynegy.

Best,
Jeff