Message-ID: <8461424.1075859125386.JavaMail.evans@thyme> Date: Sun, 2 Dec 2001 21:32:35 -0800 (PST) From: energy@1stgmc.net To: energygroup@buffalo.com Subject: Utilities Biweekly Report Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: "Energy" @ENRON X-To: energygroup@buffalo.com X-cc: X-bcc: X-Folder: \Elizabeth_Sager_Jan2002\Sager, Elizabeth\Deleted Items X-Origin: Sager-E X-FileName: esager (Non-Privileged).pst =20 =09 Utilities Biweekly Report =09 A news service for energy professionals =09 December 4, 2001 =09 To Remove, Substitute or Add an email address to our list, please send bri= ef message to msid@ieee.org=20 =20 Enron's Collapse Has Experts Questioning Future of Electric Deregulation The collapse of energy company Enron has several experts questioning its i= mpacts on the future of electric deregulation. Analysts say that the compa= ny's public championing of electric deregulation in Florida and its curren= t financial situation might signal caution to state regulators. "Enron was= the most visible and ardent cheerleader of deregulation, and I think what= 's happened to them is going to raise all these questions about deregulati= on," says Jim Owen, spokesman for the Edison Electric Institute. Another v= iew comes from Steven Weiss of the Center of Responsive Politics in Washin= gton, who says that politicians may step away from deregulation because th= ey view Enron "like a rotten egg." Other insiders believe that Enron's sit= uation may be another reason that Florida's Governor Jeb Bush has postponed= any movement toward deregulation until after his 2002 re-election campaig= n. Jon Cartwright, a senior energy analyst with Raymond James & Associates= , says that it will be difficult for deregulation plans to be completely h= alted, but Enron is going to give regulators something to think about in a= ddition to California's problems with deregulation. Retail Choice Available in Massachusetts Dominion Retail Inc. has become the first residential supplier to enter Ma= ssachusetts' near-moribund competitive retail electricity market. Until no= w, no companies have attempted to enter the state's retail marketplace. Ro= b Wilson, a spokesman from Massachusetts Division of Telecommunications an= d Energy, said that low electric rates have made the market unattractive f= or new power providers. He also said suppliers were deterred by the nature= of the default/standard-offer system that tends to spread potential custo= mers in the default group over a broad area. Dominion will offer an altern= ative choice of power supply to Massachusetts Electric's 270,000 residenti= al customers who are now receiving their power on default service. Default= customers can receive their power from Dominion at $66.31 per month if th= ey commit to a three-year deal, which is slightly less than the $67.75 ave= rage cost for Massachusetts Electric default customers. However, it is sti= ll more than the proposed $57.56 per month that an average Massachusetts E= lectric standard-offer customer will pay beginning January 1, 2002, pendin= g state approval. Currently there are already several companies competing = for commercial and industrial customers in the state's electric marketplac= e. =20 Consumer Choice Drives Green Power Market A new study from the National Renewable Energy Laboratory (NREL) and the L= awrence Berkeley National Lab's Environmental Energy Technology Division h= as found that consumers prefer to receive their power from clean energy so= urces. If consumers are given the choice, they will choose power from clea= ner sources such as wind, solar, geothermal, and biomass. The study says t= hat in order for green power to gain full support in the marketplace, rest= ructuring should proceed without delay and that market rules in restructur= ed markets should be conducive to competition. "Our study shows that givin= g consumers energy supply choices can be a powerful mechanism for moving r= enewable energy into the marketplace," says Blair Swezey of NREL, coauthor= of the study entitled "Forecasting the Growth of Green Power Markets in t= he United States." Under the best conditions, use of green power could gro= w 40 percent in less than a decade, to a capacity of 7,000 megawatts. Howe= ver, the study concludes that it is more likely that renewables will exper= ience a slow growth in the market. In addition to a competitive marketplac= e, vigorous promotion and education will also be necessary to ensure the s= uccess of green power. =20 Electricity Bill Will Be Put Off Until Next Year The House Energy and Air Quality Subcommittee is preparing an electricity = bill that will focus on increasing power supplies and improving electricit= y transmission from one part of the country to another. Subcommittee Chair= man Joe Barton (R-TX) has not set a date for markup, an aide said, but aims= to consider the bill during the first two weeks of December. Accordingly,= Energy and Commerce Committee Chairman, Billy Tauzin (R-La) announced at = a news conference yesterday that he expects to receive the bill for consid= eration by the year's end. Chairman Tauzin told reporters that Congress sh= ould allow states to make their own decisions regarding siting transmissio= n facilities within their boundaries, but that interstate projects might r= equire Federal intervention. He also noted that grid connections among sta= tes are necessary for regional transmission