Message-ID: <8987067.1075859608065.JavaMail.evans@thyme> Date: Wed, 18 Apr 2001 01:29:00 -0700 (PDT) From: christian.yoder@enron.com To: steve.hall@enron.com Subject: Fwd: Seattle City Utility Racks Up $92 Million in Power Purchases in March Cc: elizabeth.sager@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: elizabeth.sager@enron.com X-From: Christian Yoder X-To: Steve C Hall X-cc: Elizabeth Sager X-bcc: X-Folder: \Elizabeth_Sager_Jun2001\Notes Folders\Notes inbox X-Origin: Sager-E X-FileName: esager.nsf George, We have been watching this "border state" very closely to see where they are going to go and it looks like we need to shore up our proactive mitigation maneuverings. The muttering is getting to a pretty bitter level up there across the Columbia. You'd better take a ride up that way and have a look. ----cgy ---------------------- Forwarded by Christian Yoder/HOU/ECT on 04/18/2001 08:35 AM --------------------------- Enron Capital & Trade Resources Corp. From: "Ronald Carroll" 04/18/2001 07:41 AM To: , , , , , , , , , , , cc: Subject: Fwd: Seattle City Utility Racks Up $92 Million in Power Purchases in March Please note the attention paid to Enron. Content-Transfer-Encoding: quoted-printable Date: Wed, 18 Apr 2001 09:29:15 -0500 From: "Tracey Bradley" To: "Paul Fox" Cc: "Ronald Carroll" Subject: Seattle City Utility Racks Up $92 Million in Power Purchases in March Mime-Version: 1.0 Content-Type: text/plain; charset="us-ascii" Content-Disposition: inline FYI Seattle City Utility Racks Up $92 Million in Power Purchases in March Jim Brunner , The Seattle Times ( April 17, 2001 ) Apr. 16--Seattle City Light spent a record $92 million buying power on the market in March, more than any month in its 91-year history. City Light officials say the cost of buying power for local residents and businesses eclipsed the previous records -- $84 million set in February and nearly $80 million in January. To put that in perspective: In 1999, before the current power crisis, the utility's total power bill for the entire year was $90 million. "We're spending that every month now. The dollars that are involved are staggering," said Paula Green, deputy superintendent of City Light. It's a cash hemorrhage brought on by Washington's drought, which means less water in the reservoirs at city-owned dams. That increases Seattle's need to purchase electricity on a market where prices have zoomed to unprecedented levels. Adding to the frustration for Seattle city officials is the fact that most of that money is flowing to out-of-state utilities and power brokers who are profiting enormously from the energy crunch. Last month alone, the bill from Enron, a Houston-based corporation, was $25.5 million, putting it well ahead of the No. 2 seller, California's Sempra Energy, which sold $7.4 million worth of electricity to City Light. City Light still gets most of the 1,200 megawatts necessary to serve its load from city-owned dams and from its contract with the Bonneville Power Administration (BPA). The utility buys only about 15 percent of its power on the market. But that thin slice now accounts for more than 90 percent of its power costs. Part of the explanation for March's record power-buying binge was City Light's recent decision to store up extra water behind Ross Dam on the Skagit River instead of spilling it through the dam's power turbines. In a normal water year, City Light officials would be spilling water for energy and expecting it would be replaced with spring runoff. Now, they're saving the water so it can be spilled later to help salmon runs and to generate power for Seattle this summer, when energy prices are expected to surge even higher, to more than $400 per megawatt hour. "We're insulating ourselves. By putting out one eye now, we're avoiding cutting off our head later," said Bob Royer, City Light spokesman. Seattle ratepayers are feeling the pain, with a 28 percent City Light rate increase so far this year. More rate increases are likely on the way. Higher rates have also led to plant closures and layoffs in Bellingham and Spokane. Meanwhile, Enron's revenues more than doubled last year, to $101 billion. Its stock prices surged to end the year at $88 a share, up from $44 the year before. The stock was trading at $57 a share last week. "It doesn't just feel unfair, but immoral that these major companies like Enron are making billions of dollars at the expense of everyday people and businesses," said City Councilwoman Heidi Wills, who chairs the Council's Energy and Environmental Policy Committee. "There's this enormous transfer of wealth from our