Wholesaler Switch Some Power Responsibility Back to Utilities
Associated Press, 02/02/2001
Energy Service Provider Switching Customers' Power Source Back to Utilities
Associated Press, 02/02/2001
Calif May Issue 2nd Request For Pwr Bids As Terms Expire
Associated Press, 02/02/2001
Capstone May Get Microturbine Orders Worth Up To $60M
Dow Jones, 02/02/2001
FFBN Converts Wrap: Enron Prices $1.25B Zero Offering
Federal Filings Newswire, 02/02/2001
Judge Recovering From Arsenic Poisoning
Associated Press, 02/02/2001
Energy Service Provider Switching Customers' Power Source Back to Utilities
Associated Press, 02/02/2001
CROATIA: Us Plans Croatia Investment Conference in Spring
Reuters English News Service, 02/02/2001
Currency: The Business of Change
God Speed: What's faster than Richard Norman's Petabit Router? Maybe the 
Frenetic Work-Junky Himself
National Post, 02/02/2001
Gas Traders Seek Compromise Talks Between Enron and On-Line Rivals May End 
Lawsuit, Lead to 'Superindex'
The Globe and Mail, 02/02/2001
Senators Spar On U.S. Role In Resolving Energy Crisis
The New York Times, 02/02/2001
Power Exchange to Live On In Lawsuits
Los Angeles Times, 02/02/2001
THE CALIFORNIA ENERGY CRISIS PG&E Ability to Buy Natural Gas Eased Energy: 
PUC Grants Firm's Request to Use Money Owed by Customers as Collateral. 
Suppliers had Threatened to Stop Deliveries.
Los Angeles Times, 02/02/2001
Power Source Ends Direct Flow to California Businesses
The New York Times, 02/02/2001
Democrats, Utilities Urge Price Controls to Aid West
Pittsburgh Post-Gazette, 02/02/2001
Florida Energy Commission Recommends Deregulating Wholesale Electricity
Knight-Ridder Tribune, 02/02/2001
Senate Powerless On Power / No Easy Answers to State Energy Crisis
The San Francisco Chronicle, 02/02/2001
Deals & Deal makers: Burning Issues: Convertible Securities Are This Year's 
Big Model
The Wall Street Journal, 02/02/2001
Hot, Dark Summer Ahead for California; Drought Worsens Power Crunch, Senators 
Told
The Washington Post, 02/02/2001
Enron Award Should Have Been Through Competitive Bidding, Says Sarma
Business Standard, 02/02/20001
Options Report
Volatility Readings Hardly Move On News Of Federal Reserve's Cut In Interest 
Rates
The Wall Street Journal, 02/01/2001



Wholesaler switching some power responsibility back to utilities
By JAY JORDEN
Associated Press Writer

02/01/2001
Associated Press Newswires 
Copyright 2001. The Associated Press. All Rights Reserved. 

DALLAS (AP) - As California's energy market continues to struggle, a major 
electricity wholesaler said it will stop funneling power directly to dozens 
of corporate clients there, instead shifting their needs to local utilities. 
Houston-based Enron Energy Services cited concern over losses by California's 
power companies and the move to shut down the state's electrical exchange, 
company chief executive Marty Sunde said Thursday.
He said the switch won't affect the price paid by dozens of large customers, 
including Kaiser Permanente, though it may hurt the Enron Corp. subsidiary's 
bottom line. 
The company tries to help businesses cut their energy bills by, among other 
things, purchasing power wholesale and reselling it to clients at reduced 
rates. Like California's large utilities, Enron has been hurt by the state's 
soaring wholesale prices. 
Enron will have to pay the local utilities at the going rate but cannot pass 
on any higher costs to its customers because their contracts guarantee a 
price. 
"We are re-sourcing - choosing another sourcing alternative under an existing 
client relationship that we absolutely honor," Sunde said. "It seems like a 
better strategy to serve our customers directly from the utility" instead of 
canceling the contract. "There is a risk that our decision to honor our 
contracts will come with some cost." 
The New York Times, citing an unidentified source close to Enron, reported 
Thursday that the energy service provider might lose $1 billion if it 
fulfilled all its contracts. 
Sunde called the figure "absurd" but acknowledged that financial concerns and 
the quickly changing energy market in California played heavily in the 
decision. 
California has recently faced rolling blackouts because of a tight power 
supply that has been blamed on the state's 1996 deregulation, inadequate 
hydroelectric power, high natural gas prices, transmission glitches and power 
plant repairs. 
The state's two largest utilities, Southern California Edison and Pacific Gas 
and Electric Co., say they are $12.7 billion in debt because of soaring 
wholesale prices and the 1996 law, which blocks them from recouping those 
losses from their customers. 
--- 
On the Net: 
Enron Energy Services: http://www.ees.enron.com

Energy service provider switching customers' power source back to utilities
By JAY JORDEN
Associated Press Writer

02/01/2001
Associated Press Newswires 
Copyright 2001. The Associated Press. All Rights Reserved. 

DALLAS (AP) - A subsidiary of the largest seller of wholesale electricity in 
North America says concern over losses by California's major power companies 
has prompted it to quit scheduling power to dozens of its customers, 
switching that job to one of the state's debt-ridden utilities. 
The decision, which would apparently affect companies like Cisco Systems, 
Genentech and Clorox, would not stop the flow of electricity. But it would 
potentially raise the rates these big customers pay, perhaps by as much as 35 
percent, and could also increase the role of the state government as the 
major supplier of power in California, The New York Times reported Thursday.
As a result of the decision, the customers would be switched from the 
Houston-based Enron Corp. unit, called Enron Energy Services, to the Pacific 
Gas and Electric Company. They would lose the discounts and low rates they 
had enjoyed. 
The chief executive of Enron Energy Services said the unit was taking the 
step because of financial turmoil in the state's power market, but emphasized 
the company will honor current contracts with the dozens of corporations 
affected. Many companies arranged five-year contracts with Enron in 1997 and 
1998. 
"We are re-sourcing - choosing another sourcing alternative under an existing 
client relationship that we absolutely honor," said Marty Sunde, Enron Energy 
CEO. 
A source close to Enron told The Times that the energy service provider might 
lose $1 billion if it fulfilled all its contracts for the length of their 
terms. Sunde called the figure "absurd," but said financial issues played 
heavily in the decision. 
"Market forces, including legislation that is probably gone on in the last 12 
hours, continues to change whatever the price or cost picture is going to 
be," he said. 
One person with knowledge of Enron's move told The Times that the customers 
being cut off use about 3,000 megawatt hours, equal roughly to the output of 
six major generating plants. The state would become financially responsible 
for covering that, potentially adding millions of dollars a day to its 
already heavy burden. 
Financially strapped utilities Southern California Edison and Pacific Gas and 
Electric Co., forced by California's deregulation law to sell their power 
plants, say they've been pushed $12.7 billion in debt by soaring wholesale 
prices that deregulation blocks them from passing on to their customers. 
The state Legislature has been forced to spend hundreds of millions of 
dollars to keep the lights on in California, and is debating passage of a 
bill that would rescue the crippled utilities by floating up to $10 billion 
in bonds to buy power. 
In another move to shield itself from the power woes threatening California, 
Enron's parent company on Wednesday sued the California Power Exchange, a 
nonprofit market where electricity was auctioned. The lawsuit was filed the 
same day trading was stopped on the exchange because of the deep debt of the 
state's two biggest utilities. 
The lawsuit seeks to prevent the market from using letters of credit that the 
company was required to file to trade on the exchange. The suit is a move to 
ensure the market could not tap Enron's assets to pay off other debts.

Calif May Issue 2nd Request For Pwr Bids As Terms Expire

02/01/2001
Dow Jones Energy Service 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 

(This article was originally published Wednesday) 

LOS ANGELES -(Dow Jones)- The bids California received last week from 39 
power suppliers who may provide the state with long-term contracts for up to 
10 years expired at noon Wednesday, without the state signing a single 
contract for the 6.9-cent-per-kilowatt-hour weighted price, an adviser to 
Gov. Gray Davis told Dow Jones Newswires.
The state will likely request that generators resubmit new bids, which could 
result in higher rates and less capacity, the adviser said. 
The terms of the request for bids issued Jan. 24 to generators states that 
"the bidder's price and quantity shall be held until 3:00 p.m. EST Jan. 31, 
2001." 
Davis said the state was interested in signing contracts from six months to 
10 years. 
A spokesman at Mirant (MIR), formerly Southern Energy Co., said he could not 
discuss the matter because of confidentiality reasons. 
Earlier this week, San Jose-based Calpine Corp. (CPN) and another power 
supplier met with David Freeman, general manager of the Los Angeles 
Department of Water and Power, and Michael Peevey, former head of Edison 
International, to negotiate long-term contracts with the suppliers. Neither 
side came to an agreement. 
But the governor's office said the deadline has been extended for a "few of 
the bids" that were promising. The governor hopes to sign those contracts if 
legislation is passed by the Senate and Assembly Wednesday night. 
The state received bids from Duke Energy (DUK), Reliant Energy (REI), Enron 
Inc. (ENE), Williams Cos. (WMB) and Dynegy Inc. (DYN), but contracts were not 
signed, the adviser said. 
State Pushes Forward Power Prices Up 
Traders said the announcement by Davis that the state would become the 
largest purchaser of electricity for up to 10 years pushed up prices in the 
forward power market, with many Northwest utilities scrambling to ensure they 
have enough supplies for 2002 to 2006. 
Forward power prices for Mid-Columbia flat for 2004 to 2006 traded at $55-$63 
a megawatt-hour. Calendar year 2002 power at the California-Oregon border 
traded at $175/MWh last week. A month ago, it sold for $112/MWh. 
-By Jason Leopold; Dow Jones Newswires; 323-658-3874; 
jason.leopold@dowjones.com

Capstone May Get Microturbine Orders Worth Up To $60M

02/01/2001
Dow Jones News Service 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 

(This report was first published late Wednesday.) 

