Subject: MA Forum -- 10/11
From: [email-masked]
To: [email-masked]
Cc: [email-masked]
Date: Tue, 16 Oct 2001 13:21:45 -0700 (PDT)

Did anyone from Enron attend the event referenced in the article below?  Also, in the future I would like to be included if you are notified or invited to these events as it provides good opportunities to get a pulse on the market.

Thanks,

Chris

Forum revisits energy issues 

Friday, October 12, 2001

By Bob Kievra
Telegram & Gazette Staff 

BOSTON-- Considerable progress has been made to restructure the state's electric power industry, but four years into the process, several lingering issues need revisiting, officials said yesterday.
     At a daylong forum at the Federal Reserve, legislators, utility executives, and consumer advocates said the 1998 law likely needs some fine-tuning, but the benefits of restructuring have largely come to pass.
     The restructuring law, passed amid the promise of lower electric rates and competitive suppliers, has not been a panacea, but it has done much of what was intended, said James Connelly, chairman of the Department of Telecommunications and Energy.
     A robust retail market has failed to emerged, but restructuring has shepherded into place a surplus of wholesale power that insulates the region from California-like problems, Mr. Connelly told an audience of about 110.
     For the first time in Massachusetts, default customers for one utility -- Fitchburg Gas and Electric Light Co. -- are poised to pay less than their standard-offer counterparts, he said.
     "We hope that's indicative of things to come," Mr. Connelly said. "We've got some work to do on that, but hopefully, we'll see something shortly that will push that ball further down the field."
     DTE, which was battered last year for allowing utilities to recoup the costs of rising fuel prices, made the right call, Mr. Connelly said. The process might have been painful, but it sent a message to the market that should stir more interest from other suppliers.
     House Speaker Thomas M. Finneran, who organized the event, said he wanted to hear a broad range of opinions before considering how to address the law's potential shortcomings.
     "I'm encouraged by what I see and hear," Mr. Finneran said during a break. "I like to think we're taking a long-term view. If Massachusetts is to succeed, we need a dependable supply of energy. Without that, you revert to the same status as a Third World country."
     Mr. Finneran said he was not concerned only 4,078 businesses and residential customers have opted to purchase electricity from a competitive supplier -- even though it was one of the restructuring act's goals.
     He said the rapid price increases last year kept many people from leaving their standard-offer service, but falling prices in recent weeks will likely prompt many customers to consider a competitive supplier.
     "It's not a fatal consequence," Mr. Finneran said. "We need to get a more robust market out there, and how we do that is one of the issues we need to talk more about."
     Standard-offer service, which will be phased out, was crafted to give customers savings of 15 percent during the first two years of restructuring.
     Default-service customers are those who signed up for power after the industry's March 1998 restructuring, moved to a different utility service territory or returned to their old utility after leaving a competitive power supplier.
     Standard-offer customers are those who have bought power from the same utility since before restructuring.
     Standard-offer customers initially saw price cuts -- totaling an estimated $1.7 billion -- but those subsidies curtailed suppliers from entering the market, Mr. Connelly said.
     "The temptation to extend standard-offer service should be resisted," he said. "It was necessary to give consumers a sense of value, but it has been a major roadblock to the emergence of competitive suppliers."
     Rep. John J. Binienda Sr., D-Worcester, said new air emissions standards might need revisiting because they would likely force some older power plants to go offline. Losing that reliable supply of energy might be a problem if it cannot be easily replaced, said Mr. Binienda, chairman of the House Energy Committee.
     David L. O'Connor, commissioner of the Division of Energy Resources, said current price trends are encouraging but the state remains a long way away from achieving the full vision of restructuring.
     Utilities such as Massachusetts Electric and NSTAR, which were to be solely distribution companies, remain involved in procurement because of few competitive suppliers, he said.
     Short-term price hikes for wholesale power have yet to curtail the retail demand for electricity and the reliability of some distribution companies has been poor in some cases, he said.
     "This is a symptom of a system that remains relatively immature," Mr. O'Connor said.
     Under the law, investor-owned utilities moved out of the generating business and became mostly distribution companies. But the law's fine print also enabled utilities to recoup millions they say they have lost from selling power at prices below the cost of generation.
     Those added costs soared last year because of rising oil and natural gas prices, producing a tempest which put the law under re-examination.
     Cheryl A. LaFleur, president and chief executive officer of Massachusetts Electric, said now is the time to study restructuring the industry because standard-offer service ends Feb. 28, 2005.
     She said standard-offer rates and default rates are quite close and will likely fall if fuel prices continue to decline.
     Competitive suppliers are still not interested in the retail market, said both Ms. LaFleur and George R. Gantz, senior vice president of Unitil Corp., the parent of Fitchburg Gas and Electric Light.
     The transition to a market-based environment for energy generation has not always been palatable, but the law is fundamentally sound and workable, Mr. Connelly said.
     DTE has tried to walk a tight rope this year, balancing the needs of consumers against those of an industry vital to everyone's well-being, he said. The rolling blackouts in California this year showed everyone how hard a job that can be, he said.
     "California showed that a public utilities commission can kill a market by doing foolish and cowardly things," he said. 

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Copyright 2001 Worcester Telegram & Gazette Corp.