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 17:07:00 -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.