By Pat Maio 
Of DOW JONES NEWSWIRES 

LOS ANGELES -(Dow Jones)- Capstone Turbine Corp. (CPST) may have landed its 
biggest microturbine order to date from a consortium of public agency water 
suppliers in California - valued at up to $60 million, according to sources.
The Association of California Water Agencies, which is made up of 440 members 
who supply water to 90% of California's farms and cities, has signed a deal 
with an energy consulting firm that is working to secure up to 2,000 
microturbine unit orders for Capstone over the next two years. 
ACWA uses up to 7% of the state's electricity on pumping stations needed to 
irrigate farms, and many of its members have been hit hard financially by the 
energy crisis. 
Under the agreement, privately held Harza Energy LLC will buy the 
microturbines from Capstone, based in Chatsworth, Calif., and install them 
for ACWA's member water agencies. 
"For Harza, this will end up being our largest order ever," Steve Chippas, 
president of the Chicago engineering and energy consulting firm, said in a 
phone interview. 
Capstone marketing vice president Mark Kuntz, confirmed that his company has 
had discussions with ACWA regarding the potential to sell up to 2,000 
microturbines. 
The 30-kilowatt units would cost up to $30,000 each - making the total deal 
worth up to $60 million. 
"We have every expectation that this will result in a large order," Kuntz 
said. "We have made this a high priority to secure a large number of orders" 
with the ACWA agencies. Representatives of about 30 of those agencies will 
visit Capstone on Thursday to get a firsthand look at how a microturbine 
works, he added. 
Capstone said it had produced about 1,000 microturbines through last 
November, its last publicly disclosed production number. 
Dan Smith, director of regulatory affairs for ACWA, said public water supply 
agencies are being devastated financially by California's energy crisis. 
"I've been here almost 26 years, and I've seen droughts, but I've never seen 
so much aggravation and concern as this problem has caused," Smith said. 
He pointed to one San Diego-area agency, the Valley Center Municipal Water 
District, that plans to increase its water rates 25% on Feb. 1, and another 
25% on April 1. The district mainly supplies water to avocado growers, some 
of whom are saying them may be forced out of business because of the rate 
increases, Smith said. 
ACWA also is looking at reducing power costs to its members by picking a new 
wholesale supplier of electricity to replace AES Corp. (AES). Finalists are 
said to include Enron Corp. (ENE) and a joint consortium of Coral Energy, a 
unit of Royal Dutch/Shell (RD) and New West, an energy service supplier owned 
by Salt River Project, one of the nation's largest publicly owned energy 
businesses. 
Microturbines are primarily fueled by natural gas and can generate from 25 
kilowatts to 600 kilowatts of electricity a day. They also run on propane, 
diesel fuel, kerosene, landfill gas and waste and water treatment gases. 
Microturbines use just one moving part - a shaft on which a compressor 
turbine and permanent magnet generator are seated. Microturbines also use 
airfoil bearing technology, which eliminates the need for oil bearings. This 
is why microturbines cost less to maintain than other power sources and 
produce less pollution and noise. 
Microturbines can be turned on during the middle of the day when power prices 
are most expensive or during blackouts caused by interruptible contracts with 
electric utilities. Interruptible contracts give utilities the legal 
authority to turn off electricity when shortages are imminent. In return, 
customers get discounted power bills. 
Shares of Capstone closed Wednesday at $41, up 69 cents, or 1.7%, on Nasdaq 
volume of more than 1 million shares, compared with average daily volume of 
913,800. 
-By Pat Maio, Dow Jones Newswires; 323-658-3776; patrick.maio@dowjones.com

FFBN Converts Wrap: Enron Prices $1.25B Zero Offering

02/01/2001
Federal Filings Newswires 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 

ISSUER: FEDERAL FILINGS 
SYMBOL: X.FFI 


(This market wrap was originally published Wednesday evening.) 

WASHINGTON (FFBN)--Utilities and communications company Enron Corp. 
priced a $1.25 billion zero coupon convertible bond overnight in a Rule 144a 
private placement through Salomon Smith Barney. 

The securities include a yield to maturity of 2.125% and conversion 
premium of 45%, which according to Lehman Brother Chief Convertibles 
Strategist Ravi Suria, makes it "by far the richest priced zero that the 
convertibles market has absorbed so far. 

"Priced with such rich terms, upside participation on the bond should 
be limited, while the downside is less strong despite the existence of the 
put and the company's good credit profile," he wrote in a research note 
Wednesday. 

Suria said the most favorable elements of the deal are its massive 
size and its investment-grade credit rating, which will add to its liquidity. 

With five zero coupon convertibles entering the market in January 
alone, Suria wrote, "we would anticipate (or hope)that investor appetite will 
adjust somewhat and pricing terms will improve." 

In the secondary market, shares of convertible issuer Tekelec rose 
10.6% after the company reported fourth quarter adjusted net income of 27 
cents a diluted share, in line with expectations. The company also said it 
sees 2001 revenue growth of 23% to 27% and earnings growth of 25%. 

Tekelec's shares were up $2.69, at $28, while its 3.25% convertible 
notes were quoted at 167, or 9 points above parity. 

Based in Calabasas, Calif., Tekelec supplies signaling and control 
systems. 

Elsewhere, enterprise software maker PeopleSoft Inc.'s shares fell 
16% Wednesday after Morgan Stanley downgraded its stock to neutral from 
outperform. 

The company's stock lost $7.94 to close at $41, while its 4.75% 
convertible notes due 2002 were quoted at 101.72, or 21 points above parity. 

Terayon Communications Inc. shares fell almost 12% after it said it 
expects a first quarter pro forma loss of 45 cents to 50 cents a share on 
revenue of $45 million to $50 million. 

A First Call/Thomson Financial survey of three analysts yielded an 
average first quarter loss estimate for Terayon of 33 cents a share. 

As reported, Terayon said its forecast reflects restricted spending 
within the telecommunications industry, product transitions, and the 
company's reorganization and capital spending plans. 

The company's stock lost 88 cents to close at $6.50, while its 5% 
notes due 2007 were quoted at 24.6, or 17 points above parity. 

Terayon develops broadband data access and distribution network 
systems for the satellite and cable TV markets. 

-Dan Lowrey; 202-393-7402 

08:06

Judge recovering from arsenic poisoning

02/01/2001
Associated Press Newswires 
Copyright 2001. The Associated Press. All Rights Reserved. 

