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djcustomclips@djinteractive.com on 08/09/2000 02:00:36 PM
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Subject: Enron Corp.: Calif. city contracts with Enron to protect from 
volatility


Calif. city contracts with Enron to protect from volatility

08/08/2000
Megawatt Daily
(c) Copyright 2000 Pasha Publications, Inc. All Rights Reserved.

  A small California city that currently buys one-third of its
electricity on the wholesale market has turned to Enron Power Marketing
for protection from price volatility.

  The City of Roseville, which operates a municipal electric utility,
last week signed a five-year contract with Enron, beginning Sept. 1,
under which Enron will provide the city with 50 MW around-the-clock at a
fixed price of $49/MWh. The total bill to the city will come to $114
million.
  "One-third of our needs today, we have to go the market," said Tom
Habashi, director of Roseville Electric. The muni, which has a peak
summer load of 240 MW to 250 MW, obtains about one-third of its power
needs from the Western Area Power Administration and the remaining third
from generating units it owns through the Northern California Power
Agency.

  Hot weather in June drove demand much higher than Roseville had
predicted earlier in the year, Habashi said. Power consumption in July
was below predictions, but prices were twice as high as had been
forecast. The cost for power in August is expected to remain much higher
than predicted, Habashi said.

  Once the summer months have passed, Roseville expects to pay about $6
million more than it had budgeted for wholesale power expenses. That,
Habashi said, led the city to look for alternatives.

  "We had to weigh things out, see whether we are willing to take the
risk of market price fluctuations and pass those prices along to
customers," he said.

  On the flipside, he noted, prices could go below the fixed rate
Roseville will pay to Enron through September 2005. The city, through a
vote of the City Council last Friday, chose to contract with Enron
despite the potential risk. Habashi said the contract "will give us some
stability."

  Another unknown variable, Habashi said, is how many Roseville
customers will switch power providers. A few were given the option at
the beginning of this year, but none have left yet. Choice for all
customers will be phased in over four years.

  The city, which is located about 15 miles from Sacramento, expects
rapid residential and business growth, and is forecasting that its
electricity needs will double by 2005.         ML



Folder Name: Enron Corp.
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