Message-ID: <15660177.1075857364873.JavaMail.evans@thyme> Date: Tue, 24 Apr 2001 05:52:00 -0700 (PDT) From: lance.cunningham@enron.com To: doug.gilbert-smith@enron.com, clint.dean@enron.com, smith.day@enron.com, eric.saibi@enron.com, mike.curry@enron.com, martin.lin@enron.com, ron.mcnamara@enron.com, thane.twiggs@enron.com, jean.ryall@enron.com Subject: Fwd: Dow Jones Newswires - Article on TX Stranded Cost Issue Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Lance Cunningham X-To: Doug Gilbert-Smith, Clint Dean, Smith L Day, Eric Saibi, Mike Curry, Martin Lin, Ron McNamara, Thane Twiggs, Jean Ryall X-cc: X-bcc: X-Folder: \Clint_Dean_Jun2001\Notes Folders\Discussion threads X-Origin: Dean-C X-FileName: cdean.nsf FYI ---------------------- Forwarded by Lance Cunningham/NA/Enron on 04/24/2001 12:50 PM --------------------------- From: Geriann Warner on 04/24/2001 11:26 AM To: Jean Ryall/NA/Enron@Enron, Joe Allen/NA/Enron@Enron, Patrick Keene/NA/Enron@Enron, Stacey Bolton/NA/Enron@Enron, Leslie Lawner/NA/Enron@Enron, Ron McNamara/NA/Enron@Enron, Gloria Ogenyi/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Lance Cunningham/NA/Enron@Enron, Thane Twiggs/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Nancy Hetrick/NA/Enron@Enron, clandry@enron.com, pochsner@enron.com, bevin.hunter@enron.com cc: Subject: Fwd: Dow Jones Newswires - Article on TX Stranded Cost Issue FYI Geriann Warner Government Affairs - The Americas 1400 Smith Street, EB 4740C Houston, TX 77002 Tel: 713-853-5036 Fax: 713-853-7297 E-Mail: geriann.warner@enron.com ----- Forwarded by Geriann Warner/NA/Enron on 04/24/2001 11:26 AM ----- "Bill L. Bryant" 04/24/2001 10:23 AM To: cc: Subject: Fwd: Dow Jones Newswires - Article on TX Stranded Cost Issue Katz, Kutter Haigler, Alderman, Bryant & Yon et al 106 East College Avenue, Suite 1200 Tallahassee, FL 32301 (850) 224-9634 www.katzlaw.com _______________________________________ This transmission is intended to be delivered only to the named addressee(s) and may contain information that is confidential, proprietary, attorney work-product or attorney-client privileged. If this information is received by anyone other than the named addressee(s), the recipient should immediately notify the sender by E-MAIL and by telephone (850) 224-9634 and obtain instructions as to the disposal of the transmitted material. In no event shall this material be read, used, copied, reproduced, stored or retained by anyone other than the named addressee(s), except with the express consent of the sender or the named addressee(s). Thank you. ----- Message from "Stiles, Billy" on Tue, 24 Apr 2001 10:50:53 -0400 ----- To: "Carole Joy Barice (E-mail)" , "David B. Struhs (E-mail)" , "E. Leon Jacobs (E-mail)" , "Helen A. Ferre' (E-mail)" , "J. Dudley Goodlette (E-mail)" , "Jack Shreve (E-mail)" , "John J. Anderson (E-mail)" , "Joseph K. Tannehill (E-mail)" , "Joshua High (E-mail)" , "Kaaren Johnson-Street (E-mail)" , "Kenneth W. Littlefield (E-mail)" , "Lou Frey Jr. (E-mail)" , "Miguel De Grandy (E-mail)" , "Sandra B. Mortham (E-mail)" , "Sandy J. Woods (E-mail)" , "Sanford (Sandy) V. Berg Ph. D. (E-mail)" , "Stephen J. Mitchell (E-mail)" , "Tom Lee (E-mail)" , "Walter Revell (E-mail)" Subject: Dow Jones Newswires - Article on TX Stranded Cost Issue Dow Jones Newswires Texas PUC To Rule On Thorny Stranded-Cost Issue Dow Jones Newswires HOUSTON -- The Texas Public Utility Commission is set to unleash a hornet's nest of protest from three investor-owned utilities this week if it orders the electric firms to return billions of dollars to rate payers. At issue is money the utilities have collected to offset expenses they contend will be left "stranded" when electric retail competition begins in Texas next year. If the two-member PUC agrees with the proposed rulings, it could be the first reversal of stranded-cost recovery policy in the country. The PUC is holding a two-day meeting, Tuesday and Wednesday, to complete its work on several contentious issues that must be resolved soon. Texas is caught between early expectations that wholesale power prices would fall under deregulation and recent recognition that wholesale prices may not fall due to higher fuel costs. Over-recovery of "stranded costs" - past utility investment in generating units, primarily nuclear power plants, that may not be competitive in a deregulated electric market - emerged with the dramatic rise in natural gas prices over the past year. Higher priced gas-fired generation makes nuclear power more competitive in Texas' open market, thereby reducing the stranded costs utilities expected, say critics. Texas PUC chairman Pat Wood and several Texas legislators are worried that ongoing efforts by TXU (TXU) unit TXU Electric & Gas, Reliant Energy's (REI) Reliant HL&P and American Electric Power's (AEP) Central Power & Light to collect money to mitigate their stranded costs will result in excess recovery which could hurt new entrants and stifle early market competition. The PUC wants to use revised stranded-cost estimates to decide if ongoing mitigation efforts should be reversed. When the Texas bill electric restructuring bill was passed in 1999, the trio of utilities expected total stranded costs to reach $7 billion. Updating the economic model to reflect higher natural gas prices eliminated the stranded costs and led to talk of "negative" stranded costs of nearly $5 billion. The utilities say they don't believe they are recovering excess dollars and argue that the PUC can't alter the mitigation process until 2004 when the Texas restructuring law calls for a final accounting procedure using actual market data, not the economic model they call flawed. They argue that if PUC estimates are wrong, power prices will jump in Texas in 2004. They staunchly oppose the idea that customers should benefit from negative stranded costs. By the end of the year, TXU will have collected roughly $1.2 billion; Reliant about $1.5 billion CP&L about $36.5 million. The stranded-costs rulings are part of an "unbundling" process each Texas investor-owned utility is undergoing to establish transmission and distribution rates. In addition, the PUC will set certain non-bypassable wires charges which will come into play as the state moves to a competitive retail electric market beginning in January. TXU has said it will challenge any PUC ruling to change the mitigation process before 2004. In addition to the PUC effort, a bill is under consideration in the Texas House of Representatives that addresses over-recovery and "negative stranded costs" not just for TXU, Reliant and CP&L, but for other Texas utilities as well.