NACOGDOCHES, Texas (AP) - A retired judge is recovering from arsenic 
poisoning while the Texas Rangers investigate whether he might have been 
intentionally sickened with the element. 
Texas Ranger Tom Davis confirmed Tuesday that the Rangers and the Department 
of Public Safety are looking into whether District Judge Jack Pierce was 
poisoned in a criminal act.
A DPS crime van has processed items in Pierce's house in Nacogdoches as 
potential evidence but Davis declined to give any details on the case. 
Pierce was treated for the poisoning earlier this month at a hospital in 
Dallas, and his family expects a full recovery. 
His daughter, Mary Elizabeth Pierce, said Pierce is feeling better, and his 
spirits are high. 
"He's working on getting his strength back," she told the Nacogdoches Daily 
Sentinel. "We're expecting a full recovery, because he's Jack Pierce." 
She declined to comment on the poisoning, or how it was treated. 
Arsenic is a naturally occurring element that can be found in tobacco and 
treated wood. 
But a toxicologist with a state Poison Control Center said most arsenic 
poisonings do not occur from exposure to the element in the environment. 
Wayne Snodgrass, a toxicologist, physician and professor at the University of 
Texas Medical Branch in Galveston, said if a person is normally healthy, 
suddenly becomes ill and receives an accurate diagnosis of arsenic poisoning, 
arsenic could have been added to something they ate or drank. 
--- 
Kelly, Brooks AFB stores to close as agency trims commissaries 
SAN ANTONIO (AP) - Commissaries at Kelly and Brooks Air Force bases will 
close this year in a move to pare down, officials said Wednesday. 
It was not immediately known how many workers would be affected by the 
closures. 
Mark Solheim, spokesman for the Defense Commissary Agency said the agency 
would try to place all workers at other stores. 
"Every effort is going to be made to slot those people in vacancies in the 
Fort Sam (Houston), Randolph and Lackland (AFB) stores," Solheim said. 
"That's certainly our first prerogative." 
Kelly's commissary is to close April 15, three months before the ordered shut 
down of the base. 
The Brooks' store will close Oct. 1. 
A Defense Commissary Agency press release encouraged customers at Brooks to 
shop at larger nearby stores at Lackland, Randolph and Fort Sam Houston. 
Officials at Brooks were said they fought the closure of the commissary. 
The last day of operation for the Kelly store will be April 13. The last day 
at Brooks will be Sept. 28. 
--- 
Bush plans to loosen charity regulations invite abuses, critics say 
WASHINGTON (AP) - Taking advantage of one of George W. Bush's experiments, 
Teresa Calalay sent her son to a Texas church home last year hoping to break 
his pattern of legal, behavioral and work problems. He returned weeks later, 
broken in other ways. 
The 18-year-old's feet were swollen from severely sprained ankles and his 
body was covered with hundreds of welts, bruises and bug bites that led a 
doctor to file an abuse report with police. 
The home's superintendent now awaits trial on a felony charge of unlawful 
restraint - and Calalay has sued the church for what she says was a 
substitution of abuse for Christianity. The home denies wrongdoing. 
"I don't know where in their Bible it says you've got to beat God into 
people," Calalay said. 
Bush as president is now promoting a plan to shift more federal social 
services to religious groups - as he did as Texas governor. The idea has 
early bipartisan support, though supporters of the separation of church and 
state are pledging to fight it. 
A review of similar state and federal initiatives shows that beyond the 
political debate, these experiments have generated allegations of financial 
and physical abuse, questions of lax oversight and lawsuits questioning 
whether the needy are being force-fed religion at public expense. 
Supporters, including Bush himself, offer stories of churches freed from 
bureaucratic constraints that have helped turn lives around. And they suggest 
religious groups are less prone to fraud and abuse because of their beliefs. 
--- 
UNT fraternity accused of using racial slurs 
DENTON, Texas (AP) - A diverse group of University of North Texas students 
protested peacefully Wednesday against a fraternity accused of using racial 
slurs and waving a Confederate battle flag at a group of mostly black 
football recruits. 
The Kappa Alpha Order chapter at UNT was temporarily suspended after 
accusations that members confronted about 30 mostly black football recruits 
who were touring the Denton campus with their parents over the weekend. 
A representative from the National Association for the Advancement of Colored 
People met with a group of students Tuesday night to organize the march, 
according to Adrienne Williams, a UNT senior. 
Williams, 22, is the president of Eagle Angels, the volunteer group that was 
escorting the recruits on the tour. The group marched to the administrative 
building carrying envelopes outlining demands. 
Colleen Murphy, an Angels officer, said the demands include an endorsement of 
the suspension, the assessment of a fine or possibly confiscation of the 
fraternity house, according the Denton Record-Chronicle. 
LaToya Royal, a member of the tour-leading Angels, said about 20 men wearing 
their Greek letters Saturday ran down the stairs of the student union with a 
dog wearing a Confederate battle flag bandanna and "stopped about 20 feet 
away and began chanting and singing." 
--- 
Airline: Discussions may involve merger talks 
HOUSTON (AP) - Continental Airlines Inc. has been in talks with industry 
officials about corporate moves that may involve combining with another 
carrier, executives say. 
Airline officials said Wednesday night in a written statement that it has had 
and anticipates that it will have further discussions with "third parties" 
about "strategic alternatives" that could include alliances or mergers. 
The statement preceded Thursday's planned hearing on industry consolidation, 
in which officials will consider whether planned deals will benefit 
consumers. Some lawmakers are concerned that the mergers will hurt fliers by 
reducing competition. 
As major industry mergers continue, speculation has focused on Delta Air 
Lines buying Continental. But the possibility also exists that the smaller 
Continental might want to buy Atlanta-based Delta, the nation's third largest 
airline. 
Gordon Bethune, Continental's chief executive and chairman, told the Houston 
Chronicle on Wednesday that although the airline wasn't in talks with Delta 
or another carrier, he wouldn't rule out the option. 
Analysts say a merged Delta-Continental would be a legitimate response to 
mergers between United Airlines and US Airways as well as American Airlines 
with TWA. 
Continental and Northwest already have a marketing alliance in which they 
feed each other passengers. Bethune has previously said that Continental is 
open to Delta joining the Northwest-Continental alliance. 
--- 
Energy service provider switching customers' power source back to utilities 
DALLAS (AP) - One of the largest sellers of wholesale electricity in North 
America says concern over losses by California's major power companies and 
the move to shut down that state's electrical exchange has prompted it to 
quit scheduling power to dozens of its customers, switching that job instead 
to the utilities. 
The chief executive of Houston-based Enron Energy Services says Thursday the 
move will not alter current contracts with dozens of corporations, whose 
rates will not change under those agreements, but likely will affect the 
power outsourcing company's bottom line. 
"It seems like a better strategy to serve our customers directly from the 
utility as opposed to turning them back - the normal procedure," said Marty 
Sunde, Enron Energy CEO. "There is a risk that our decision to honor our 
contracts will come with some cost." 
The subsidiary of Enron Corp., a major supplier of power to Californians, has 
gone to Kaiser Permanente and other major customers with the need to source 
power for delivery directly from utilities, instead of scheduling itself in a 
state hit by rolling blackouts amid electricity shortages. 
"We are re-sourcing - choosing another sourcing alternative under an existing 
client relationship that we absolutely honor," Sunde said. "A measure of that 
is what Enron means when it says the contract remains in place - our 
customers' expenditures will remain the same." 
A source close to Enron told The New York Times in Thursday's editions that 
the energy service provider might lose $1 billion if it fulfilled all its 
contracts for the length of their terms. 
Sunde called the figure "absurd," but added that financial issues played 
heavily in the company's risk management decision. 
--- 
Former POW has trouble convincing government he's alive 
LANSING, Mich. (AP) - It was last week when Staff Sgt. Christopher Stone 
discovered he was still dead. 
He tried to buy a car, but a dealer told him "`Sorry, but you have this black 
mark on your credit report,"' Stone said. "I guess they don't like lending 
money to a dead guy because they're hard to collect from." 
Stone, a former prisoner of war, first discovered his problem about a year 
ago while he was preparing his taxes. 
Ever since, he has been trying to convince the government that he is alive. 
"It all started the day I was captured," Stone told the Detroit Free Press 
for a story Thursday. "Somebody decided on that day to initiate a death claim 
for benefits. I don't know who or how, but that claim was passed on to the 
credit bureaus." 
The former Capac High School student was captured, along with two soldiers 
under his command, by about 20 Serb soldiers on March 31, 1999, while 
patrolling the Macedonian-Yugoslav border and imprisoned for 32 days. The 
Serb soldiers fired on the Humvee scout vehicle Stone, Staff Sgt. Andrew 
Ramirez of Los Angeles and Spc. Steven Gonzales of Huntsville, Texas, were 
riding in and set the engine on fire. 
The three prisoners of war were released more than a month later when 
Yugoslav authorities handed the soldiers over to the Rev. Jesse Jackson, who 
had negotiated their release. 
Elsewhere 
TEACHERS' INSURANCE: About 750 teachers and school employees rallied in front 
of the Capitol on Wednesday, calling on legislators for state-paid health 
benefits. Many of them waved signs and chanted "health care that's fair now!" 
Unlike state employees, public school workers do not get any state-paid 
health insurance. Although state law requires districts to offer comparable 
coverage - but not necessarily comparable cost - to that which state 
employees receive, some districts offer no plan at all because there is no 
penalty for failing to do so. ... STATE EMPLOYEES: A Texas workers' union on 
Wednesday called for an 8.25 percent pay raise for all state workers, which 
would cost the state about $1 billion. Lawmakers already have said there 
isn't enough money in the budget. ... ELECTION LAWS: Banning punch-card 
ballots in the 14 counties using them would cost at least $25 million and 
could financially strain local governments, Secretary of State Henry Cuellar 
said Wednesday. "I believe in eliminating the punch card," Cuellar said, 
outlining ways Texas might avoid some pitfalls Florida faced after the 
November presidential election. But Cuellar warned that doing away with 
punch-card ballots in favor of a more up-to-date voting technology still may 
not make for the most accurate vote count. TAX SEASON: Joe Hardie likes to 
cut it as close. That's why he made the trip to the North Dallas branch of 
the Dallas County Tax-Assessor Collector and pay his property tax on the last 
day possible without having to pay a penalty. He joined Texans statewide 
making the trek to their tax offices to pay property taxes.

Energy service provider switching customers' power source back to utilities
By JAY JORDEN
Associated Press Writer

02/01/2001
Associated Press Newswires 
Copyright 2001. The Associated Press. All Rights Reserved. 

DALLAS (AP) - One of the largest sellers of wholesale electricity in North 
America says concern over losses by California's major power companies and 
the move to shut down that state's electrical exchange has prompted it to 
quit scheduling power to dozens of its customers, switching that job instead 
to the utilities. 
The chief executive of Houston-based Enron Energy Services says Thursday the 
move will not alter current contracts with dozens of corporations, whose 
rates will not change under those agreements, but likely will affect the 
power outsourcing company's bottom line.
"It seems like a better strategy to serve our customers directly from the 
utility as opposed to turning them back - the normal procedure," said Marty 
Sunde, Enron Energy CEO. "There is a risk that our decision to honor our 
contracts will come with some cost." 
The subsidiary of Enron Corp., a major supplier of power to Californians, has 
gone to Kaiser Permanente and other major customers with the need to source 
power for delivery directly from utilities, instead of scheduling itself in a 
state hit by rolling blackouts amid electricity shortages. 
"We are re-sourcing - choosing another sourcing alternative under an existing 
client relationship that we absolutely honor," Sunde said. "A measure of that 
is what Enron means when it says the contract remains in place - our 
customers' expenditures will remain the same." 
A source close to Enron told The New York Times in Thursday's editions that 
the energy service provider might lose $1 billion if it fulfilled all its 
contracts for the length of their terms. 
Sunde called the figure "absurd," but added that financial issues played 
heavily in the company's risk management decision. 
"Market forces, including legislation that is probably gone on in the last 12 
hours, continues to change whatever the price or cost picture is going to 
be," he said. "The driving force is that we started to connect the dots and 
saw a trend." 
Financially strapped utilities Southern California Edison and Pacific Gas and 
Electric Co., forced by California's deregulation law to sell their power 
plants, say they've been pushed $12.7 billion in debt by soaring wholesale 
prices that the same law blocks them from recovering from their customers. 
Meanwhile, Enron Energy customers shouldn't notice a change, said company 
spokeswoman Karen Denne. 
"The price our customers pay for their electricity is not changing," she 
said. "The only difference is that PG&E will now supply the physical power."

INDIA: Indian state likely to miss Enron bill deadline.

02/01/2001
Reuters English News Service 
(C) Reuters Limited 2001. 

BOMBAY, Feb 1 (Reuters) - India's Maharashtra state government is likely to 
miss a Thursday evening deadline for paying 890 million rupees ($19.2 
million) owed to the Indian unit of Enron Corp , leading the U.S. energy 
giant to demand payment from the federal government. 
"We have two options. Either invoke the counter guarantee of the federal 
government, or encash the letters of credit," an Enron spokesman told Reuters 
on Thursday. He said the company had not decided which option to pursue.
Enron has invested more money in India's power sector than any other foreign 
company, and is also one of the country's largest overseas investors. Its 
struggle, and tactics, to obtain payment has attracted much media attention 
at a time when India is desperately trying to attract more foreign investment 
to feed a growing hunger for power. 
After numerous payment delays, Dabhol Power Company (DPC), Enron's Indian 
unit, last week decided to invoke the counter guarantee of the Maharashtra 
state government. 
The state government has until the close of business on Thursday to provide 
the cash-strapped state electric utility with the money it needs to pay for 
power purchased in recent months from an Enron-owned power plant. 
If that deadline is not met, Enron can demand payment from the federal 
government, which signed an agreement to guarantee the state utility's bills 
in 1996. 
Counter guarantees are designed to assure foreign investors that their bills 
would be paid by the federal or state governments in case state utilities 
default. 
A letter of credit is an instrument through which a bank stands guarantee for 
payment by its client. 
Senior state government officials could not be contacted for comment, but a 
government spokesman told Reuters that no meeting of the state cabinet is 
scheduled for Thursday to discuss the issue.

CROATIA: US plans Croatia investment conference in spring.

02/01/2001
Reuters English News Service 
(C) Reuters Limited 2001. 

ZAGREB, Feb 1 (Reuters) - The United States plans to hold an investment 
conference in Croatia this spring to spur investor interest in the country 
after it undertook democratic and economic reforms. 
"One of my aims is to find ways to encourage more U.S. companies to invest in 
Croatia," new U.S. ambassador Lawrence Rossin told journalists on Thursday.
"We are planning an investment conference in Croatia, sponsored by the 
Overseas Private Investment Corporation, probably in April," Rossin said, 
singling out tourism, agri business, information and technology as sectors of 
interest. 
"We need to educate U.S. companies about Croatia and its possibilities, 
political and security climate," he added. 
Rossin also said Croatia should work on improving the investment climate by 
cutting bureaucratic procedures, reforming its legal system and ensuring 
legal security for businesses. 
U.S. investment was scarce during the previous nationalist regime, which 
ruled Croatia from independence in 1991 to 2000, when it was replaced by a 
reformist coalition. 
One of the rare major U.S. players to venture into the Croatian market was 
energy giant Enron . 
It signed a number of deals on cooperation and purchase of electricity with 
state power board HEP last September, after a long dispute over agreements 
worth $1.6 billion it had signed with the previous government and which the 
new one disputed.

