----- Forwarded by Miyung Buster/ENRON_DEVELOPMENT on 09/29/2000 04:44 PM 
-----

	djcustomclips@djinteractive.com
	09/27/2000 02:17 AM
	Please respond to nobody
		 
		 To: 86464@WCTOPICS.djnr.com
		 cc: 
		 Subject: Utilities, Electric: Deregulation: As Power Prices Rise, Businesses 
In Ore. Seek to Delay ...


 
The Wall Street Journal
THE WALL STREET JOURNAL / NORTHWEST 
As Power Prices Rise, Businesses In Ore. Seek to Delay Deregulation 
By Rob Eure 
? 
09/27/2000 
The Wall Street Journal 
(Copyright (c) 2000, Dow Jones&Company, Inc.) 

A year ago, Oregon's big businesses encouraged the state Legislature to 
deregulate the electricity market. Now the corporate lobby is working with 
state regulators to effectively put the law on hold.

When the businesses asked for deregulation, they thought it would save them 
money: If the market was opened to competition, they reasoned, they could use 
their high demand as a bargaining chip and get better rates on power. But 
electricity prices skyrocketed this summer, and now businesses face the 
prospect of buying power that's much pricier than historical norms. 

So, some big commercial consumers have asked the state Public Utilities 
Commission for help. The PUC, which is writing the rules implementing the 
law, says it is considering modifying the rules to allow companies to keep 
buying power at essentially the old, regulated rates until market prices come 
down.

"We still favor deregulation, but we need a smooth transition," says Ken 
Cannon, executive director of Industrial Customers of Northwest Utilities, a 
Portland-based trade group.

Indeed, executives with major companies predict doom if the law -- ordering 
the biggest users of electricity to shop on the open market for power, giving 
up their access to regulated rates -- is put into action.

"If deregulation is instituted next October, it will devastate commerce and 
industry in Oregon," says Dan Williamson, an energy consultant for 
Portland-based Pope&Talbot Inc., a pulp and lumber company that is a member 
of the Industrial Customers of Northwest Utilities, a Portland-based trade 
group of 40 large industrial-power users that lobbied heavily for the 
deregulation.

The PUC's rule proposal wouldn't change the date of deregulation; it would 
still go into service on Oct. 1, 2001, and mandate that major power consumers 
-- essentially, the bulk of Oregon's businesses -- buy on the open market. 
Small companies and residential customers will be able to continue to buy 
power from their current, regulated suppliers.

Instead, the proposal would work this way: The big power users affected by 
the law would enter into contracts of varying length -- six months, a quarter 
or a year -- with their current, regulated providers. The users would pay 
higher rates tied to free-market prices, but then -- through a complicated 
accounting process -- the providers would give them credits that would, 
effectively, bring the rates down to the current regulated rates. When the 
contracts were up, the users could either jump into the free market or renew 
their contracts with regulated providers, if market rates were still too high.

In theory, that "should leave our rates at about the same level, if we do it 
right," says Julie Brandis, a lobbyist with the Salem-based Associated Oregon 
Industries, the state's largest business lobby with 18,000 members.

Ms. Brandis says she expects that most businesses in the state will back the 
stopgap plan and remain with their incumbent utilities next October. She says 
AOI still believes "deregulation is the right way to go, but the higher 
prices are a concern. We think we need a bridge of some sort for the short 
term."

Randy Dahlgren, director of pricing for Portland General Electric, a unit of 
Houston-based Enron Corp. and Oregon's largest utility with 730,000 
customers, says the utility understands the need for the stopgap measure. 
"We're working on a [pricing plan] now that should be similar to the 
regulated rate," he says. Regulators have asked the state's private utilities 
to submit their proposals by next month, and Mr. Dahlgren says that's just in 
time. "We need to start planning for our power purchases as soon as 
possible," he says.

Deregulation seemed a fine idea to many until earlier this year, when 
wholesale prices spiked to $200 a megawatt in June from $25 a megawatt in 
April. Now, commercial customers say that, as they talk to suppliers about 
buying electricity starting in October 2001, they're being told prices will 
be in the neighborhood of $60 a megawatt -- 140% more than they're paying now 
under the fixed-rate, regulated contracts they have with providers overseen 
by the Oregon PUC.

"That's more than most businesses can afford to pay," says Mr. Williamson of 
Pope&Talbot.

Deregulation proponents in the Legislature say they recognize power users are 
in a tough spot, but aren't sure deferring the inevitable is the right 
course, as any delay in creating a fully open power market in Oregon, where 
marketers vie to sell electricity, will delay the kind of competition that 
could ultimately bring prices down.

"The idea was that by sending the large users into the market, they would 
create demand and that would cultivate the market," says Senate Majority 
Leader Gene Derfler, a Salem Republican and the major architect of the 
deregulation law. "The sooner we get to that point, the sooner I think we 
have the economic incentives in place to develop more power generation" to 
reduce the rates.

Still, Sen. Derfler says he would prefer delay of a few months over 
legislation that would change the law's effective date. "I certainly hope 
that we can leave the deregulation bill alone in the coming session," he says.

More than just the law's timing is coming under pressure. The Building Owners 
and Management Association of Portland, whose members own or operate 500,000 
square feet of commercial property in the city, recently asked the PUC to 
exempt some smaller users of electricity who fear they aren't big enough to 
wield sufficient buying power in the open market.

Under the law, any commercial consumer that uses more than 30 kilowatts in 
any given hour must quit buying from its regulated provider and go shopping; 
the association wants the cutoff to be 500 kilowatts.

Ann Fisher, a Portland lawyer for the association, says that the summer price 
spikes proved "there is a big risk to deregulation. If the people who want to 
jump in to deregulation are wrong, we are going to be in a world of hurt."

PUC Commissioner Roger Hamilton says raising the threshold might leave so few 
industries shopping for power that it would thwart the creation of a 
competitive market. But he adds that the commission will consider the request.

Mr. Cannon of the industry group thinks the delay is a reasonable step, but 
he doesn't think it really delays the state's deregulation. "It's worth 
remembering that if the market for electricity goes up and stays there, 
sooner or later, we will all be paying a higher price, with or without 
deregulation," he says. 

Folder Name: Utilities, Electric: Deregulation 
Relevance Score on Scale of 100: 99

______________________________________________________________________ 
To review or revise your folder, visit Dow Jones CustomClipsor contact Dow 
Jones Customer  Service by e-mail at custom.news@bis.dowjones.comor by phone 
at 800-369-7466. (Outside the U.S. and  Canada, call 609-452-1511 or contact 
your local sales representative.) 
______________________________________________________________________ 
Copyright (c) 2000 Dow Jones &Company, Inc. All Rights Reserved