Message-ID: <17944897.1075846361891.JavaMail.evans@thyme> Date: Tue, 12 Dec 2000 04:36:00 -0800 (PST) From: christi.nicolay@enron.com To: mary.hain@enron.com, richard.shapiro@enron.com, steven.kean@enron.com, james.steffes@enron.com, joe.hartsoe@enron.com, sarah.novosel@enron.com, mark.palmer@enron.com Subject: Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Christi L Nicolay X-To: Mary Hain, Richard Shapiro, Steven J Kean, James D Steffes, Joe Hartsoe, Sarah Novosel, Mark Palmer X-cc: X-bcc: X-Folder: \Steven_Kean_Dec2000_1\Notes Folders\Notes inbox X-Origin: KEAN-S X-FileName: skean.nsf The article deals with the Cal ISO credit risk and the effect on power prices. This is on the Enron web site. Maybe we work this into the talking points response? Reliant Energy: Selling Pwr To Cal ISO Could Be Risky Of DOW JONES NEWSWIRES Dec. 11, 2000 Dow Jones Energy Service (Copyright (c) 2000, Dow Jones & Company, Inc.) (This article was originally published Friday) By Mark Golden LAS VEGAS (Dow Jones)--BC Hydro's concerns about the California Independent System Operator's credit have spread quickly this week to other suppliers, forcing the grid operator to pay premium prices when it can't find electric supplies, Reliant Energy's (REI) vice president for western U.S. trading, Reggie Howard, said Friday. Suppliers are concerned about the ISO's financial guarantees from the investor-owned utilities, for whom it buys: Edison International (EIX), PG&E Corp. (PCG) and Sempra Energy (SRE). PowerEx, the power marketing unit of provincial utility BC Hydro, demanded letters of credit from the utilities for ISO purchases this week. Edison complied, while PG&E refused. Sempra said that the state of California should make the guarantee as part of a declared state of emergency. Reliant is looking at the ISO credit issue, but so far has demanded no such letters of guarantee, Howard said. Other risks in selling to the ISO include the possibility that state politicians will tell the ISO not to pay its bills. "when you have state Sen. Steve Peace telling San Diego residents not to pay their electric bills two months ago, you worry about what might be said to the ISO. There are political risks," Howard said in an interview with Dow Jones Newswires. Peace, a democrat from the San Diego area, is chairman of the California Senate Budget Committee. Suppliers also risk that prices on sales to the ISO could be reviewed by the Federal Energy Regulatory Commission anytime 24 months after the transaction occurs, under the proposed FERC order on California. Prices could be lowered retroactively, and refunds from the suppliers could be ordered. Sales to other western utilities face no such review. Taken together, these risks have forced the ISO to pay a premium of at least 10% more than market prices, according to several traders attending the Day of the Trader industry conference in Las Vegas Thursday and Friday. "It could be 5% or 20%. We have a number, but we won't disclose it because that's proprietary," Howard said. Reliant, which has 3,800 megawatts of generators in California, has no plans to build any more plants in the state. The company is building a plant in Nevada, just east of the California border. The optimal location for any new plant, Howard said, is near California, but not inside the state. Howard said that Reliant isn't looking for offers to sell its California plants, but if a good offer came up, they would consider it. -By Mark Golden, Dow Jones Newswires; 201-938-4604; mark.golden@dowjones.com