National Post Business Magazine
Currency: The Business of Change
God Speed: What's faster than Richard Norman's petabit router? Maybe the 
frenetic work-junky himself
Julie McCann
National Post

02/01/2001
National Post 
National
19
(c) National Post 2001. All Rights Reserved. 

Richard Norman, president and CTO of Montreal-based Hyperchip Inc., powers 
from thought to thought at warp speed. His frenetic energy is countered only 
by his work environment (Feng Shui-master-approved). Mini-fountains, natural 
light and round-leafed plants wrap around the 250-odd employees fighting to 
get their product, a petabit router, to market. "Everybody here works 
ridiculous hours, they think fast, they drink lots of coffee," he says. "It's 
just adrenaline." 
At 43, Norman is the chief work-junkie. He started out programming computers 
when he was eight and, since co-founding the company back in 1997, he has 
averaged about 100 hours a week. "I want to get down to 70 or 80," he says 
earnestly. "But I haven't missed a day of work due to illness since Hyperchip 
was incorporated. Adrenaline just burns off those viruses." His efforts could 
soon pay off. Though the full capacity of Hyperchip's product (which directs 
Internet traffic 1,000 times faster than the terabit servers of today) won't 
be necessary until around 2003, the data-moving needs of tomorrow are 
calling. Norman wants to take on competitors like Cisco Systems, Inc. and 
Lucent Technologies Inc. For now, he says, California-based Juniper Networks, 
Inc. is the company's benchmark. "They're worth about $40 billion even in a 
down market," he explains. "And that's 18 months after their IPO. They're our 
role model so we'd like to go one step better."
Having rounded up $147 million in investments as of September from major 
lenders like Enron Corp. and Morgan Stanley Dean Witter, among others -- the 
largest ever for a pre-revenue Canadian company -- they're off to a good 
start. The product is currently running in test labs, and customer product 
testing should begin by spring. "The financial goal here is to be a 
networking powerhouse," Norman says. He'd better stock up on those 
mini-fountains.

Black & White Photo: Tshi / Richard Norman; Graphic/Diagram: Illustration by 
Aaron Leighton 
Report on Business: Canadian
Gas traders seek compromise Talks between Enron and on-line rivals may end 
lawsuit, lead to 'superindex'
DAVID PARKINSON

02/01/2001
The Globe and Mail 
Metro
B7
"All material Copyright (c) Bell Globemedia Publishing Inc. and its 
licensors. All rights reserved." 

CALGARY -- A legal battle between two major on-line natural gas trading 
companies could lead to a more comprehensive index for tracking natural gas 
prices. 
Insiders said energy trading company Enron Canada Corp. and on-line trading 
firm NGX Canada Inc., along with energy newsletter publisher Canadian 
Enerdata Ltd., are holding talks aimed at settling a $101-million lawsuit 
Enron filed late last year against the other two companies.
Enron has alleged that it suffered "irreparable harm" when NGX, operator of 
the on-line Natural Gas Exchange, purchased the rights to Enerdata's natural 
gas price indexes last September and immediately changed the way the indexes 
are calculated. 
Officials at NGX and Enerdata have countered that they struck their index 
deal for legitimate business purposes, with no intent to harm Enron's 
business, and that the new indexes are superior to the old calculations. 
Sources said the talks could lead to the establishment of a so-called 
"superindex," combining trading data from several on-line trading systems to 
create a more reliable and representative measure of natural gas prices in 
the open market. 
Calgary-based Enron, like many participants in the Canadian natural gas 
market, uses Enerdata's indexes as the price basis for its gas hedging 
contracts. 
In its lawsuit, Enron contends that the new method for calculating the 
indexes -- using only trades conducted though the Natural Gas Exchange -- 
isn't as neutral, reliable or broad-based as Enerdata's old method of 
surveying a wide variety of market participants. 
The dispute comes against a background of competition for market share in the 
fast-growing and increasingly competitive on-line gas trading business. 
Enron Canada's parent, Enron Corp. of Houston, competes with NGX for 
customers through EnronOnline, the dominant trading system in the on-line 
marketplace. Ownership of a reliable price index is considered a sure-fire 
drawing card to attract customers. 
"NGX now controls and otherwise generates the gas price indexes based upon a 
far more restricted basis of compiling source data based only on those trades 
consummated on the NGX trading system," Enron said in documents filed to the 
Alberta Court of Queen's Bench. 
"The effect of the new methodology is to coerce industry participants to 
transact through the NGX trading system." 
Participants in the natural gas market have generally applauded NGX's changes 
in calculating the gas price indexes, arguing that the data are more timely, 
transparent and accurate than under Enerdata's old survey method. 
But there are indications Enron wanted to establish a benchmark price index 
on its own Web site. In an affidavit, Richard Zarzeczny, the owner of 
Enerdata who is also named as a defendant in the lawsuit, says Enron actually 
offered to buy Enerdata and its price indexes last October, but Mr. Zarzeczny 
refused the offer. Enron declined comment. 
Sources close to the lawsuit said the mood surrounding the dispute has thawed 
considerably in the past week, opening the door for a possible settlement 
that could improve pricing information for the entire natural gas industry. 
Enron has dropped its request for an injunction that would have forced 
Enerdata of Markham, Ont., to revert to its old method of calculating the 
indexes. 
The injunction hearing had been set for Feb. 7. Enron is continuing its 
lawsuit, but the parties are holding talks for an out-of-court solution. 
"We have dropped the injunction in order to pursue a settlement," Enron Corp. 
spokesman Eric Thode said. 
"We're currently in some discussions to try to resolve this," said Peter 
Krenkel, president of Calgary-based NGX. 
Sources close to the talks confirmed that the superindex is on the 
negotiating table. 
"That's one of the possible solutions to this," Mr. Krenkel confirmed.

National Desk; Section A
Senators Spar On U.S. Role In Resolving Energy Crisis
By JOSEPH KAHN

02/01/2001
The New York Times 
Page 16, Column 3
c. 2001 New York Times Company 

WASHINGTON, Jan. 31 -- Senate Democrats and Republicans clashed today over 
whether the Bush administration had done enough to help California extricate 
itself from an electricity crisis, suggesting that the politics of power are 
as volatile as energy prices. 
The administration ''has an obligation to find a solution before the crisis 
worsens,'' Senator Jeff Bingaman, Democrat of New Mexico, said in a Senate 
hearing on the problem.
Mr. Bingaman criticized the administration for using the power shortages to 
promote its plan, made public in last year's presidential campaign, to drill 
for oil in an Alaskan wildlife refuge. ''All the oil in Alaska'' would do 
little to relieve electricity shortages, he said. 
But some Republicans firmly backed the new administration's relatively 
hands-off approach and its focus on what they called a long-term energy 
policy. 
Senator Frank H. Murkowski, the Alaska Republican who is chairman of the 
Senate energy committee, argued that a Clinton administration order forcing 
power producers and natural gas companies to sell supplies to California -- 
an order the Bush administration temporarily extended last week -- 
potentially made the federal government liable for billions of dollars in 
debt incurred by California utilities. 
''In the event California cannot repay generators for this power, the federal 
government is going to have to meet that obligation, because this was an 
order of the federal government,'' Mr. Murkowski said. 
He has backed the Bush administration's decision to end the executive order 
next Wednesday, a step that will increase the pressure on California 
politicians to solve the state's problems quickly. 
The split on the energy panel suggests that there is no groundswell of 
support in Congress for tackling California's energy woes. 
Numerous lawmakers plan to introduce legislation that will address both 
electricity shortages and the long-term search for domestic sources of 
energy. But today's hearing gave no indication that the Republican-controlled 
Congress plans to challenge the administration's position that the federal 
government should have a relatively limited role in correcting imbalances in 
electricity supply and demand. 
The politics are more complex in the West, where Republicans and Democrats 
alike have pushed for the federal government to impose price caps on 
electricity in the region. Supporters of caps argue that the limits would 
curtail sky-high prices and buy time for California and other states to line 
up long-term supplies. Opponents say they would distort the market and remove 
an incentive for power companies to build more plants. 
The power to regulate prices on interstate sales of electricity belongs to 
the Federal Energy Regulatory Commission, a low-profile independent agency. 
The commission has shown little inclination to impose a regional price cap, 
but critics have urged Congress to force it to take action. 
Several Democrats, including California's two senators, backed price caps at 
today's hearing. Senator Dianne Feinstein of California cited a study 
predicting that her state's power problems would only increase this summer 
and that caps were needed to keep the state's two main utilities solvent and 
the lights on in the nation's most populous state. 
Ms. Feinstein was joined in the call by California utility executives. Fred 
John, senior vice president for Sempra Energy, the parent company of San 
Diego Gas and Electric, said his company had long opposed price caps. But, he 
said, ''You reach a point where enough is enough.'' 
But executives from companies that sell power to California, including the 
Enron Corporation and the Williams Companies, testified that price caps were 
harmful. They said that the solutions to California's problems were to allow 
consumer prices to reflect the market's supply, and to make it easier for 
companies to build new power plants. 
The Bush administration has tended to favor that position, as have some 
Republican lawmakers. Mr. Murkowski said California had to devise a way to 
encourage companies to build new power generation plants and transmission 
lines. 
''You can't have the state take over the industry and try to run it,'' he 
said.


