Message-ID: <9474976.1075844152775.JavaMail.evans@thyme> Date: Wed, 24 Jan 2001 07:28:00 -0800 (PST) From: lorna.brennan@enron.com To: lindy.donoho@enron.com, jeffery.fawcett@enron.com, kevin.hyatt@enron.com, lorraine.lindberg@enron.com, tk.lohman@enron.com, michelle.lokay@enron.com, steven.harris@enron.com, lee.huber@enron.com, susan.scott@enron.com Subject: I'm sure you guys have seen most of this, but may pick up some storage information, etc. Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Lorna Brennan X-To: Lindy Donoho, Jeffery Fawcett, Kevin Hyatt, Lorraine Lindberg, TK Lohman, Michelle Lokay, Steven Harris, Lee Huber, Susan Scott X-cc: X-bcc: X-Folder: \Michelle_Lokay_Dec2000_June2001_2\Notes Folders\Articles X-Origin: LOKAY-M X-FileName: mlokay.nsf Bush Administration Extends Emergency Supply Orders Despite recent indications that the Bush administration would take a more hands-off approach to the California crisis, Energy Secretary Spencer Abraham late yesterday gave PG&E and Southern California Edison another two weeks of breathing room by extending emergency orders requiring gas and power suppliers to continue supplying the cash-strapped utilities. The emergency gas order now expires at 3 a.m. (EST) Feb. 7. In granting the extensions, Abraham urged the state to get to work to solve its own problems. He said only California can implement the policies necessary to resolve the short-term and long-term supply challenges. "Our action today is designed to give the governor, the California legislature and other relevant parties the time to take necessary action. I strongly urge the parties to act immediately," said Abraham. He also said he was keenly aware that other western states have expressed concerns about their own supply situation and the impact the order is having on power prices in their areas. Despite the action, PG&E said it still is having trouble getting gas suppliers to comply with the emergency order originally issued Jan. 19. "The gas supply situation is [not good]," utility spokeswoman Staci Homrig said yesterday afternoon. "We are quickly depleting our storage. Even under the order, J. Aron & Co. [a subsidiary of Goldman Sachs] has not delivered gas. They represent about 9% of our daily needs (1.5 Bcf/d in January). "Oh yeah, we've been in contact with them," she said. "We've been in contact with the DOE, too. The other two suppliers who had stopped delivering gas to us last week have made gas available to us under the order. They are Sempra Energy Trading and Western Gas Resources." Homrig said PG&E expected DOE to take legal action against those who didn't resume deliveries. The order applied to 27 gas suppliers, all of which supplied gas to PG&E within the last 30 days. "There's not a lot I can say," said J. Aron spokeswoman Kate Baum. "J. Aron has always complied with the law and we intend to comply with this order. That's my statement. I can neither confirm nor deny anything else." Meanwhile, other suppliers who were not among those on the DOE's list, were staying as far away from California as possible. "All I know is we're not selling in California any more. A person could get fired around here for doing that," said one marketer. "All we had in California were a few spot deals that expired at the end of December. Needless to say we didn't re-up them." Without the DOE's order, PG&E would be back where it was last week, with some suppliers stopping delivery, others planning to stop at the end of their contract terms and most suppliers unwilling to sell additional gas to the utility. PG&E has said it has enough gas in storage to make up for the lost supply under such a scenario until the first week in February. Homrig said PG&E's storage currently is well below 50% full, or less than 16 Bcf and depleting rapidly by about 500 MMcf/d to 1 Bcf/d. PG&E's Pipe Ranger web site shows the utility has been averaging about 500 MMcf/d of withdrawals over the past several days and is expecting a slight increase over the next few days. CA Launches New Buying Program; Supplies Remain Tight Depending on your perspective, California either moved toward future solutions to its nagging energy crisis or took several steps backward yesterday with the launch of its electricity bulk buying program for long-term, fixed-price supplies. The auction began yesterday and will run through noon today. The state is seeking sealed bids for six-month, three-year, five-year and 10-year supply agreements. Whether results of the auction would be made public was still unclear yesterday, but the results are expected to be given to legislators, who now are debating various long-term solutions in the state senate. A spokesperson in the state Assembly Speaker's office said the legislature is basically "standing by," awaiting more price information. Action on the proposed comprehensive legislation, including the question of the state taking over the private utilities' hydroelectric systems, should come by the end of the week. Merrill Lynch said yesterday it was "increasingly skeptical" that the "securitization for hydro" plan would go forward. It has received "muted support," Merrill Lynch said, and has not been drafted as a bill yet. Recent revisions of the comprehensive bill show some progress on contract flexibility, with the possibility that the value of the entire portfolio of energy contracts might be capped at a weighted average price of $55/MWh, which is well below the utilities retail rate caps (Edison at $72.40/MWh and PG&E at $66). The difference is expected to be used to pay down the utilities' debt. Meanwhile, the electric system limped along under the specter of another Stage Three yesterday, but without rolling blackouts, and elsewhere indications outside the state were that some energy marketers have written off California from their prospective marketing lists. "We're not selling in California any more, a person could get fired for doing that around here," said one Texas-based gas marketer, referring to the continuing credit problems of Pacific Gas and Electric Co., which has been hobbled by the weight of its wholesale electricity debts on the natural gas side, too. In the meantime, Southern California Edison Co. is back in federal district court in Los Angeles, where it obtained a favorable initial ruling two weeks ago. This time it is asking for the court to force the California Public Utilities Commission to allow it to raise its rates to cover the wholesale cost of power. Calling the action with the court "a last resort," Edison said it has tried to get the rate situation resolved, but at every turn it has met "resistance, denial and finger-pointing" by the CPUC's five-member governor-appointed board. The CPUC on Tuesday acted to anticipate new state legislation regarding the hydroelectric systems in the state by canceling hearings it had scheduled this week and next to go exclusively to written comments for the environmental review of the ongoing case looking at PG&E's hydro utility assets. "The current energy crisis in the state makes it prudent for the commission to shift from public hearings to written testimony," the CPUC said in a prepared statement.