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Enron Corp.
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		 cc: 
		 Subject: Cal-ISO/FERC -2: Companies Allegedly Gamed Power Market

Cal-ISO/FERC -2: Companies Allegedly Gamed Power Market
Updated: Friday, June 8, 2001 05:29 PM ET   Email this article to a friend!

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LOS ANGELES (Dow Jones)--The California Independent System Operator has
filed a motion with federal energy regulators asking that four major power
suppliers in California be stripped of their ability to charge market rates
because they have allegedly gamed the wholesale electricity market.  Duke
Energy (DUK, news, msgs), Dynegy Inc. (DYN, news, msgs), Mirant Corp. (MIR,
news, msgs) and Reliant Energy Inc. (REI, news, msgs) have been identified
by the ISO as exercising market power - the ability to influence
electricity prices - in California's wholesale power market.

The ISO, which manages the state's high-voltage transmission system,
recently made a similar filing against AES Corp. (AES, news, msgs) and
Williams Cos. (WMB, news, msgs), claiming those companies have profited
excessively in California by exercising market power.  The ISO wants the
Federal Energy Regulatory Commission to revoke generators' authority to
charge market-based rates for their power supply.

Tom Williams, spokesman for Duke Energy, said the company had just received
the FERC filing and is reviewing the allegations.  "We've obviously just
got the filing and we're reviewing it and we are going to respond with our
own FERC filing. But we're also gratified that market forces are at work in
California and prices have come down," Williams said.

Richard Wheatley, a spokesman for Reliant, said the ISO's allegations are
"nothing new."  "It's similar in nature to issues and allegations that have
been raised against other generators," Wheatley said. "The ISO is incorrect
in asking for emergency relief. The situation in California remains to be
an imbalance between supply and demand. The blame game prohibits lasting
solutions from being reached and the business climate in California will be
affected by finger pointing."

Steve Maviglio, press secretary to Gov. Gray Davis, said the governor
"strongly supports any attempt to bring prices down for Californians and to
break the grip a handful of generators have on the electricity market."

The ISO has asked FERC to terminate by June 28 Dynegy's ability to charge
market prices for power from its Southern California power plants and to
schedule a hearing to determine rates based on the energy company's
production costs.  The grid operator also wants Dynegy to refund billions
of dollars, retroactive to May 1, "of the difference between cost-based
rates...and the market revenues actually received."  Similar requests were
made with FERC against Duke, Reliant and Mirant.

"The ISO has submitted compelling evidence that the exercise of market
power is more pervasive than the commission has acknowledged...," according
to the filing.  In the filing, generators have also been accused of
"megawatt-laundering," in which suppliers sell power out-of-state that is
resold to California at a higher price.

California consumers have spent $7 billion for wholesale electricity in
1999, $27 billion in 2000 and could pay as much as $50 billion this year.

Charles Robinson, the ISO's chief counsel, said he is "optimistic" the
state will prevail "in one forum or another and will be able to get the
relief we're seeking."  He said FERC should implement an "effective" market
mitigation plan that will put the brakes on skyrocketing wholesale power
prices.  FERC set up a market mitigation plan, which went into effect June
1, to stabilize wholesale power prices when operating reserves dip below
7%. Robinson said that plan wasn't good enough.

Wholesale power prices were at a seven-month low Thursday, due in part to
the new FERC plan, cooler temperatures, low natural-gas prices, and
conservation measures, energy officials said.

Every three years, FERC reviews generators' ability to charge market rates
for electricity. Generators were first allowed to charge market rates three
years ago, but it is unclear whether FERC has ever stripped suppliers from
their right to charge market prices.