Subject: California Update 4/23/01
From: [email-masked]
To: [email-masked], [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Date: Mon, 23 Apr 2001 07:07:00 -0700 (PDT)

Executive Summary
? FERC Considers Price Caps in the West
? Davis/SoCal Ed MOU subject to legislative revisions (we still stand by our 
early reports that the SoCal/Davis transmission deal will most likely fail 
and that SoCal will follow PG&E into bankruptcy court)

FERC mitigates price spikes in the West
FERC Chairman Hebert has placed a RTO West proposal onto the agenda for this 
week's meeting. The proposal would "mitigate" price surges by requiring 
generating companies to sell power into California and other western states 
during Stage 3 emergencies (when there is less than 1% surplus electricity in 
the grid) and cap the price generators could charge during these highest 
states of emergency. 
1)  The FERC proposal would not set price caps for any other time than Stage 
3 emergencies
2)  It would expire after a year
3)  It would set the top reference rate at "cost plus" based on the cost to 
produce electricity by the most inefficient producer 
FERC is also looking at initiatives that would encourage the agriculture 
industry to possibly sell their power and natural gas contracts instead of 
using them to produce their products. Although this proposal has not been 
formally approved or voted on at this time, the Chairman's control over 
FERC's agenda is absolute and nothing gets on the agenda he does not want to 
consider. Thus, if it stays on the agenda through meeting time, the odds of 
it passing are quite high if the meeting avoids total breakdown into 
hard-headed chaos. The key has been Commissioner Breathitt.  The two recently 
nominated Commissioners have not yet been approved by the Senate and so 
cannot vote this week. Thus any change in Breathitt's position definitively 
tips the balance of power in FERC.
Davis & SoCal. MOU not a Done Deal 
According to sources, the first legislative alteration to the Davis/SoCal MOU 
will involve removing the dedicated rate component necessary to repay SoCal's 
creditors.  This point only highlights the Senates' indecision on how to deal 
with paying off generators.  Solutions currently range from seizing assets to 
seeking legal relief for corporate price gouging and sources indicate that 
the QFs are still likely to file involuntary bankruptcy against SoCal upon 
the Senate's first official sign of unwillingness to work with creditors.