Photo: Senator Dianne Feinstein of California greeted Steve Frank, chief 
executive of Southern California Edison, as hearings began yesterday. 
(Associated Press) 
Metro Desk
Power Exchange to Live On in Lawsuits
ROBIN FIELDS
TIMES STAFF WRITER

02/01/2001
Los Angeles Times 
Home Edition
A-19
Copyright 2001 / The Times Mirror Company 

The California Power Exchange may be passing from existence, but it's still a 
live target for litigation. 
Enron Corp. sued the market Wednesday to prevent it from using letters of 
credit that the company was required to file to trade on the exchange.
Though Enron's collateral exceeds its liabilities to the exchange, the 
company moved preemptively to make sure the market could not tap its assets 
to pay off other debts, an exchange spokesman said. 
The Power Exchange has also sued Southern California Edison for failing to 
pay for $215 million of power it bought in December, asking to recoup the 
money by liquidating the utility's long-term power contracts. A Superior 
Court judge is scheduled to rule on the matter Friday. Pacific Gas & 
Electric, fearing that the exchange would file a similar action if it 
defaults on its January purchases, has sued to prevent the market from doing 
so. 
In all three cases, lawyers may still be arguing after the Power Exchange 
turns off its own lights. On Tuesday, the Power Exchange board voted to shut 
down its spot market, saying decisions by federal regulators had diminished 
trading activity to the point of futility. 
The exchange closed its "day ahead" market Tuesday and ended trading on its 
"day of" market at noon Wednesday. It will stay open indefinitely with a 
skeleton staff to handle long-term contracts. 
The Pasadena-based nonprofit was once a cornerstone of the state's 
deregulation plan, the principal market in which electricity was auctioned 
for delivery to Californians. 
But the exchange's demise was sealed by continuing credit problems at 
Southern California Edison and Pacific Gas & Electric, a federal ruling that 
the utilities could buy power elsewhere and changes in pricing policies that 
sent sellers to markets outside California. 
Trading volume on Tuesday, its last full day, was 24,176 megawatt-hours, 
compared with a daily average of 530,000 megawatt-hours last summer. One 
megawatt-hour is enough electricity to supply 1,000 typical homes for an 
hour. 
The exchange dismissed 15% of its 200 employees Jan. 19 and has fired 10 to 
15 more since then as their jobs became unnecessary, spokeswoman Beth 
Pendexter said. "People are kind of down," Pendexter said. "We know the end 
is inevitable, but that doesn't make it any easier."

Metro Desk
THE CALIFORNIA ENERGY CRISIS PG&E Ability to Buy Natural Gas Eased Energy: 
PUC grants firm's request to use money owed by customers as collateral. 
Suppliers had threatened to stop deliveries.
TIM REITERMAN
TIMES STAFF WRITER

02/01/2001
Los Angeles Times 
Home Edition
A-19
Copyright 2001 / The Times Mirror Company 

SAN FRANCISCO -- Moving to head off a "doomsday scenario" of widespread and 
prolonged natural gas outages in Northern and Central California, state 
regulators on Wednesday granted cash-strapped Pacific Gas & Electric Co. 
permission to use money owed to the company by customers as collateral for 
future gas purchases from suppliers. 
As the Public Utilities Commission took steps to ease California's natural 
gas shortage, PUC President Loretta M. Lynch unloaded on suppliers that have 
threatened to stop delivering gas to PG&E without advance payment or 
collateral.
Calling the situation "egregious," Lynch accused the industry of taking 
advantage of the state's continuing energy crunch. 
"I believe PG&E is the victim . . . of predatory practices of the natural gas 
industry," she said. 
The commission did not act on an unusual request by PG&E to force Southern 
California Gas to sell emergency gas supplies to the utility, a step that the 
gas company feared would spread the crisis to its own 18 million customers. 
The matter was deferred to the commission meeting next week, but Lynch said 
she views the two PG&E proposals as an "either-or" proposition. 
"It is incumbent on PG&E to make this work," she said after Wednesday's 5-0 
vote. 
In addition to allowing PG&E to use its unpaid gas customer accounts as 
collateral, the commission allowed the company to pledge its core gas 
inventory to secure additional gas supplies. However, the PUC said that 
action could be taken only if PG&E did not have enough accounts receivable to 
cover a particular gas purchase. 
The authorization, the PUC said, will expire once PG&E's financial condition 
improves. That could come within 90 days of any state bailout legislation or 
15 days after certain improvements in the company's credit rating occur. 
"This is good news," said PG&E spokeswoman Staci Homrig. "We hope we can take 
this authorization to gas suppliers and make them do business with us. 
"This [decision] keeps the gas flowing for at least the next month," Homrig 
said, explaining that it takes so long to collect gas money from customers 
that the 90-day limit would cover only one billing cycle. The company, she 
said, could file for an extension if necessary. 
The company estimated, in filings with the PUC, that firms providing 71% of 
its core gas supply either have terminated or have threatened to terminate 
gas shipments. They are J. Aron & Co., a subsidiary of Goldman Sachs; Sempra 
Energy Trading; Duke Energy and partner Coastal Merchant Energy; and Western 
Gas Resources. 
Alex Hemerick, spokeswoman for Sempra Energy Trading of Stamford, Conn., 
declined to comment, saying the firm is studying the plan. 
Tom Williams of Duke Energy North America said, "We don't have any comment 
one way or the other. We are following developments hour by hour, day by 
day." 
Other suppliers did not return calls late Wednesday. 
PG&E made a series of urgent requests starting two weeks ago after gas 
suppliers threatened to halt sales to the utility, fearing it could not pay 
its bills. The crisis recently took on added urgency because a federal order 
requiring gas suppliers to sell to California expires at midnight Tuesday. 
Without emergency assistance, PG&E representatives said, many of the 
company's 3.9 million residential and business customers--and entire cities, 
from Sacramento to San Francisco and Fresno--faced potential shut-off of 
their gas. And, they said, dwindling supplies would have a ripple effect on 
many of the company's 4.8 million electricity customers, because gas-fired 
power plants are among the large "non-core" industrial customers that would 
lose gas supplies first. 
The company also warned that non-core customers farthest from pipelines would 
suffer "catastrophic effects. . . . Hospitals, government agencies and 
industrial users would have reduced gas supply and would have to limit or 
cease operations." 
The company appealed for help from the U.S. Department of Energy, gas 
suppliers, Southern California Gas and Gov. Gray Davis, who sent letters to 
the White House to seek assistance. The utility warned that, without a 
solution to its supply problems, it would have to start diverting gas from 
non-core customers by mid-February, with residential and small-business 
customers to follow shortly thereafter. 
On Jan. 18, PG&E asked the PUC to declare a gas supply emergency and to order 
Southern California Gas to come to the rescue. Four days later, PG&E asked 
the commission for permission to use unpaid customer accounts as collateral 
to help persuade its suppliers to keep gas coming. 
The PUC's order prohibits PG&E from providing collateral for any gas 
purchases from its own affiliates. A company spokesman said PG&E Energy 
Trading has provided the utility with gas but has not asked for any advance 
payments or security. 
Was the crisis averted? 
"I hope and expect so," said PUC Commissioner Carl W. Wood. "But these days 
we never know what tomorrow will bring." 
Times staff writer Chris Kraul contributed to this story. 
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC) 
Power Points Background 
The state Legislature approved electricity deregulation with a unanimous vote 
in 1996. The move was expected to lower power bills in California by opening 
up the energy market to competition. Relatively few companies, however, 
entered that market to sell electricity, giving each that did considerable 
influence over the price. Meanwhile, demand has increased in recent years 
while no major power plants have been built. These factors combined last year 
to push up the wholesale cost of electricity. But the state's biggest 
utilities--Pacific Gas & Electric and Southern California Edison--are barred 
from increasing consumer rates. So the utilities have accumulated billions of 
dollars in debt and, despite help from the state, have struggled to buy 
enough electricity. 
Daily Developments 
* The state Senate put final touches on AB1X, which authorizes the state to 
enter long-term contracts for electricity and issues $10 billion in bonds to 
pay for that power. 
* 
* At a U.S. Senate committee hearing in Washington, senators complained that 
the power crunch is spreading throughout the West and that California brought 
its problems on itself by making it difficult for companies to build power 
plants. 
* 
* Enron Corp. sued the California Power Exchange to prevent it from tapping 
its assets to pay off other debts. 
* 
Verbatim 
"No more talking about leadership. Put up or shut up." 
--Assembly Republican Leader Bill Campbell 
(R-Villa Park) 
Complete package and updates at www.latimes.com/power

National Desk; Section A
Power Source Ends Direct Flow to California Businesses
By JAMES STERNGOLD with MATT RICHTEL

02/01/2001
The New York Times 
Page 16, Column 3
c. 2001 New York Times Company 

LOS ANGELES, Jan. 31 -- In a sign that problems are deepening in California's 
overburdened energy market, a division of the Enron Corporation that sells 
power directly to large industrial and commercial concerns has decided to 
halt such service to dozens of its clients because of the potential for 
mounting losses. 
The decision, which would apparently affect companies like Cisco Systems, 
Genentech and Clorox, would not stop the flow of electricity. But it would 
potentially raise the rates these big customers pay, perhaps 35 percent or 
so, and sharply increase the role of the state government as the major 
supplier of power in California.
Enron, based in Houston, is one of the largest companies -- if not the 
largest -- supplying low-cost energy to such big customers in California. 
As a result of the decision, the customers would be immediately switched from 
the Enron unit, called Enron Energy Services, to the Pacific Gas and Electric 
Company. But they would lose the discounts and low rates they had enjoyed. 
It was unclear whether Enron would compensate the customers, most of whom 
arranged five-year contracts with it in 1997 and 1998. 
Marty Sunde, chief executive of Enron Energy Services, confirmed late today 
that his unit was taking the step because of the severe financial turmoil in 
the power market in the state. But Mr. Sunde emphasized repeatedly that the 
company would honor in some way its contractual obligations. 
Enron Energy Services is a unit that seeks to help companies find ways to 
reduce their overall energy costs. One way is by selling power at reduced 
rates. To accomplish that, it has sought to buy power on the wholesale market 
at competitive rates, but just like California's large utilities, it has 
suffered from the rocketing wholesale costs. 
Mr. Sunde said two issues forced his company's hand. One was the enormous 
losses suffered by California's two major utilities, Pacific Gas and Electric 
and Southern California Edison, because of the soaring wholesale price of 
electricity. The other was the recent decision by the California Power 
Exchange, where Enron and other large energy companies buy and sell power at 
wholesale rates, to shut down because of the crisis. 
''This actually threatened the financial mechanism of how electricity is 
supplied,'' Mr. Sunde said. 
A person close to Enron said the company had determined that it could lose 
perhaps $1 billion if it fulfilled all the contracts for the length of their 
terms. But Mr. Sunde denied that figure. 
Perhaps the most important result of Enron's decision was that switching 
those big customers to the utilities would sharply increase the amount of 
power that the State of California would be forced to buy on an emergency 
basis. 
With Pacific Gas and Electric and Southern California Edison saying they are 
on the verge of bankruptcy because of the soaring price of wholesale power, 
the state government has stepped in, buying huge amounts of power and selling 
it to the utilities. 
One person with knowledge of Enron's move said that, all told, the customers 
being cut off -- several dozen large corporations -- use about 3,000 megawatt 
hours, equal roughly to the output of six major generating plants. That means 
the state would become financially responsible for covering that, potentially 
adding millions of dollars a day to its already heavy burden. 
Mr. Sunde said he could not confirm that total. 
Generally, the large customers that Enron supplies cannot have power service 
stopped as long as they pay their bills. As a result of being dropped by 
Enron, the companies would become clients of Pacific Gas and Electric, which 
already operates the transmission lines to them. 
While Enron's decision does not suggest that another crisis has developed, it 
shows how quickly the private players in the once-thriving energy business 
here have been forced to pull out or curtail their involvement, even if it 
means harming relations with customers. 
It also suggests that, though the state government is already playing a major 
role on an emergency basis, it will probably have to continue that role for 
many years. 
Some Enron customers, contacted today, said they had not received any notice 
from Enron, and they expressed shock and dismay about the decision on 
withdrawal. 
One was Kaiser Permanente, the large managed care organization. Rich A. 
Seguin, senior energy manager at Kaiser Permanente, said late today that two 
weeks ago Enron had asked to modify its contract with Kaiser to allow for the 
switching of power sources. He said Kaiser's lawyers had reviewed the request 
and found no problem. 
''If they stand behind our contract, which is what their stance is,'' Mr. 
Seguin said of Enron, Kaiser would not be harmed. 
But he said that if Enron was unable to supply power, Kaiser might have to 
pay $500,000 a month in extra costs, because it would be more expensive to 
get electricity from utilities at regular rates. 
Calvin Yee, an executive at Pacific Gas and Electric who deals with large 
clients that would revert to his company, said that if Enron withdrew, the 
impact could be handled by the utility without disruptions. 
''It might mean a bubble of work,'' Mr. Yee said, ''but it would not be 
extraordinary. If it happens, we'll be prepared.'' 
At one time, several large energy companies arranged these contracts directly 
with large industrial users and other big companies as part of California's 
ambitious deregulation program. The idea was that these large energy users 
could shop around among power companies and choose the best deal, much as 
individuals can shop among long-distance telephone companies and pick the 
best plan. 
Among Enron's other clients here are GTE, Safeway, I.B.M., McDonald's and 
International Paper, a person close to the company said.

