Message-ID: <7241272.1075846348073.JavaMail.evans@thyme>
Date: Wed, 18 Oct 2000 08:22:00 -0700 (PDT)
From: ann.schmidt@enron.com
To: mark.palmer@enron.com, karen.denne@enron.com, meredith.philipp@enron.com, 
	steven.kean@enron.com, elizabeth.linnell@enron.com, 
	laura.schwartz@enron.com, eric.thode@enron.com, mary.clark@enron.com
Subject: Enron Mentions
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Power-company profits climb along with prices=20



By Craig D. Rose=20
SAN DIEGO UNION-TRIBUNE STAFF WRITER=20
October 18, 2000=20
A power company executive yesterday boiled California's ongoing electricity=
=20
crisis down to the bottom line.=20
"Prices are rising, and I know that's hurting consumers =01) but it certain=
ly=20
has been beneficial for Enron," said Jeffrey Skilling, president and chief=
=20
operating officer of the Houston-based energy and trading company.=20
Enron declined to specify how much it earned from California during the pas=
t=20
summer, when the state's deregulated electricity market sent power prices=
=20
soaring. But the Texas company did say that profits of its sales and servic=
es=20
unit =01) which trades California electricity and other commodities =01) in=
creased=20
135 percent to $404 million.=20
Dynegy Inc., also based in Houston, reported that income from its marketing=
=20
and trade unit soared more than 300 percent to $142 million.=20
Steve Bergstrom, president of Dynegy, said California was perhaps only the=
=20
third-biggest contributor to that surge. But industry analysts said the=20
earnings reports are the first indication of a pattern expected in coming=
=20
weeks.=20
"California clearly drove the positive momentum at both of these companies,=
"=20
said Carol Coale, senior analyst of Prudential Securities. "And you probabl=
y=20
just saw the beginning of a string of strong reports (from the power=20
industry)."=20
She and others say they suspect that power companies derived billions in=20
profits from the state, where tight supplies set the stage for huge price=
=20
increases.=20
Companies did not necessarily have to own generating plants to profit from=
=20
the deregulated market. Enron produces no electricity in California but is=
=20
the nation's largest electricity trader, buying and selling the output of=
=20
power plants owned by other companies.=20
Rep. Duncan Hunter, R-El Cajon, said the big profits should be seen in=20
something other than a business context.=20
"These massive profits by the energy companies translate directly into=20
thousands of San Diegans losing savings that were planned for education,=20
mortgage payments, health care and other .?.?. necessities," Hunter said.=
=20
When the state power exchange saw dramatic price increases within a matter =
of=20
hours, "it was clear that predatory pricing was producing massive profits f=
or=20
someone," Hunter said.=20
Hunter insists that recent power prices violate federal law mandating that=
=20
rates be "just and reasonable." He is calling for the Federal Energy=20
Regulatory Commission to order refunds. FERC is scheduled to issue a report=
=20
on the California market by Nov. 1.=20
The political fallout from the price increases, meanwhile, appears to weigh=
=20
heavily on power companies, which are reluctant to tout successes in=20
California for fear of being singled out for profiteering.=20
After noting that Dynegy's recent acquisitions in Illinois contributed=20
strongly to the company's success last quarter, Bergstrom was reminded that=
=20
he had omitted mention of California.=20
"Illinois is not as politically volatile as California," Bergstrom said.=20
He acknowledged that Dynegy did "pretty well" in California because its pow=
er=20
plants produced far more electricity this year than last. Bergstrom also=20
sought to correct an earlier report that Dynegy had quickly recouped the co=
st=20
of power plants it recently acquired in the state.=20
He said that was true only of the plants it owns in Long Beach and El=20
Segundo, which it bought in 1998. Bergstrom said the cost of Dynegy's half=
=20
interest in the former San Diego Gas & Electric Encina power plant in=20
Carlsbad =01) acquired at the end of 1998 =01) had not been recovered.=20
Typically, plant operators assume that it will take as long as 20 years to=
=20
recoup such costs.=20
In comments to financial analysts, Skilling, of Enron, suggested that power=
=20
companies could help provide a solution to California's power problems.=20
"Supply constraints and the resulting price pressures in California and oth=
er=20
locations have demonstrated the need for skilled marketers like Enron to=20
provide reliable power and stable prices," Skilling said.=20
He predicted that California's utility companies =01) which now buy much of=
=20
their power from other companies =01) would sign long-term contracts to=20
stabilize prices, following an approach suggested by many power generators=
=20
and traders.=20
"If they were willing to extend the terms of their purchases to 10-year=20
contracts, then they could get contracts for $50 a megawatt, which is not=
=20
much different than they were paying two or three years ago," Skilling said=
.=20
But consumer advocates have noted that long-term contracts at those levels=
=20
would lock consumers into price increases and leave them with little choice=
=20
about suppliers. Advocates of electrical deregulation had predicted that=20
introducing competition would lead to reductions in power costs and to=20
greater consumer choice.=20
Harry Snyder, senior advocate for Consumers Union in San Francisco, said he=
=20
was skeptical of solutions proposed by the power industry.=20
"Any proposal from the industry has to be suspect because they have engaged=
=20
in faking out the California public and price gouging when there are=20
shortages," said Snyder, who advocates an end to deregulation.=20
"They do not have consumer interests at heart."
?=20