Message-ID: <11908614.1075844231123.JavaMail.evans@thyme> Date: Thu, 5 Apr 2001 02:29:00 -0700 (PDT) From: kerry.stroup@enron.com To: richard.shapiro@enron.com Subject: Re: Missouri genco bill issues and a proposed strategy Cc: janine.migden@enron.com, barbara.hueter@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: janine.migden@enron.com, barbara.hueter@enron.com X-From: Kerry Stroup X-To: Richard Shapiro X-cc: Janine Migden, Barbara A Hueter X-bcc: X-Folder: \Richard_Shapiro_June2001\Notes Folders\Discussion threads X-Origin: SHAPIRO-R X-FileName: rshapiro.nsf Rick, here's the contact information. We received a call this morning from our local MO political consultant Cagle that Ameren is applying extreme political pressure to move the bill. It would be best for Ken to call Kinder on Friday, when Kinder is in his office in Cape Girardeau. Number there is 573-335-6611. ----- Forwarded by Kerry Stroup/NA/Enron on 04/05/2001 09:14 AM ----- Kerry Stroup 04/02/2001 02:17 PM To: Richard Shapiro/NA/Enron@Enron cc: James D Steffes/NA/Enron@ENRON, Janine Migden/NA/Enron@ENRON, Steven J Kean/NA/Enron@Enron Subject: Re: Missouri genco bill issues and a proposed strategy The best information we have at this point is that the bill will be considered on the Mo. Senate floor in a few weeks. Roy Cagle, our political consultant in Jefferson City, is keeping tabs and will advise of any developments. It would be best given current information for the call to be placed within the next week, Senator Kinder can be reached at his Senate office at 573-751-2455. On Fridays he works out of his office at the newspaper in Cape Girardeau, 573-335-6611. Janine, I've forwarded you a briefing memo for Ken Lay. Richard Shapiro 04/02/2001 01:24 AM To: Kerry Stroup/NA/Enron cc: James D Steffes/NA/Enron@Enron, Janine Migden/NA/Enron@Enron, Steven J Kean/NA/Enron Subject: Re: Missouri genco bill issues and a proposed strategy We can get Ken to make the call- when does it need to occour? Kerry Stroup 03/30/2001 05:03 PM To: Richard Shapiro/NA/Enron@Enron, James D Steffes/NA/Enron@Enron cc: Janine Migden/NA/Enron@Enron Subject: Missouri genco bill issues and a proposed strategy (from Barbara and Kerry) Ameren UE has been successful in developing political support for a bill that would permit each Missouri IOU to transfer its generation assets to a genco at net book value. The genco would enter into a five-year term purchased power arrangement with the utility, with subsequent minimum three-year term renewals. Each utility transferring its generation assets would be required to establish a "dedicated supply" tariff for large customers, who could elect to obtain energy from alternative suppliers in a buy-through arrangement. Alternative suppliers would be required to sell dedicated supply to the utility in a wholesale transaction; the utility would transport the power to the large customers, who, from an operational perspective, remain native load customers of the utility. The Senate Commerce and Environment Committee has passed the bill, which will be considered by the Senate sometime in the next several weeks. If the Senate passes the bill, the debate will resume in the House. Legislators are interested in moving the bill because they believe it will improve reliability of supply in Missouri. Ameren UE has postponed building generation, and will require an additional 800 MW for next summer. In the wake of the California situation, the legislative interest is not in providing a competitive discipline to the marketplace. Ameren has promoted a genco structure as necessary for mitigating the investment community's concern over regulatory risk associated with building new generation facilities under traditional rate of return regulation. There are a number of problems with the bill. From a retail aspect, it will be difficult if not impossible to compete for large customers, who will be able to procure power from the utility at FERC established cost-based rates that are currently below market. In its present form the bill does not include meaningful code of conduct provisions, and it permits the utility to enter into billing and metering "experiments" in which customers can be aggregated and sold utility services at unregulated rates. Although the bill requires that rates for utilities establishing gencos must be reestablished in rate cases within twelve months prior to the transfer of generation assets, it is unclear the extent to which rates will be unbundled. Finally, alternative generation suppliers and their customers would be subject to balancing charges, which render physical transactions untenable at this time. From the wholesale perspective, the bill is unacceptable because incremental resources required to serve Missouri retail load are not required to be competitively procured. An earlier version of the bill would have permitted competitive procurement of additional generation sources at the utility's discretion, but was removed at the request of the Missouri PSC staff, who are sensitive to the legislature's focus on the issue of reliability. The bill is sponsored by President Pro-Tem Peter Kinder, who in the past introduced comprehensive legislation that required competitive procurement for customers not choosing alternative supply sources. Although Senator Kinder told Barbara and Roy Cagle that he would support passage of a bill this year, he does not appear to be taking an active interest in the details of the legislation. Senator Kinder belonged to the same fraternity at the University of Missouri as Ken Lay, though they didn't attend college together. Senator Kinder has voiced his admiration of Ken Lay, and met him at the Republican Convention this year. It might be possible to persuade Senator Kinder to improve the bill, if Ken Lay were to communicate personally with him. We recommend that Senator Kinder be persuaded to alter the bill to require competitive procurement for incremental generation resources. On the basis of our discussions with EES and ENA, it appears that taking steps to address retail market structure problems will not put us in a position to compete effectively for large customers in the short and mid term. Barbara and I will prepare briefing materials for Ken Lay, if you wish to proceed in this fashion. Please advise.