organizations as a means to ex= pand the grid and eliminate electricity bottlenecks. Separately, Senate Ma= jority Leader Tom Daschle (D-SD) is expected to introduce a Senate energy = bill that includes an electricity title, but said that the Senate will not= consider it until next year. FERC Underestimated Environmental Impacts of Competition The final environmental impact statement the Federal Energy Regulatory Com= mission (FERC) completed for Order 888 underestimated the effects that a c= ompetitive wholesale power market would have on air pollutants, a new stud= y says. Synapse Energy Economics, a Massachusetts-based firm, prepared the= study for the commission. It reviewed the accuracy of FERC's predictions o= n the effects competition would have on the environment in the year 2000. = The most important conclusion from the analysis is that FERC's modeling me= thodology was too narrowly defined to capture the effects, the report says= . Synapse found that FERC did not fully consider the impacts from increase= s in electricity demand, improvements in nuclear plant efficiency, and the= extension of nuclear and coal plant lifetimes. The study concludes that F= ERC's forecast of NOx emissions was roughly four percent lower than actual= experience and its forecast of CO2 emissions was roughly eight percent lo= wer. Also, the report finds that FERC underestimated actual national elect= ricity demand through 2000 by 4.6 percent. The North American Commission f= or Environmental Cooperation, a panel created under the North American Fre= e Trade Agreement, was expected to address these findings and other enviro= nmental concerns among the United States, Canada, and Mexico at a forum he= ld November 29-30, 2001, in San Diego. Michigan PSC Protects Consumers from Retail Slamming The Michigan Public Service Commission (MPSC) has adopted standards to pro= tect retail electric consumers from slamming and cramming. Slamming is the= unauthorized switching from one electric customer from electric service p= rovider to another, while cramming is the billing of a customer for unauth= orized electric services. The Customer Choice and Reliability Act of 2000 = requires that the Commission issue orders to protect Michigan's electric c= ustomers from slamming and cramming and authorizes the Commission to condu= ct contested proceedings to investigate any violations. Under the new meas= ures, customers may authorize switching of their electric service provider = through written authorization, a call to a toll-free telephone number voic= e response unit, a Web-based connection, notice to an appropriately qualif= ied third party, or a three-way call between the new supplier, the custome= r, and the older supplier. New suppliers must notify customers and the exi= sting provider within seven days of the requested change in service. Viola= tors can be fined up to $30,000 for the first offense, up to $50,000 for t= he second offense, and up to $70,000 for repeated violations. Michigan PSC Approves Commonwealth Energy as Alternative Supplier The Michigan Public Service Commission (MPSC) has approved Commonwealth En= ergy Corporation's application to sell electric generation to Michigan ret= ail customers. The commission approved Commonwealth's license to be the 12= th alternative electric supplier in the state under the Customer Choice an= d Electricity Reliability Act of 2000. The state regulators concluded that= approval of the alternative electric supplier license would expand the op= portunities for retail electric competition in the state. The commission g= ranted the license conditioned upon Commonwealth providing electric servic= e within a reasonable time and indicated that failure to do so may result = in revocation of the license. Commonwealth will operate in Michigan under t= he name ElectricAmerica. Hearing Held on Pennsylvania's Electric Deregulation The Pennsylvania House Democratic Policy Committee held a hearing on elect= ric deregulation on November 28, 2001, during which witnesses testified on= the state's future electricity needs and the impacts of deregulation. The= committee is concerned about whether enough power plants will be built to= meet the state's future demand. Robert Hinkle of PJM Interconnection, whi= ch manages the mid-Atlantic transmission grid and serves as a wholesale el= ectricity market, said that 4,000 megawatts of increased electricity capac= ity are planned for the next three years. With this increase, the region's= capacity would reach 60,000 megawatts, which is more than sufficient to m= eet the region's electricity needs for the foreseeable future, Hinkle said= . Richard Maurer, of Local 29 International Brotherhood of Electrical Work= ers, testified that deregulation has resulted in layoffs and more burdens o= n an increasingly aging work force that his union represents. On the other= hand, Duquesne Light Company President Victor Rogue told the committee th= at Pennsylvania's electric deregulation has been a success. Rogue said tha= t Duquesne Light customers have been protected from steep rate increase an= d can expect an estimated 16 percent decline in the rates early next year. Northeast May See Increased Power Costs Energy Security Analysis (ESAI), a Boston-based consulting firm, reports t= hat urban areas in the Northeast may experience increased power prices unl= ess investments are made in regional power generation and