THE FRIDAY BURRITO

"If you aren,t confused, then you don,t understand the problem."

At first, I refused to deliver this Burrito until the next President is
elected.  But I eventually gave up.  How much longer will this craziness
go on?  The events are firmly stitched into the fabric of our culture,
now and for decades hence.  You can,t go to a conference nor have a
casual conversation with someone without the topic arising.  Columnist
Dave Berry had the best solution to fix the Florida ballots.  Put a
picture of each candidate on the ballot, give the voter a hand-held hole
punch, and punch out the eyes of the candidate for whom you wish to
vote.  Naturally, there would be squabbles about double punching, holes
that didn,t penetrate the picture (hence, the intent to vote), and all
the other particulars which disqualify a ballot.

Speaking of elected officials, Governor Davis re-delivered his message
to FERC this week, live and in person in San Diego.  He spoke to three
of the FERC Commissioners in San Diego, Ms. Breathitt being absent.  I
wasn,t there, but I heard the reports of those who were.  The reactions
ranged from "so what,s new?", to "this is good news".  The Gov.
re-iterated the request for refunds.  I don,t think that is good news,
and I don,t think the State has a legal prayer to order such.  One power
marketer in the Pacific Northwest, not a WPTF member but who soon will
be, called me to ask if he was going to lose his bonus because the State
was going to order refunds from generators and power marketers.  If Mr.
Davis wants to settle nerves of the investment community, then this
isn,t the way to do it.

The Gov. also endorsed the implementation of load-differentiated price
caps.  Read our lips, Mr. Gov.  Price caps don,t work, and
load-differentiated price caps damage markets.  They throw unnecessary
burdens on the settlement of transactions, and would all but effectively
kill long-term forward contracts.  Forward contracts seem to the be the
preferred way to solve California,s problems, assuming the PUC doesn,t
give blanket reasonableness to any and all contracts.  There must be
appropriate mechanisms for the PUC to provide incentives for the UDC,s
to procure prudently, and to avoid self-dealing with their non-regulated
subsidiaries. (Clue: license the utility owned plants to be Exempt
Wholesale Generators under the Energy Policy Act of 1992)

The Gov. also claimed that he supports competitive markets, but that the
markets are dysfunctional at present, and need time to mature, and work
out the severe demand-supply imbalance.  Mr. Gov. is taking quite a risk
that the investment community will continue to invest while he tries to
cap prices.  I don,t think this is a wise bet, but, on the other hand,
it is his political future at risk, not mine.  Once upon a time, Mr.
Peace unsuccessfully tried to tame the power market hoping it would be
an arrow in his political quiver.  He thought it would be both fun, and
expedient.  I my estimation, the ploy exploded in his hands, and sullied
his reputation.  Mr. Gov. is headed in the same direction.  It will only
take one small slip, and then he will be trying eagerly to cleanse
himself of the power dilemma.  I don,t think Davis, advisor on energy
matters is at all up to the task of protecting his boss.

I wonder how you folks outside of California feel about this?  I mean,
California politics are definitely having an effect on your ability to
transact business in the West.  I guess that is the way it goes.  Mr.
Davis doesn,t need to solve California,s power problem to be re-elected
Governor.  He is a shoo in, best I can tell, and given the political
leanings of the State.  He is staging himself as a presidential
candidate.  As such, he must appear to be fixing problems of a much
larger scale, and guess what shows up on his radar screen?  If the
market survives the purge, then the Gov., and all the other politicians
will take credit for saving the world.

I had the privilege of speaking at two seminars this week, both hosted
by New West Energy, and one taped investigative interview at the local
NBC station in San Francisco. The speaking engagements gave me an
opportunity to test sound bites on real humans, and I am relaxing the
definition of human, a bit, to include TV reporters.  I was pleased with
the outcome.

The public speeches were in Oakland and Irvine, respectively.  When I
arrived at the hotel in Oakland, Enron Energy Services also was having a
customer seminar just down the hall.  I walked over to their room to see
if I could get my speaker,s fee bid up from $0.  Guess who was in front
of Enron,s very packed room?  Sue Mara, one of our Board members.  She,
like I in the adjoining room, started our presentation lamenting the
political stew in which our restructured power industry currently
simmers.  Great minds think alike.  The fact that two ESPs were holding
customer meetings simultaneously might signal a long-awaited turn around
in the business.  Have we reached the ebb of ESP existence?  I don,t
know.