WORLD
DEMOCRATS, UTILITIES URGE PRICE CONTROLS TO AID WEST
H. JOSEF HEBERT, THE ASSOCIATED PRESS

02/01/2001
Pittsburgh Post-Gazette 
REGION
A-6
(Copyright 2001) 

Senate Democrats, joined by Western utility companies, urged federal price 
controls on wholesale power yesterday as fallout from California's power 
problems appeared to spread across the West. So far, President Bush has 
opposed the idea. 
At the same time, one of California's cash-strapped utilities came under 
criticism at a Senate hearing for diverting $4.5 billion to its parent 
company when it now is unable to pay its own energy bill and faces possible 
bankruptcy and a state bailout.
"It seems to me the shareholders came first," Sen. Ron Wyden, D- Ore., told 
Southern California Edison chairman Steve Frank, who defended the legal 
transfer to SoCal parent Edison International. 
Frank rejected a suggestion by Wyden of "money laundering" and said the money 
was transferred over five years, reflecting proceeds from the state-mandated 
sale of the utility's power plants. 
"The money simply went back to shareholders and investors," Frank said, a 
"normal business practice." 
SoCal and Pacific Gas & Electric, California's two investor-owned utilities, 
owe about $12 billion to power suppliers and face possible bankruptcy because 
they have been unable to pass on additional costs to retail customers. 
During a five-hour hearing before the Energy and Natural Resources Committee, 
senators heard repeated requests, mostly from California and Northwest 
utilities, for federal price controls on wholesale power. Prices have soared 
not only in California but in many of the other 10 states connected in the 
Western power grid. 
Bush, while conceding that California's power problems are beginning to have 
widespread impact, has not allowed the Federal Energy Regulatory Commission 
to impose price controls. 
Power suppliers have been accused of price gouging and manipulating the 
California market, although no clear evidence of such activities has 
surfaced. Generating companies argued again yesterday that their prices 
simply reflect short energy supplies and market restrictions under 
California's now widely criticized attempt at deregulation. 
At one point during the hearing, Sen. Dianne Feinstein, D-Calif., asked some 
of the out-of-state power generators, who lined the witness table, for "a 
little cooperation" in addressing her state's electricity crisis. 
"All of you have made a lot of money off this," she said, scolding the 
executives for appearing "not to care what happens, not to care about the 
people that are being thrown out of jobs." 
Among power producers represented by witnesses at the hearing were Calpine 
Corp., Reliant Energy Wholesale Group, Enron and the Williams Cos., all major 
providers of power to California's utilities. Like many energy companies, 
they have posted record profits during the past year. 
Williams President Keith Bailey rejected suggestions of price gouging and 
said most of the power his company had sold was at a reasonable price "very 
marginally above our actual costs." 
Like other power producers, Bailey said a federally imposed cap on wholesale 
prices "makes no sense" and would discourage production, affect supplies and 
discourage consumers from conserving energy. 
Price controls "have not worked. they don't get at the fundamental supply and 
demand problem," maintained Steve Kean, executive vice president of Enron, 
the largest seller of wholesale electricity in North America. 
As California tries to address its immediate power problems, consumers in 
other Western states already were feeling the impact with dire predictions 
that the problem will get worse this spring and summer. 
Mark Crisson of Tacoma Public Utilities in Tacoma, Wash., said his company 
recently boosted retail electricity rates by 50 percent and may have to 
borrow $100 million to keep up with wholesale price spurts. 
"We just can't raise our rates fast enough to keep up with what we're seeing 
in these [wholesale] markets," Crisson said. 
Like others, he urged temporary federal controls on prices across the West as 
a stopgap. 
Sen. Jeff Bingaman of New Mexico, the panel's ranking Democrat, said the Bush 
administration "has an obligation to find a solution ... before the crisis 
worsens." 
Bingaman said the administration's "only solution to the problem" in 
California so far has been to recommend oil drilling in Alaska's Arctic 
National Wildlife Refuge. 
While there are many causes for California's power shortage, the ban on 
drilling in the refuge is not one of them, Bingaman said.

Florida Energy Commission Recommends Deregulating Wholesale Electricity
David Cox

02/01/2001
KRTBN Knight-Ridder Tribune Business News: The Orlando Sentinel - Florida 
Copyright (C) 2001 KRTBN Knight Ridder Tribune Business News; Source: World 
Reporter (TM) 

TALLAHASSEE, Fla.--Florida's political and business leaders moved cautiously 
toward deregulating the state's electric industry Wednesday while vowing to 
avoid problems such as those in California, where widespread blackouts and 
skyrocketing prices are wreaking havoc. 
Florida's Energy 2020 Study Commission unanimously recommended that the 
Legislature consider deregulating wholesale electricity -- that is, 
electricity sold to energy providers such as Florida Power & Light from other 
producers.
The move could spark construction of a number of power plants, including one 
proposed in New Smyrna Beach by Duke Energy of North Carolina. 
The recommendation Wednesday was part of an effort to remove state 
regulations at all levels, the eventual aim being a system in which consumers 
choose their power company much as they now choose their long-distance phone 
service. 
Such a scenario, though, would take several years. Wednesday's action, if 
approved by the Legislature in its spring session, would be a small step 
toward that goal. 
The potential impact of the panel's recommendations on residential and 
commercial electricity bills is unclear. But an immediate effect would be to 
open Florida to independent power providers such as Duke Energy, which wants 
to build so-called "merchant plants" that would generate electricity to be 
sold on the open market. 
Michael Green, general manager for Duke's operations in the southeastern 
United States, said his company would immediately revive its plans to build a 
merchant plant near New Smyrna Beach. The Florida Supreme Court killed the 
proposal last year, ruling that such plants are prohibited under state law. 
Several commission members and officials with the power companies say 
deregulation should lower customers' rates over time because of the increased 
competition in the energy market. And even if these proposals fail to lower 
rates, they should at least keep electricity bills from going up as quickly 
as they would under the current system of regulated electric monopolies, 
deregulation proponents say. 
But consumer groups and municipal electrical providers disagree. They say 
deregulating wholesale energy would lead to higher electricity bills because 
big utilities would be allowed to earn higher profits but not share the 
benefits with consumers. 
Commission chairman Walter Revell rejected the idea that the panel is 
proposing anything that would favor power companies over consumers. 
"We're not doing this for the benefit of any company, we're doing it for the 
consumers," Revell said. 
He said Florida must build up its energy supply to avoid problems such as 
those in California. That state is struggling with rolling blackouts and 
runaway utility costs stemming from a cold winter, low reserves and heavy 
reliance on costly out-of-state power. 
California also failed to build new power plants or use effective 
conservation steps in the 1990s. 
Luckily, Florida's plentiful reserves make it unlikely -- at least for the 
foreseeable future -- that it will experience shortages such as those in 
California. Revell believes that deregulation will ensure that such a 
scenario never unfolds here. 
But Barry Moline, a spokesman for the Florida Municipal Electric Association, 
said Revell's concerns are "bogus." 
Florida law already requires power companies to hold 20 percent of their 
power supplies in reserve so they can handle periods of extreme usage, and 
utilities already are planning to provide additional capacity in the future, 
he said. 
The commission, created by Gov. Jeb Bush last May, was under pressure from 
the governor and independent power providers to submit an initial 
deregulation proposal for this spring's legislative session even though the 
panel will continue its work until December. It is planning to recommend ways 
to deregulate the retail energy market -- electric power purchased by 
residents and businesses -- for the 2002 Legislature. 
The movement toward deregulation troubled some of the 17 commission members, 
who were concerned that the Public Service Commission's and the state 
Cabinet's reduced role over investor-owned utilities would harm customers. 
Duke and Enron Energy, a Houston-based energy giant that was among President 
Bush's top campaign contributors, are among the out-of-state firms charging 
to deregulate the industry and get a toe-hold on Florida's growing market. 
But the state's large investor-owned monopolies -- Florida Power & Light, 
Tampa Electric, Florida Power Corp. and Gulf Power -- initially resisted the 
recommendations to let the independent suppliers enter the state. 
That's because they would lose their monopolies. 
But the commission struck a deal with Florida's large companies, allowing 
them the opportunity to cash in as well. 
While the power sellers now in Florida could not keep their power plants, the 
plan would allow them to transfer those plants -- which are often paid off -- 
to related companies. Those companies, in turn, would be allowed to compete 
with the new merchant plants. 
It was that concessions that created the most controversy among commission 
members, including Sen. Tom Lee, who said he could not support the provision. 
The Brandon Republican will be instrumental in passing any deregulation 
legislation this year. 
Lee said there is simply no guarantee that the deregulation plan would 
benefit consumers. 
But if lawmakers change the commission's concessions to the monopolies, those 
companies may pull their support and jeopardize passage of anything this 
year. 
"Obviously the investor-owned utilities are an extremely powerful political 
force in the state, and they'll be looking out for their best interests in 
this," said Duke Energy's Green. "I hope there's enough in this proposal to 
keep them supportive of this recommendation."

