Message-ID: <4851544.1075846341733.JavaMail.evans@thyme> Date: Fri, 27 Oct 2000 04:29:00 -0700 (PDT) From: peter.styles@enron.com To: mark.schroeder@enron.com Subject: EU plans for single power market - cross border transmission tariffs Cc: nailia.dindarova@enron.com, mark.frevert@enron.com, steven.kean@enron.com, joe.gold@enron.com, andrew.morrison@enron.com, eva.hoeffelman@enron.com, gregor.baumerich@enron.com, heribert.kresse@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: nailia.dindarova@enron.com, mark.frevert@enron.com, steven.kean@enron.com, joe.gold@enron.com, andrew.morrison@enron.com, eva.hoeffelman@enron.com, gregor.baumerich@enron.com, heribert.kresse@enron.com X-From: Peter Styles X-To: Mark Schroeder X-cc: Nailia Dindarova, Mark Frevert, Steven J Kean, Joe Gold, Andrew Morrison, Eva Hoeffelman, Gregor Baumerich, Heribert Kresse X-bcc: X-Folder: \Steven_Kean_Dec2000_1\Notes Folders\Europe X-Origin: KEAN-S X-FileName: skean.nsf Thanks, Mark. Of course in doing the Reuters telephone interview yesterday morning at Eva's request, for more than an hour, I made all of the critical/ explanatory points, and more, you mention below. The temptation of the quote from the Commission official was obviously irresistible for one of the journalists (Pomeroy) however. On the positive side, however, mention of traders' objections to level and incidence of the proposed tariff, its discriminatory effect, and absence of agreement about implementation in Germany are attributable to my briefing of the other journalist, Orgill. The quoted official is giving the Dominique Ristori (a Commission Energy Policy Director of French nationality) party line, but our "victory" is attributable to decisions taken in the Cabinet of Loyola de Palacio, the Energy Commissioner, with whom I intervened on behalf of EFET two weeks ago, and who had already been confronted in September by British government objections. As such, it no longer matters objectively what M. Ristori and his spokespersons think about the "demise of the 2 euros". As you and I discussed yesterday, we must now move on rapidly to offer an alternative traders/ system users' solution for establishment of non discriminatory cross border transmission tariffs. An EFET paper for this purpose is already in preparation, and I spoke to the Cabinet of Mario Monti (Competition Commissioner) about the principles involved on Wednesday evening this week. Mark Schroeder 10/27/2000 11:52 AM To: Mark Frevert/NA/Enron@Enron, Steven J Kean/NA/Enron@Enron cc: Peter Styles/LON/ECT@ECT, Joe Gold/LON/ECT@ECT, Andrew Morrison/LON/ECT@ECT Subject: EU plans for single power market suffer setback.- Enron Mention- Reuters This article/wire report from Reuters came in yesterday just as I left for a lecture, so I am only now forwarding it to you. Joe tells me that Investor Relations has received some inquiries about "what is going on in Europe" yesterday, due to the bad headline Reuters chose below (aided by a self-serving European Commission official), and Dynegy's Q3 earnings showing red ink for Europe. Ignoring the headline, and the quote from the European Commission civil servant (which I will elaborate upon below), this is a BIG WIN. It is progress for liberalisation, and I intend to tell The Economist just that when I do an interview with a reporter later today. This story is about the DEMISE of the ill-conceived 2Euros/MWh export charge. It stands truth and logic on its head to say, as the unnamed European official does, that the demise of the 2 euros charge was anything like "harmonisation" or that its demise sets back European liberalisattion. It is now much more likely that we will get a charging regime that will maintain or increase trade, and certainly will not set back trade as the 2 euros would have. Just to further de-construct the article, it was never a "single charge" (recall that new entrants disproportionately bore the burden, with many pre-existing contracts (of incumbents, since we did not exist in this market 3+ years ago) being exempt, nor would it contribute to a single market, but rather would have raised barriers to cross-border trade. Moreover, the cost basis for the charge was never made transparent, either. Finally, the rebate scheme likely would have subsidised the incumbents' competition against new entrants. There is a good quote from Peter Styles (and Peter deserves a great deal of recognition for leading the efforts to defeat this). If you read the article, not the headline and European Commission official quote, you can see the other arguments against it, including the claim by German industrial consumers that it would have raised their prices by 10%. Any message from PR or Investor Relations must be that this is a victory in the march towards a fully liberalised market, and a win for consumers. The reason a European ommission official would say what they did is that they have been complicit in the German/Franco conspiracy to impose the 2 euros charge, and probably felt compelled to save face by saying this is a setback; otherwise, one would ask why were they working on/supporting something so deleterious to the development of the market?! Apologies for being a