Here are the themes that I believe struck a chord with the audiences,
and I hope with the investigative report.  First,  California started
the restructuring process from a system of regulated cost-based rates
that was controlled by a few people: the utilities, the PUC, and not
very many others.  The few-people system responded to the Arab Oil
Embargo crises in the early 1970's by dumping tons of money into
renewable energy, and signing long-term QF deals that embedded oil-price
escalators that assumed $100/bbl a decade hence.  Add a nuclear unit
into the portfolio, and the sum of those brilliant decisions led to
California retail rates being 50% higher than the national average.  The
response to higher prices led to a better idea.  That is, market-based
rates that come from competition could be utilized to pay off the
egregious excesses of the past, and open up the system to all who both
desired and could chart their own energy future.  It would either erase
or significantly lessen the influence of the few-people system, and
replace that old system with a well populated many-agent paradigm: e.g.,
ISO, PX, scheduling coordinators, direct access customers, merchant
generators, etc.

After almost three years of the many-people competitive system, where
not too many people opted for direct access (but we sure populated those
stakeholder governing boards, now didn't we), the situation remains
problematic.  Some would say the current dilemma is a signal that
competition can,t work (that is, until we have either more supply, or
more demand response, or both), and we would be better off if everyone
had stable cost-based rates, just like the good ol, days.  THEN, I ask,
do you believe that giving back the power grid to the control of a "few"
will solve today,s problems, or do you think a market based approach
will more quickly resolve the supply/demand imbalance?  If you don,t
want to make choices about your energy future, then give Mr. Davis and
the UDCs your support.  They will gladly turn back the hands of the
clock.  If you want the freedom to make economic choices, then speak out
publicly regarding your support for continuing the competitive markets
for power.  Using the latter approach, lower prices will come about much
quicker.

The problems we have are difficult, but not impossible to fix.

Sermon is over.  Here is what is on this week,s agenda.

>>> Things in the People,s Republic of California
@@@ WPTF Written response to the FERC Order of November 1
@@@ ISO files GMC Unbundled Rates
@@@ Data Subpoena for WPTF.  No Joke.
@@@ Some responses to last week's Burrito questions

>>> Things in the People,s Republic of California
@@@ WPTF Written response to the FERC Order of November 1

Everyone I talk to is preparing written comments to FERC,s Order of
November 1.  Or at least it seems that way.  Did you know that FERC,s
Order was immediate in that the time clock for notice started on
November 1?  I don,t understand why we are providing written comments to
the Order, unless amendments to the Order can be implemented without
disturbing the initial time clock.

WPTF plans to file a substantive document.  It seems this venue is the
appropriate one for laying out our version of the epic.  The Order, you
know, never says that wholesale power rates are unjust and
unreasonable.  It says that the markets rules that led to high prices
are unjust and unreasonable.  It sounds a little like reading between
the lines, so it would be helpful if FERC clarifies, someday, exactly
what it meant.

We will also highlight the fact that FERC should encourage California to
pursue competition for UDC procurement of forward energy.  The markets
need price transparency.  Regulators and market participants should know
the prices within a reasonable time after bilateral contracts are
signed.

Third, if FERC is going to "understand the story" of why prices rose
dramatically in California, then the generation component of the UDC,s
frozen rates needs to be compared to the monthly wholesale power rates
since competition began.  We calculated and reported such to FERC in our
October 31 reply to the PG&E and SCE emergency petitions.  In all but
the last five months, the UDC generation component (average of 6.3?/kWh)
was higher than the monthly wholesale power rates.  How is this a
dysfunctional market if it has worked so well prior to May of this
year?  And isn,t it still working well given the cost factors are
continuing to escalate, such as natural gas price and Nox emission
credits?  And from where did approximately one-half of the stranded cost
get collected, if not from the headroom between wholesale power prices
and the UDC fixed generation component?