BUSINESS
Senate Powerless On Power / No easy answers to state energy crisis
Carolyn Lochhead
Chronicle Washington Bureau

02/01/2001
The San Francisco Chronicle 
FINAL
B1
(Copyright 2001) 

Accusing out-of-state power generators of price gouging, Sen. Dianne 
Feinstein warned colleagues on a Senate energy panel yesterday that chaos 
will spread throughout the West this summer if California's energy crisis 
can't be solved. 
From Wall Street analysts to Western utility executives who testified before 
the Senate Energy and Natural Resources Committee yesterday, all agreed on 
that much.
But one side's cure was the other's poison, leaving no clear course for 
federal lawmakers other than to help get more power plants on line fast -- 
while knowing none will arrive before a severe electricity crunch this 
summer. 
Comparing California's blackouts to a Third World affliction, consultant 
Peter Fox-Penner of the Brattle Group said: "There is no parallel to this 
episode in the history of the developed world." 
Lawrence Makovich, senior director of North American Electric Power at 
Cambridge Energy Research Associates, said, "one of the biggest problems in 
California is that no one can agree on what went wrong." 
"Indeed," he added, "there is a grave danger of drawing the wrong lessons." 
Energy analysts and power generators warned the wholesale price caps urged by 
Feinstein would make the situation worse. 
But utilities in Western states argued the situation will worsen without 
price caps. They said they buy power on the same spot market that has driven 
Pacific Gas & Electric Co. and Southern California Edison all but bankrupt 
and will soon face the same fate. 
And Northwest senators angrily lashed out at California, saying layoffs are 
spreading as electricity rates soar, even as Californians are shielded from 
price increases while draining power from the Western electricity grid. 
Cisco Systems of San Jose was held up by critics as the "poster child" of 
California hypocrisy. The networking giant was accused of guzzling power 
while working to block construction of a gas-fired electricity plant near its 
planned Coyote Valley facility. 
"Let me tell you what steams me," fumed Sen. Gordon Smith, R-Ore. "Right now, 
Oregonians are being notified, and many Washingtonians, that their rates will 
be soon going up 20, 30, 40 (percent), and in one Washington utility, 50 
percent. Now I don't think that's fair when California's capped at 10 
percent. I think that stinks." 
Smith said he awoke yesterday morning to a newspaper cartoon showing the view 
of Oregon from California: an outline of the state with two empty sockets in 
it. He added that the drain on Northwest hydroelectric reservoirs means that 
salmon are "getting flushed." 
Sen. Barbara Boxer, D-Calif., insisted that environmental rules are not to 
blame for a decade of no power plant construction in California. But the 
generators complained the state's regulatory restrictions are "insane." 
The most heated disputes were over price caps on wholesale electricity sold 
in the daily spot market. The Federal Energy Regulatory Commission has 
refused to impose them, saying caps could make the situation worse, by drying 
up power sales to California. 
Energy analysts urged more long-term contracts for cheaper power - - which 
Gov. Gray Davis is trying to negotiate now -- saying they accomplish the same 
thing as price caps, but without creating shortages. 
Feinstein said California will be short of power this summer when air 
conditioners are flipped on. 
California will build new power plants, she said, "and I agree the rates have 
to go up." 
But in the meantime, she said, without price caps by summer, jets will be 
grounded for lack of fuel, businesses will close and communications will 
falter. 
"What do you suggest will get us through the summer, short of somebody being 
able to make a decision as to how much profit and how much cost should be 
passed through and some control?" she asked. "The utilities can only pass 
through $64 a megawatt hour (to consumers) and they're buying at $3,000 a 
megawatt hour." 
Kit Konolige, managing director at Morgan Stanley Dean Witter, told 
Feinstein: "I would first suggest, senator, that the problem is the shortage 
of supply. And standard economic theory would be that if you put a price cap 
on the supply, you'll get less of the supply, not more." 
The remedy, he said, is to "sign all the long-term contracts that you can." 
Utility executives pleaded for lifting price caps on their sales to 
consumers, but imposing them on their wholesale purchases. 
Mark Crisson of Tacoma Public Utilities in Tacoma, Wash., said the utility 
could run out of its $130 million reserve by April, even after a 50 percent 
rate surcharge on consumers. 
Scoffing at a warning that price caps would distort the market, Crisson said: 
"In my view, a distortion in this market would be an improvement." 
But executives of the generating facilities, including Houston's Enron and 
Reliant Energy Wholesale Group, San Jose's Calpine Corp. and the Williams 
Companies of Tulsa, Okla., adamantly disagreed. 
All said their costs were rising due to natural gas shortages, increased 
demand and state delays in approving new power plants. 
Feinstein resorted to a combination of veiled threats and pleas to 
generators, reminding them as California's senior senator: "I'm going to be 
around here for six years, I'm going to be on this committee, and I'm going 
to watch this situation." 
"Gentlemen," she said, "when spot power at 3 a.m. in the morning is 500 times 
higher than it would be normally, that to me . . . is price gouging."

Deals & Deal Makers: Burning Issues: Convertible Securities Are This Year's 
Big Model
By Suzanne McGee
Staff Reporter of The Wall Street Journal

02/01/2001
The Wall Street Journal 
C1
(Copyright (c) 2001, Dow Jones & Company, Inc.) 

When the ducks quack, you feed 'em. 
The Wall Street maxim is taking on new life in the convertible-securities 
market this year. The climate for initial public offerings of stock remains 
sluggish -- there have been just three IPOs in the U.S. this year -- and the 
appetite for follow-on stock issues by already public companies is also 
muted. But investors are clamoring for new convertible securities, and Wall 
Street investment bankers, with visions of a steady stream of fees dancing in 
their heads, are obliging them.
"We can always use new paper in this market," says Nick Calamos, a 
Naperville, Ill., convertible-securities money manager for Calamos Asset 
Management. "We may buy only two out of 10 of these deals, but we really want 
as much as possible out there to choose from." 
In the aftermath of last year's stock-market slide, convertibles remained one 
of the healthiest products for Wall Street firms. That is because these 
hybrid securities offer the safety of a bond, with features like annual 
interest payments, with the upside potential of a stock, since the investor 
is able to swap his securities for common stock at a predetermined premium to 
current market prices, providing exposure to any rise in stock prices. 
That mix of traits helped push convertible issuance to a record last year, 
when investment bankers used the securities to raise $61.48 billion in 146 
deals, according to Convertbond.com, an industry Web site run by Morgan 
Stanley Dean Witter & Co. 
This year looks ready to at least match, if not better, last year. "Both 
investment-grade and non-investment-grade [convertible] markets are on fire, 
thanks to the interest-rate cuts we've had," says Phil Jones, managing 
director and head of global equity-linked product development at Merrill 
Lynch & Co. 
Yesterday, Federal Reserve policy makers again cut key lending rates, 
dropping the federal-funds rate, the interest rate charged by banks on 
overnight loans to each other, to 5.5% from 6%. As with the last rate cut, 
earlier in January, the latest reduction is expected to spur investor 
interest in investments that offer higher yields, ranging from convertibles 
and corporate debt to junk bonds. 
Reflecting investors' enthusiasm, the Miami cruise line Royal Caribbean 
Cruises Ltd. this week sold $500 million of 20-year convertible bonds through 
underwriter Merrill Lynch. Originally, the company had planned to sell only 
$350 million of convertible securities together with an additional $350 
million of ordinary debt. But demand for the investment-grade deal surged, 
and the deal was increased and priced several days ahead of schedule at the 
top end of the range expected. 
That deal brought convertibles' issuance for the month of January up to $3.05 
billion, dwarfing IPOs, which through yesterday had raised a mere $212.4 
million for three companies. And although follow-on stock issues have raised 
$4.86 billion for issuers in 17 deals so far this year, according to CommScan 
LLC, that is dwarfed by the issuance in January 2000, when $12.96 billion was 
raised in 37 issues. 
At least one other massive deal was priced ahead of schedule late Tuesday 
when Enron Corp. raised $1.25 billion in one of the convertible market's 
largest and most costly deals ever. Underwriter Salomon Smith Barney, a unit 
of Citigroup Inc., priced the bonds at 65.5% of par value, meaning that they 
carry a yield to maturity of 2.125% and have a conversion premium of 45%. 
That means that at the time they were sold, the bonds were worth 45% more 
than the value of the common shares into which they are convertible. 
That is extraordinarily costly: Typical deals' conversion premiums currently 
range anywhere between 22% and 30%, while Royal Caribbean's issue, which, 
like Enron's, carried no annual dividend, was priced at a 27% premium. The 
most expensive deal of this kind ever priced was last June's sale of $319 
million of zero-coupon bonds issued by retailer Kohl's Corp. at a 45% 
premium. 
"That's not a deal we'll be participating in," says Mr. Calamos of the Enron 
deal. "There's no way we'd be a buyer on those terms." 
In fact, the pricing on the Enron transaction, like other features of 
January's convertible market, remind participants of last year's early 
ebullience. As was the case early last year -- and in contrast to the closing 
weeks of 2000 -- several of the companies now issuing convertible securities 
carry junk-bond ratings. Last year, more than three-quarters of new 
convertible issues were either unrated or carried a junk-bond rating. By late 
in the year, that had stung investors as the stock prices of these issuers, 
including many telecommunications companies and even some Internet firms, 
plunged, driving down the value of the convertible securities as well. In 
reaction, November's new-issue calendar was composed largely of higher-rated 
investment-grade offerings. 
But by January, the market had become more receptive to unrated or junk-bond 
issuers, and companies like Adelphia Communications Corp., Six Flags Inc. and 
XO Communications Inc. were once again able to tap the convertibles market. 
Still-jittery investors remain loath to put money to work in IPOs or anything 
else that is perceived as volatile or risky. But some see convertibles as a 
relative haven, meaning that investment bankers stuck with a large list of 
IPO candidates waiting to go public can at least generate fees from 
convertibles issues. 
Part of the demand is coming from traditional investors in convertible 
securities, including managers of convertible-securities mutual funds and 
hedge funds. But some investors, including individuals, who at this time last 
year were eager buyers of IPOs, figure that convertibles can offer a 
combination of safety and exposure to growth stocks. 
"That's really sending demand up, and making the pricing aggressive," says 
Jonathan Cunningham, managing director of Jefferies & Co., who monitors the 
convertible securities market. "Other markets may be wobbling, but ours is 
open wide for business." 
The wide-open convertibles market is also making it possible for companies to 
complete concurrent deals: simultaneous offerings of either debt or equity 
along with convertible securities. That is what Royal Caribbean did with its 
billion-dollar issue this week. And today Aviron, a biotech company, plans to 
raise about $160.8 million in a follow-on stock offering and at the same time 
bring in another $150 million through the sale of convertible securities. 
Next week, another concurrent deal is expected to be priced, with Ciena Corp. 
seeking as much as $721 million from a follow-on stock issue and $350 million 
from convertible investors. 
But investors warn bankers not to become too complacent about demand. Some 
warn that they won't be there for the high-priced deals, or if quality once 
again starts to slide. "There's a lot of demand for new product, but not at 
any price," says Mr. Calamos. "We've got to keep our heads on straight."