bit lengthy, but I wrote this hopefully with sufficient detail that if you want to forward this to either PR or Investor Relations, they will be armed with enough info that they can respond to further inquiries. By the way, we had an inkling of this via telephone coversation I had with UK DTI three days ago (communicated immediately to traders, just did not have time to summarise in an e-mail to you). I will be summarising my conversation with UK DTI momentarily, even though it is 3 days old, because I will be adding some of her commentary on the wider political lay of the land, which I think you will want to read for the "big picture" of European machinations. let me know if you need more. thanks mcs ---------------------- Forwarded by Mark Schroeder/LON/ECT on 27/10/2000 10:36 --------------------------- Iona Maclean 26/10/2000 17:35 To: Peter Styles/LON/ECT@ECT, Jackie Gentle/LON/ECT@ECT, John Sherriff/LON/ECT@ECT, Michael R Brown/LON/ECT@ECT, Eva Hoeffelman/LON/ECT@ECT, Mark Schroeder/LON/ECT@ECT, Joe Gold/LON/ECT@ECT, Andreas Radmacher/FRA/ECT@ECT, Paul Hennemeyer/LON/ECT@ECT, christina_mueller@de.cohnwolfe.com, Viviana Florio/FRA/ECT@ECT, Christopher McKey/FRA/ECT@ECT, Bart Lyon/LON/ECT@ECT, Peter Kreuzberg/FRA/ECT@ECT, Sven Becker/FRA/ECT@ECT, Gregor Baumerich/LON/ECT@ECT, John Oliver/LON/ECT@ECT cc: Subject: EU plans for single power market suffer setback.- Enron Mention- Reuters ---------------------- Forwarded by Iona Maclean/LON/ECT on 26/10/2000 17:35 --------------------------- Enron Capital & Trade Resources Corp. From: djcustomclips@djinteractive.com 26/10/2000 18:22 Please respond to nobody@mail1.djnr.com To: 216668@mailman.enron.com cc: Subject: Enron Reuters folder: UK: EU plans for single power market suffer setback. UK: EU plans for single power market suffer setback. By Margaret Orgill 10/26/2000 Reuters English News Service (C) Reuters Limited 2000. LONDON, Oct 26 (Reuters) - European Union hopes for a single electricity market have suffered a setback after power companies and consumers failed to agree a system for harmonising cross-border transmission tariffs, said officials on Thursday. Plans to introduce a single tariff for access to the west European grid by November 1 have been postponed because of misgivings, particularly from some power producers, said a European Union source. "It seems that we have more problems than expected and the European Commission could have to go for legislation," said the official, who declined to be named. The tariff is a voluntary proposal by western European grid operators to harmonise cross border charges and create a single regional power market. The official declined to give more details of the producers' doubts but traders are opposed to the fee which they say is too high and will stifle the emerging European power trading market. The proposal has also run into legal problems in Germany where its introduction would require changes to an industry agreement on access to the regional electricity grid. German consumer bodies are unlikely to accept the new tariff which will add around 10 percent to wholesale power prices. "The VIK, which represents industrial consumers, has already written to the Commission saying they will not accept this fee," said Einar Vestra, managing director of the trading division at Mannheim-based utility MVV. TARIFF TO BE DISCUSSED BY EU, INDUSTRY The tariff will be discussed by the so-called Florence group, which includes EU officials, government and industry representatives, which is due to meet again on November 9-10. If the voluntary approach does not work, Brussels may decide to include provisions on cross-border transmission in a forthcoming directive to speed up the opening of Europe's electricity markets. Grid operators have proposed a flat charge of two euros per megawatt hour for exports regardless of how many borders the power crosses, instead of charging a fee at each frontier. The funds from the tariff will be put in a central pot and divided among grid owners to reimburse network transit costs, estimated at around 200 million euros a year. Traders argue the fee is too expensive and object to the fact the grid companies want to charge it only on new contracts and exempt existing long-term contracts. "An export-related transmission fee was misconceived in the first place," said Peter Styles, vice president of European government affairs at U.S. utility Enron. "The priority in the Florence process should be greater harmonisation between access regimes in member states...with a view of achieving transmission tariffs which include cross border access." (Additional reporting by Robin Pomeroy). Folder Name: Enron Reuters folder Relevance Score on Scale of 100: 82 ______________________________________________________________________ To review or revise your folder, visit http://www.djinteractive.com or contact Dow Jones Customer Service by e-mail at custom.news@bis.dowjones.com or by phone at 800-369-7466. (Outside the U.S. and Canada, call 609-452-1511 or contact your local sales representative.) ______________________________________________________________________ Copyright (c) 2000 Dow Jones & Company, Inc. All Rights Reserved