Fourth, there is absolutely no room for a compromise solution on
governance of the ISO and the PX.  The CPUC should have no authority
over California's wholesale power markets.  The stakeholder boards must
disband, and be replaced per FERC,s recommended method.  Further, the
CEO's of each institution, respectively, and without the approval of the
stakeholder boards, should write the job descriptions for the
consultants who will be retained to create the slate of suitable
candidates. Unless FERC rids the ISO of pestering State influence, we
are never going to have well-functioning wholesale markets in
California, or the West.

Consumers are affected by wholesale prices in power, as in all
commodities and consumables.  However, that doesn,t mean consumers
representatives, vis a vis the State have jurisdiction over the
regulation of the markets that govern the rules for those markets. It is
impossible for any California consumer to request of the ISO any of the
ISO's services.  Consumers must make those requests through certified,
FERC-regulated agents, called Scheduling Coordinators.  FERC should take
note that single-state RTO,s are an anathema to FERC,s policy interests,
and the promotion of competitive markets, as directed in FERC,s Orders
888, and 2000.

Fifth, the proposed soft price cap is an inferior solution compared to
mandating pre-scheduling of load and supply in forward markets.  Caps
distort markets, and discourage both new supply, and demand responses.
Forward agreements can settle jittery nerves by locking in firm prices
during volatile price periods.  The remaining volume left to spot-market
purchase would be less damaging to consumers even if prices reach
extremely high levels.  The weighted average price of forward and spot
purchases would be easily more digestible to the public relative to
gobbling down the spot price every day.  Both the PX block forward and
over-the-counter markets amply provide evidence to that effect.  With
sufficient forward contracting, no price caps are necessary.

If there is a price cap as proposed by FERC, then FERC should reduce the
time under which the bids over $150, or whatever the cap happens to be,
are subject to refund.

Sixth, robust retail competition is the key to solving the State,s
woes.  The State should separate the default customer provision by the
UDC,s, and FERC should encourage the State to take that step.  Mr.
Hoecker asked at the San Diego hearing for parties to comment on how
more ESPs could enter the California market.  Consumers want rate
stability, of that there is little argument.  It boils down to the
choice of either saddling the UDC,s with the procurement responsibility,
or putting (large vs. small, core vs. non-core) consumers in charge of
their own energy procurement.  Today the TRA balances of the UDCs are
bursting with liabilities because the UDCs are unable to raise their
rates to collect the different between the frozen generation component,
and the wholesale rate.  The State regulatory system will never move
quick enough to balance these procurement accounts within a reasonable
time.  As a result, we have the UDCs playing the begging game for rate
relief.  It would make far more sense to reduce, or eliminate the UDC,s
responsibility to be the default provider.

>>> Things in the People,s Republic of California
@@@ ISO files GMC Unbundled Rates

If you have nothing better to do this holiday weekend, then you may want
to pick up a copy of the ISO's Grid Management Charge filing to the
FERC, dated November 1, 2000.  It is five inches thick, in two separate
volumes.

Although thick, the filing does not include the budget numbers for Year
2001.  I have heard, and read in independent reports, that the GMC
budget will escalate 25%, or so to cover the ISO's operating costs.  Is
it true the ISO ties the escalation of the GMC to the earnings of the
UDCs?  I just wonder how that mechanism works.

Hence, the unbundling of the GMC into cost components is the essence of
the filing.  The ISO develops billing determinants for ISO services into
three buckets: control-area and scheduling; inter-zonal scheduling; and
market operations, billing, and settlements.

The reason WPTF will intervene in this matter is that also at stake is
the refund we have sought for the different GMC rates applied at the
start of the market for some of the public power and municipal loads in
PG&E's service territory.  Our petition on this issue dates back almost
two years, and the refunds may reach back almost as long.

So, I thought it would be a good idea to alert you to the fact that
three big things are coming down the road.  One, the ISO has filed for
an unbundled GMC rate that is split into three buckets of costs.  Two,
WPTF will be seeking to collect the refund for the difference in GMC
application to different types of load. And, three, very soon, most
likely in December, the ISO will file it's budget estimates for 2001,
and I expect you all to go berserk when you see that.  Just a little
preparation, that's all.

>>> Things in the People,s Republic of California
@@@ Data Subpoena for WPTF.  No Joke.