Financial
Hot, Dark Summer Ahead for California; Drought Worsens Power Crunch, Senators 
Told
Peter Behr and William Booth
Washington Post Staff Writers

02/01/2001
The Washington Post 
FINAL
E01
Copyright 2001, The Washington Post Co. All Rights Reserved 

California faces a serious risk of greater electricity crisis this summer 
with bigger, more frequent blackouts because of a severe drought in the 
Pacific Northwest that is draining hydroelectric power resources, energy 
analysts and company officials told a Senate committee yesterday. 
The power shortage will mean continued high electricity prices in states 
bordering California.
"You have to scramble right now because we have a looming crisis again this 
summer," consultant Larry Makovich of Cambridge Energy Research Associates 
told the Senate Energy and Natural Resources Committee, 
Senators and witnesses at yesterday's hearing debated the possibility of 
federally imposed price caps or rate controls that Northwest governors have 
requested to rein in extraordinarily high wholesale electricity prices. 
The proposals are expected to be a main focus of a meeting between western 
governors and Bush administration officials Friday. But so far there is no 
indication that Congress would move rapidly on that front and the Federal 
Energy Regulatory Commission has resisted imposing wholesale price caps in 
California. 
In the "worst case," if the region's drought continues and summer electricity 
demand is very high because of hot weather, California could face more than 
1,000 hours of blackouts this year, said Joe Bob Perkins, president of 
wholesale operations for Reliant Energy, a Houston-based company that owns 
major power plants in California. 
"Essentially, California will have to be incredibly fortunate" to avoid 
blackouts this summer, he said. 
Members of the Senate committee agreed. 
"We're going to be in a crisis situation this summer as well," said Sen. 
Frank Murkowski (R-Alaska), the committee chairman. 
Sen. Dianne Feinstein (D-Calif.) said she believes that California will be 
short between 2,000 and 5,000 megawatts of power a day when heavy air 
conditioning use goes up in hot weather. A megawatt of power provides 
electricity to 1,000 homes. 
In the summer, California's electricity demand rises to a peak of 50,000 
megawatts a day, exceeding the state's maximum generating capacity of around 
45,000, according to state officials. 
Imports make up the rest. Electricity from the Pacific Northwest -- most of 
it hydroelectric power -- contributes as much as 11 percent of California's 
power needs in a normal year. 
Recent blackouts in the state were caused by shortages of 500 megawatts, 
affecting 500,000 California households. If the worst-case scenarios come 
true, and shortages reach 5,000 megawatts, blackouts could last six hours at 
a time, affecting more than 20 million people, Perkins said. 
A drought in the Pacific Northwest is compounding California's electricity 
shortages and the failure of its four-year-old deregulation program. 
The Columbia River and Snake River regions are facing the fourth driest year 
on record, said Sen. Gordon H. Smith (R-Ore.). 
The reservoir behind the Grand Coulee Dam, largest in the Northwest, is at 
its lowest level in 25 years, and water power from Columbia River dams that 
normally would be used this summer is being tapped now to help California 
through its current shortage, Smith noted. 
The Northwest Power Planning Council recently warned that the Northwest faces 
a 1-in-4 chance of power shortages. 
"There is a very high probability that the West Coast will face blackouts," 
said Judi Johansen, executive vice president of PacifiCorp, an electricity 
utility serving six western states. 
Panelists at yesterday's Senate hearing agreed that California has few 
immediate options available to deal with continuing shortages this year. 
Although six power plants are under construction, most will not come on line 
until 2002. 
The state should consider paying big industrial users to close their plants 
and use electricity they have contracted to receive, panelists said. 
Conservation by companies and residents could save an additional 600 
megawatts a day, by one estimate. But the current prices paid by 
Californians, capped at roughly 1996 levels, don't give people an incentive 
to reduce electricity use, panelists said. 
Price caps won't prompt increased production from generators that are paying 
record prices for the natural gas used to make electricity, generating 
companies executives said. "You can start turning the power off, or pay the 
price it takes to get power to come," said Steven J. Kean, Enron Corp.'s 
chief of staff. 
In Sacramento yesterday, Gov. Gray Davis (D) said officials are close to 
completing the first piece of legislation to allow the state government to 
enter into long-term contracts with power suppliers. The state government has 
been buying power on an emergency basis, but the pending legislation would 
make the state a major electricity buyer for years to come. That would, in 
effect, end California's failed experiment with deregulation. 
The legislative action in Sacramento followed the release of a second 
state-ordered audit of one of California's struggling utility companies. The 
review of Pacific Gas & Electric's books showed that the company ignored 
warnings that its costs for wholesale electricity would soar under 
deregulation and that it failed to put cash aside to keep the company 
solvent. 
"PG&E did not anticipate it would be constrained in its borrowings and did 
not develop a cash conservation program until December 2000," the audit 
report said. 
The audit also confirmed that Pacific Gas & Electric is deeply in debt and 
nearly broke, just as an audit the day before concluded about Southern 
California Edison. 
Like Southern California Edison, Pacific Gas & Electric had transferred about 
$4.7 billion to its holding company, PG&E Corp., since 1997. The money was, 
in part, from the sale of its power generating facilities and some of it was 
used to pay debt. 
Such a transfer is not illegal or improper, but it has outraged consumer 
advocates and some elected officials in California.Booth reported from Los 
Angeles.


http://www.washingtonpost.com 
Enron award should have been through competitive bidding, says Sarma
Our Economy Bureau New Delhi,

02/01/2001
Business Standard 
2
Copyright (c) Business Standard 

Former economic affairs secretary, EAS Sarma, who quit the government last 
November, said here today the Enron project should have been awarded through 
competitive bidding and should definitely not have been based on liquid 
fuels. 
He said the country could not afford high-cost electricity and the public 
sector power producers in India had set competitively low cost benchmarks. 
"NTPC and Bhel have been very cost competitive," he said.
Sarma made these comments in his interview on India Talks programme of CNBC 
television network, telecast today. His comments are significant as he was 
involved with the country's power sector as advisor (power) in the Planning 
Commission and, subsequently, as power secretary, before moving to finance 
ministry as expenditure secretary. 
Sarma, however, declined to elaborate on individual projects, though he said 
the government should not give any further counter guarantees for power 
projects in the private sector. 
He said he was in Planning Commission at the time when the guarantees were 
awarded, but he had recommended that it cannot be a substitute for reforms in 
transmission networks and improvements in the working of state electricity 
boards. 
He is slated to take over as principal of Administrative Staff College of 
India in Hyderabad on March 1. Sarma refused to read any motive in his 
transfer, but did say that he was denied the normal courtsey of being told 
that he was being transferred to department of coal. 
He also said that there had been far too many transfers in last three years 
in the government. Sarma resigned last November when he was suddenly 
transferred from the finance ministry in a large- scale reshuffle of 
secretary- level officers, including finance secretary PG Mankad. 
However he said that the current group of officers in North Block "is 
competent enough to deliver the budget". 
On the target of eight per cent growth set for the next fiscal, the former 
economic affairs secretary said growth would be difficult without reforms in 
infrastructure.

Options Report
Volatility Readings Hardly Move on News Of Federal Reserve's Cut in Interest 
Rates
By Gaston F. Ceron
Dow Jones Newswires

02/01/2001
The Wall Street Journal 
B9
(Copyright (c) 2001, Dow Jones & Company, Inc.) 

NEW YORK -- The options market offered a relatively modest reaction to the 
latest action by the Federal Reserve 
The Federal Open Market Committee lowered interest rates by a half- 
percentage point, validating the predictions of many market observers but 
surely disappointing a few who hoped for a steeper cut.
Options traders had been looking forward to the Fed's move for days. But when 
the announcement did arrive, it caught few off guard. Volatility readings 
didn't move very sharply after the Fed made its decision public yesterday 
afternoon. 
The Chicago Board Options Exchange's Market Volatility Index, or VIX, which 
measures certain Standard & Poor's 100 option prices to determine investor 
sentiment, ended the day at 24.29, down 0.91. 
It is unclear what will be the next event that the options market will focus 
on. Tomorrow will shed more light on the economic picture, though, when the 
January employment report is released. 
Meanwhile, options traders focused on Enron Corp.'s options. At 4 p.m. in New 
York Stock Exchange composite trading, Enron rose $1.50 to $80. 
Enron's January 70 calls and puts saw heavy action yesterday (the options 
expire in January 2002). About 4,500 contracts in each of these options 
traded at the CBOE. Open interest stood at just 759 contracts in the January 
70 calls and at 1,201 contracts in the January 70 puts. 
Volatility in the options of Texas Instruments Inc. and Intel Corp. has come 
down recently, said Paul Foster, the options strategist at 1010WallStreet.com 
in Chicago. Mr. Foster said this may be a sign that options players are 
growing less concerned about the companies' prospects. 
At 4 p.m. in NYSE trading, Texas Instruments stock fell 93 cents to $43.80, 
while Intel was unchanged at $37 in 4 p.m. Nasdaq Stock Market trading. Both 
stocks remain far from their 52-week highs.