transmission sys= tems. ESAI director Ed Krapels said that, while electricity restructuring = resulted in new power plant construction in many states, urban areas remai= n at risk for higher prices. ESAI's 10-year power price forecast report fo= r New England says that 2003 and 2004 are "shaping up as years with premiu= ms close to the double digits in both on- and off-peak markets" for the Ne= w York Power Pool unless additional power and transmission are developed. = The report also concludes that Boston and southwestern Connecticut will re= quire additional generation and transmission "to keep their urban premiums= in check." The forecast estimates that premiums in the PJM region could i= ncrease by $10 per megawatt should no new generation be developed. However= , new transmission projects will likely stimulate the development of the n= ew generation projects that are currently stalled. New generation will hel= p stabilize the New Jersey market as well as contribute to New York City's= power needs. Ontario Power planning long-term debt offering in new year Ontario Power Generation is planning a long-term debt offering some time n= ext year, the company said yesterday. "We do intend to tap the long-term m= arket for the first time next year," Ronald Osborne, president and chief e= xecutive officer, told reporters following an industry breakfast in Toront= o. Mr. Osborne could not provide details on the proposed offering, but sai= d it would most likely be a long-term, or possibly medium-term, issue. This= would be the first long-term debt offering for the company, which was spu= n off from debt-ridden Ontario Hydro in the 1990s. Mr. Osborne said the pr= oceeds from the offering would be used to replace old Ontario Hydro debt t= hat has reached maturity. By the middle of next year, Ontario Power expect= s to pay off $400-million of debt. Ontario Power is one of two main spinof= fs of Ontario Hydro. The other is Hydro One,which is slated to become a pu= blicly traded company following the planned deregulation of the market nex= t year. Ontario Power is readying itself for the electricity market to ope= n to competition next year. The province has already pushed back its origi= nal November, 2000, deadline for electricity-system deregulation by 18 mon= ths. Rates Decrease For Texas Provider of Last Resort The Texas Public Utility Commission (PUC) and Assurance Energy have agreed= to reduce previously announced rates for guaranteed back-up electric serv= ice in the Houston area and south Texas when retail competition begins on = January 1, 2002. Assurance Energy will be the provider of last resort (POL= R) for residential and small non-residential customers in these areas of T= exas. As a POLR, Assurance is required to assure continued service at a fix= ed non-discountable rate to consumers who have been dropped by their curre= nt electric provider. The new prices will be 9.5 cents per kilowatt-hour (= kWh) for summer months and 7.4 cents per kWh for non-summer months, compar= ed to the previous respective prices of 12.5 cents per kWh and 9.5 cents p= er kWh. The previous agreement was negotiated early this year when the pri= ce for natural gas, a major fuel for generating electricity, reached histo= rical highs. Currently, natural gas prices are substantially lower. Louisiana Considers a Limited Deregulation Plan The Louisiana Public Service Commission (PSC) is considering a limited ele= ctricity deregulation plan that would allow large energy consumers to shop= for competitive rates. Under the plan, companies that use five megawatts = or more of energy would be allowed the option of leaving the regulated mar= ket every two years starting in 2003. The proposed plan does not include r= etail competition for residential or small business consumers. Not all com= missioners support the plan, however; Commissioner Don Owen has said that h= e does not think deregulation will benefit electricity users in the state.= Opposition to the proposal has also come from the Louisiana Energy Users = Group (LEUG) and the Louisiana Midcontinent Oil and Gas Association, which= maintain that large industrial users should be given the choice to leave = the market annually. The groups also argue that the plan hampers large ind= ustrial customers from building cogeneration plants because of a provision= that requires large industrial cogenerators to pay a stranded costs recov= ery fee. Industrial customers with new cogeneration facilities are allowed= to apply for an exemption. The PSC has not yet determined the stranded co= st fee structure under the proposed deregulation plan. David Dismukes, an = associate professor of energy studies at Louisiana State University, says = that this uncertainty may make companies hesitant to build cogeneration pl= ants. State regulators had included the fee in the proposed plan so that s= tranded cost recovery would not be unfairly shifted to residential ratepay= ers who remain in the regulated system. The PSC is scheduled to vote on th= e plan next month. Deregulation in Mississippi Not Expected Soon In a recent speech to the Vicksburg Civic Club, Public Service Commissione= r Nielsen Cochran said it is unlikely that Mississippi will soon open its = electricity market to competition. Cochran explained that, in order for co= mpetition or deregulation to work, there must be a greater abundance of ge= neration options in the state. After two