Last week I received a telephone call from the local branch of the State
Attorney's General office in San Francisco.  Apparently, WPTF is among
the special groups in the State who have received a data subpoena.  Some
of you have suggested that this is a direct result of my meeting last
Thursday evening with Steve Peace.  Maybe, but I doubt it. In case you
have never been the lucky winner of the State Lotto, or a data subpoena,
here are the questions we received.  WPTF has until December 13 to
provide answers.

1.  All documents, written responses, and data produced in response to
any subpoena duces tecum, civil investigative demand for written reports
and answers to questions, or other demand for information issued by the
Federal Energy Regulatory Commission ("FERC") in relation to the
informal investigation into bulk power markets ordered by FERC on July
26, 2000.
2.  All documents, written responses, and data produced in response to
any subpoena duces tecum, civil investigative demand for written reports
and answers to questions, or other demand for information issued by FERC
in relation to FERC Docket Nos. EL00-95-000 and EL00-98-000.
3.   All documents, written responses, and data produced in response
to any subpoena duces tecum, civil investigative demand for written
reports and answers to questions, or other demand for information issued
by the California Public Utilities Commission ("CPUC") in relation to
CPUC Docket No. I.00-08-002.
4.  All documents, written responses, and data produced in response to
any subpoena duces tecum, civil investigative demand for written reports
and answers to questions, or other demand for information issued by the
Electricity Oversight Board ("EOB") in relation to  the EOB,s
investigation of California,s electricity grid and markets during summer
2000 and thereafter.
5.  WPTF corporate by-laws.
6.  Identify all WPTF members during the period, including the
organization name, contact person, address, phone number, and date
membership began.
7.  Organization charts of WPTF officers and staff, including job
descriptions, and employee rosters.
8.  List of WPTF committees, subcommittees, boards, and working
groups, and the membership of each.
9.  All documents, including agendas, minutes, circulated or
distributed materials, and notes, relating to meetings, in person or via
conference call, of the WPTF, its committees, subcommittees, boards, or
working groups, where the subject of electricity generation, pricing,
marketing, or congestion was discussed.
10.  All documents relating to antitrust training (including records
of members receiving such training), antitrust guidelines for operation,
or antitrust compliance procedures.
11.  All documents relating to antitrust complaints or threats of
antitrust litigation.
12.  Document retention policies and documentation, if any, of
document disposal.
13.  All documents relating to comments submitted or proposed to be
submitted to the Federal Energy Regulatory Commission, the California
Power Exchange, the California Independent System Operator, the
California Public Utilities Commission, or the Western Systems
Coordinating Council, including drafts and correspondence among WPTF
members and staff.
14.  All documents relating to petitions submitted or proposed to be
submitted to the Federal Energy Regulatory Commission, the California
Power Exchange, the California Independent System Operator, the
California Public Utilities Commission, or the Western Systems
Coordinating Council, including drafts and correspondence among WPTF
members and staff.
15.  All documents analyzing, discussing, or relating to proposals
before the California Independent System Operator to impose price caps
on electricity.
16.  All documents sent to, received from, or relating to the
Independent Energy Producers Association.
17.  All documents relating to the sharing or exchange of electricity
price or cost information among WPTF members or with WPTF staff.
18.  All documents, including notes of telephone conversations and
e-mails, analyzing, discussing, or relating to electricity bidding
strategies, bidding behavior, electricity pricing, auction rules,
reserve generation capacity, withholding of generation, or congestion.
19.  All documents relating to the WSCC EHV Data Pool.
20.  Electronic calendars, calendars, day-timers, and expense reports
for the WPTF executive director and executive staff.

Sufficiently broad, I was hoping the Attorney's General office would ask
me what I was thinking on any given day.  I can't wait for them to see
copies of the Burritos.  That will tie them up for a good long time.

I find the data subpoena both offensive, and a badge of honor.  Why
should we be left out when all of you folks have had to put up with the
same?  I play the martyr well.  It is a sad state of affairs, and I
guess the best thing for us to do is answer all the questions to the
best of our ability.  On the other hand, it will cost us more than a
handful of dollars to prepare the data.  Phew.  What an odor.