ratepayers to the shareholders of these companies," Wills said. Northwest leaders have called for the Federal Energy Regulatory Commission to impose price caps. But opponents say price caps would do nothing to encourage the construction of new power plants, or energy conservation. Karen Denne, an Enron spokeswoman, said it's unfair to fault the company for selling power at prices dictated by the free market. "Enron is providing electricity to a market that needs it," Denne said. "It's unfortunate when regulators are pointing fingers, looking to fix blame, when this is a problem of supply and demand." The company hails from President George W. Bush's home state of Texas, and is one of the top "soft money" donors to political campaigns. Enron and its executives gave $435,000 to the Democrats and $1.2 million to Republicans last year, according to Common Cause. Its chairman, Kenneth Lay, has consistently been one of the top donors to Bush's presidential and gubernatorial campaigns. Enron doesn't own a lot of dams or power plants. Instead, the company makes money as a middleman -- buying power from utilities and then reselling it for a profit. The company, formed in 1985 from the merger of two pipeline companies, has become the largest trader of wholesale electricity in North America. Part of its success in the energy market stems from its groundbreaking use of the Internet to make buying electricity as easy as ordering a book online. You just point, click and spend. "It's easier than Amazon," said Steve Lewis, a power marketer with City Light, demonstrating the company's Web site. It lists available power "products" and the asking price for both buyers and sellers. Lewis and other power marketers monitor City Light's projected power needs and then use the phone or Internet to schedule electricity for the next hour, next day or months ahead. They try to find the best price available, but it's clearly a sellers' market. Utilities routinely buy power that used to cost $30 per megawatt hour for more than $200. At times last month, City Light was buying power for $450 a megawatt hour. And it's not because the cost of generation has gone up. "This is pure profit," said Green, deputy superintendent of City Light. There is evidence that the Northwest is in some ways being hit even harder than California, whose experiment with deregulation is blamed for roiling the power markets. A recent analysis found that Pacific Northwest utilities are paying the highest prices in the nation for the next-day delivery of wholesale power. However, regional utilities also sell power for extraordinarily high prices. In fact, some of the highest average prices paid by City Light last month were to neighbors. Puget Sound Energy, Western Washington's largest electric utility, charged City Light the highest average price of any seller last month, at $303 per megawatt hour, according to City Light's preliminary billing estimates. Spokane's Avista Energy charged $281. That compares with Enron's average price of $173 per megawatt hour and an overall average of $194. The BPA, by comparison, charges City Light $22 per megawatt hour. City Light typically relies on local utilities more when it needs power delivered immediately. And prices for short-term deals can be higher depending on the time of day. The city has only a long-term contract with the BPA. D espite the record-setting month, city officials hope they'll be in better shape before the year is out. Mayor Paul Schell has taken to calling Oct. 1 Seattle's "energy independence day" because that's when the city will begin receiving more hydroelectric power under a new contract with the BPA. The historically cheap BPA power, combined with a contract with a gas-fired power plant in Klamath Falls, Ore., should reduce the city's reliance on the open market, city officials say. But the BPA, too, has been stricken by higher market power costs and may have to increase its rates to City Light by 250 percent. The City Council has already agreed to pass those higher costs on to Seattle ratepayers although it's unclear how much that would raise the bill of the average person. Even at a higher rate, City Light officials regard the BPA power as a good long-term strategy for getting power costs under control. If they succeed, the rate increases approved this year could eventually be rescinded. Until then, local ratepayers will have to keep writing bigger checks to City Light with the knowledge that some of their money will find its way to Texas. ----- To see more of The Seattle Times, or to subscribe to the newspaper, go to http://www.seattletimes.com