years of hearings that ended in 1= 999, the Public Service Commission advised lawmakers that Mississippi was = not ready for deregulation. Cochran said that deregulation would result in= more expensive electricity rates for consumers across the state. Texas Electricity Provider Opposes Texas Deregulation Delay The New Power Company, an electricity provider that is participating in Te= xas' pilot deregulation program, said that it opposes delaying the January= 1, 2002, start of electricity deregulation. New Power has been a major pl= ayer in the pilot program, but has experienced its share of obstacles alon= g the way. Computer glitches have caused the company to send out customer = bills late and at times without appropriate charges. Representatives from = the company say that the company needs information from companies that ope= rate the electricity transmission and metering systems in order to issue a= ccurate bills. New Power and the Electric Reliability Council of Texas, whi= ch is responsible for making the information available, have been communic= ating to improve the situation. New Power is confident that its problems w= ill be resolved in time for the January 1, 2002, deregulation date. The Pu= blic Utility Commission requested comments from electricity companies on w= hether the state should move the date back from January 1, 2002. New California crisis: Too much electricity A man approaches a woman in a grocery-store aisle and asks whether she wou= ld rather have dinner with him tonight. Sorry, she replies, she'll be doin= g her laundry late this evening. And not tomorrow night, either, because s= he'll be doing her vacuuming in those off-peak hours. Energy conservation,= you know. Californians have been forced to watch this state government TV= commercial over and over in recent months, but are now rolling their eyes= at its outdated message. The Governor ordered the ads advocating radical = energy conservation after an unprecedented wave of blackouts that plagued = the state earlier this year. But if ads were being ordered now, they might= suggest that Californians turn on extra lights, plug in some heavy applia= nces and run their air conditioners at full blast. In only a few months, C= alifornia has gone from an energy drought to a flood, in which the state i= s now forced to sell or give away a glut of excess electricity at prices f= ar below those it paid. California's double-whammy energy crisis -- a shor= tage followed by an overstock -- serves as a cautionary tale for other jur= isdictions looking to privatize their utilities. California led the way i= n placing its electricity on the open market, and last year fell prey to w= hat some describe as a failure in its regulatory structure, and what Gover= nor Grey Davis calls "a monumental scam" committed by power-generating com= panies against the state. One thing is certain: When electricity demand was= driven up by poor weather last January, generators began charging the sta= te prices hundreds of times more than what it had paid only months before.= Because California bought its power on a day-by-day basis, prices fluctua= ted dramatically: One generator billed the state $3,880 (U.S.) for a megaw= att that had cost $29 the previous year. And because most of the state's u= tilities had capped domestic rates, the price increase had to be borne by = the state treasury. Mr. Davis now claims that the state is owed a refund o= f more than $9-billion from those generators. Federal regulators agree wit= h him, although the amount of the refund still must be negotiated. However= , the crisis left the state with debts in the tens of billions of dollars,= consumer electrical rates were raised by 43 per cent and people were terr= ified by days of rolling, random blackouts that threatened to drive busine= sses away from California's already beleaguered economy. Now Mr. Davis is = coming under fire for his solution to that crisis: As the blackouts were t= aking place, he signed $43-billion worth of long-term power contracts, som= e of them for many years, at rates averaging $69 a megawatt. These seemed = to provide stability, but now they seem onerous: With demand for oil and n= atural gas dropping in the wake of Sept. 11, rosy weather forecasts and doz= ens of new generating stations coming on line, open-market energy prices h= ave dropped below $20 a megawatt. Suddenly, California faces the prospect = of paying tens of billions of dollars a year above market rates for electr= icity. "Our children and grandchildren will be the ones who have to pay fo= r his mistakes," said Richard Riordan, former mayor of Los Angeles and Mr.= Davis's chief Republican opponent. To make matters worse, those energy-co= nservation TV ads appear to have worked too well. Californians are now usi= ng less electricity per capita than any other state. While this is applaud= ed by utility officials and environmentalists, it leaves California with c= ontracts for far more electricity than it needs. Energy companies, which h= ad rushed in to build or upgrade power plants during this year's crisis, h= ave been scaling back dramatically. Since September, at least half a dozen= planned generating stations have been cancelled. But experts warn that th= is, too, could backfire, warning that California could be hit by another r= ound of blackouts in five years. Copyright ? 2001 Egnatia Research & Management. All rights reserved