>>> Things in the People,s Republic of California
@@@ Some responses to last week's Burrito questions

Last week I wrote about the likelihood of a ballot initiative in
California to eliminate competition in the electric industry.  I
mentioned that "Environmentalists will be stuck between a rock and a
hard place.  They want conservation and demand management, which you
don't get without market prices. Environmentalists may be iffy. "

Our resident environmentalist, Dan "DKNY" Kirshner gave us his opinion
on the matter:

"Iffy is the right word.  Some of us consider the late 80s/early 90s the
good old days, when there were significant utility energy efficiency
programs, absent, one may note, market prices.  And we are reluctant to
fight the tide, whether the tide is going with or against a market.  But
I think reality dictates that the grander schemes (re-regulation, new
state energy utilities, etc.) are unlikely at best, and that markets can
help us  (imagine that -- charging customers the marginal cost of
resource use!).  This is all, of course, a topic of active discussion.
Think "default provider."  I think this is the most productive area to
work on -- there may be room for agreement across a wide range of
parties."

>>> Odds & Ends (_!_)

Blessed events are all over the place.  First, our congratulations to
Rob Lamkin , Chair of WPTF, as well as VP at Southern Energy.  Rob is
the proud father of a new baby girl, Jessa Nicole, who was born last
Monday.  Everyone in the family is doing well, we are happy to report.

The WPTF family is growing too.  At last week's Board meeting,
Constellation Power Source became our 13th Board member.  Constellation
is a subsidiary of Baltimore Gas & Electric, and headquartered in the
same location.  Their California based office is in Newport Beach, and
headed by Nam Nguyen, Manager of Strategic Planning.  We are very
pleased to have the Constellation people on our Board.

A new general member is also in our rank, Los Angeles Department of
Water and Power (LADWP).  No doubt their membership will limit some of
my more colorful editorials, but we are pleased to have LADWP with us.
It reinforces the fact that we are a broad-based membership with many
different points of view.

And while we are speaking of births, new members, and things family, let
me share with you a story about mine.

I took my parents to lunch after I was done speaking in Irvine, last
week.  Each time I play the good-son role, I reflect very early on
during the experience that I should have known better.  My parents are
retired, living a great life, spending my inheritance, travelling around
the globe, and doing what retired people should be doing.  The early
bird special is a big part of their life.

After my presentation in Irvine, I called the +rents in Laguna Hills at
12:10 p.m., and asked, "Do you want me to take you to lunch?"  I should
have known better.  "Well," my Mom answered, "we were just sitting down
to lunch.  Nothing special.  Really, it was only some left over bread.
I wouldn,t give it to a stranger, but we can put it away and have lunch
with you.  When are you coming?"  I said I,ll be there in fifteen
minutes.

When I arrive at their Leisure World retirement-village condo, their
residence since moving from Cleveland 11 years ago, a dialogue ensues
that my brain has suppressed.  I should know better.  There is a secret
part of one,s memory reserved for conversations with one's parents.  All
the dizzying and confusing parts of talking with one,s parents are
conveniently stored in that secret part of the brain, and you are
reminded of these conversations only after it is too late.  "Where do
you want to go?" she asks, knowing that my Father will defer to her
judgement: the secret of a 58-year marriage.  I suggest Mimi,s Cafe, a
local chain eatery with reasonably good food.  "What are you going to
order?"  I say I don,t know, but I remember I once had lamb shanks at
Mimi,s.  I state without pretense that I,ll order lamb shanks.  "Oh, you
can,t get lamb shanks at Mimi,s.  You have to go to the Greek restaurant
for lamb shanks.  Or you know who else has lamb shanks is ...." Ten
minutes later, I have explained at least three times that I really don,t
need to have lamb shanks.  We can go anywhere they want.  We,ll go to
Mimi,s, even if I can,t order lamb shanks.  At this point in the
conversation, if you were to put a heat recovery system and a glass of
water on my head, then you could generate enough waste heat to spin a
hand-held steam turbine.

We drive into the parking lot at the local strip mall where Mimi,s is
located.  Now we start Act II.  We have to drive all over the parking
lot looking for a space that is located not more than twelve seconds by
foot from the door of the restaurant.  Why?  I don,t know because both
of my parents are in good health.  I think the reason is they like to
argue, and parking space selection is an Olympic event for the retired.
Park over there, says my Mother, to which my Father says, who would want
to park there?  We can get closer, he insists.  Why would you want to
park closer, asks my Mother?  This is close enough she insists.  Not
wanting to take a side (that's a laugh), I keep driving around the
parking lot.  I glimpse a parking spot within the golden-ager perimeter,
and nab it.  See, says my Father.  We would have had to walk all that
way.  This spot isn,t much closer, my Mom warns him.  Now, I,m synched
to the grid and selling spinning reserve.

We are seated in the restaurant, and my Mother recalls each and every
time they have eaten at Mimi,s over the last ten years, who was with
them, and what each person ordered.  Your Mother never forgets a meal
says my Dad, a line that I have heard over 1 million times since I was a
kid.  The debate rages about what to order, and will it be too much
food.  I know with certainty that whatever they order, it will be too
much food.  I haven,t been with them once when they didn,t ask for the
boxes or Styrofoam containers to bring home the excess, the booty, the
loot, and the leftovers.  These are the meals that will last a
Depression-era couple at least a week.  Sure enough, they ask for the
instruments of portage.  Everything goes in.  The hot sauce for the
quesadillas, the bread rolls, and don,t forget the butter pats for the
bread.  I numbly ask, "Don,t you have butter at home?" No, says my Mom,
we have margarine.

With after dinner mints in mouth, and the excess inventory in
you-know-who,s purse, we head back to the car.  "Next time you come to
visit we can have lamb shanks at the Italian-Greek restaurant," says my
Dad.  "No," my Mom reminds him, "that place is out of business.  We,ll
have to go into LA to get lamb shanks."  Now I,m receiving EMS signals
every 4 seconds from the grid.

Come to think of it, I really don,t like lamb shanks all that much.  I
should have known better.  Maybe if I write this down, I,ll be reminded
for future reference.  On the other hand, the lack of memory is mightier
than the pen.
================
This week's cookie comes from Paul Gribik.  A little humor to usher in
the holiday season.

These are the nominees for the Chevy Nova Award.  This is given out in
honor of the GM's fiasco in trying to market this car in Central and
South America.  "No va" in Spanish means, "it doesn't go".

1.  The Dairy Association's huge success with the campaign "Got Milk?"
prompted them to expand advertising to Mexico.  It was soon brought to
their attention the Spanish translation read "Are you lactating?"

2.  Coors put its slogan, "Turn It Loose," into Spanish, where it was
read as "Suffer From Diarrhea."

3.  Scandinavian vacuum manufacturer Electrolux used the following in an
American campaign: "Nothing sucks like an Electrolux."

4.  Clairol introduced the "Mist Stick," a curling iron, into Germany
only to find out that "mist" is slang for manure.

5.  When Gerber started selling baby food in Africa, they used the same
packaging as in the US, with the smiling baby on the label.  Later they
learned that in Africa, companies routinely put pictures on the labels
of what's inside, since many people can't read.

6.  Colgate introduced a toothpaste in France called Cue, the name of a
notorious porno magazine.

7.  An American T-shirt maker in Miami printed shirts for the Spanish
market which promoted the Pope's visit.  Instead of "I saw the Pope" (el
Papa), the shirts read "I Saw the Potato" (la papa).

8.  Pepsi's "Come Alive With the Pepsi Generation" translated into
"Pepsi Brings Your Ancestors Back From the Grave" in Chinese.

9.  The Coca-Cola name in China was first read as "Kekoukela", meaning
"Bite the wax tadpole" or "female horse stuffed with wax", depending on
the dialect.  Coke then researched 40,000 characters to find a phonetic
equivalent "kokou kole", translating into "happiness in the mouth."

10.  Frank Perdue's chicken slogan, "It takes a strong man to make a
tender chicken" was translated into Spanish as "it takes an aroused man
to make a chicken affectionate."

11.  When Parker Pen marketed a ball-point pen in Mexico, its ads were
supposed to have read, "It won't leak in your pocket and embarrass you."

The company thought that the word "embarazar" (to impregnate) meant to
embarrass, so the ad read: "It won't leak in your pocket and make you
pregnant!"

12. When American Airlines wanted to advertise its new leather first
class seats in the Mexican market, it translated its "Fly In Leather"
campaign literally, which meant "Fly Naked" (vuela en cuero) in Spanish.

======================

Have a great weekend, a wonderful holiday, and don't look for a Burrito
next week. I'm taking one week off.

gba