See story below

-----Original Message-----
From: Andy Brown [mailto:ABB@eslawfirm.com]
Sent: Friday, September 07, 2001 5:00 PM
To: 'Sue Mara'
Subject: FW: Cal-ISO Violating Fed Law By Making Utils Buy State Pwr


what I mentioned.

Also, during the meeting (and during next Tues' FERC call) I mentioned that
we need more info from companies for pursuing a complaint.  We have some
other elements now with these articles.  We've also asked to meet with price
waterhouse coopers on the CAISO audit (Alan called about that & we've traded
voicemail.)

Things will get pretty curious.  

Have a wkend.  ABB

Andrew B. Brown
Ellison, Schneider & Harris, LLP
2015 H Street
Sacramento, CA  95814
Phone: (916) 447-2166
Fax: (916) 447-3512
mailto:abb@eslawfirm.com

CONFIDENTIALITY NOTICE:  This communication and any accompanying document(s)
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-----Original Message-----
From: cwilson@gcpn.com [mailto:cwilson@gcpn.com]
Sent: Friday, September 07, 2001 4:15 PM
To: duke_press_conferences@porternovelli.com
Cc: sbrown@gcpn.com
Subject: Cal-ISO Violating Fed Law By Making Utils Buy State Pwr


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| Updated: Friday, September 7, 2001 06:17 PM ET    | (Embedded image moved
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| By Jason Leopold                                  |
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| Of DOW JONES NEWSWIRES                            |
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| LOS ANGELES (Dow Jones)--California's grid        |
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| operator may be in violation of federal           |
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| regulations by forcing utilities to buy expensive |
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| power the state secured under long- and           |
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| short-term contracts in place of electricity that |
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| is available from their own low-cost power        |
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| plants.                                           |
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| The California Independent System Operator, the   |
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| agency that operates the real-time electricity    |
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| market and maintains reliability of the grid in   |
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| the state, has given priority during the past     |
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| three months to power the state Department of     |
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| Water Resources locked in under the $43 billion   |
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| of long-term contracts before utilizing           |
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| electricity from low-cost power plants, according |
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| to several executives at the agency.              |
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| Greg Fishman, an ISO spokesman, said "there are   |
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| times, this doesn't happen much, when because of  |
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| varying ramp rates, we take a bid out of          |
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| sequence, meaning when one plant has a bid of     |
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| let's say $50 a megawatt-hour and another has a   |
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| $60 bid, we may take the $60 bid because it would |
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| take longer to deliver the $50 power."            |
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| Fishman said the "market is not working as it is  |
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| designed to."                                     |
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| "Since the demise of the California Power         |
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| Exchange, we, the industry, have been forced to   |
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| make the market function given the tools that we  |
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| have," Fishman said. "The PX was a major portion  |
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| of the market. Without it, we are left trying to  |
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| put the market back into shape given the current  |
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| players in the market."                           |
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| However, the ISO's federal tariff states that the |
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| agency must use the cheapest electricity          |
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| available in the wholesale market before          |
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| dispatching the more expensive electricity to     |
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| generators and retail customers.                  |
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| "The ISO shall dispatch generating units...to     |
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| meet its imbalance energy requirements based on   |
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| order of energy bid prices," reads a section of   |
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| the rules approved by the Federal Energy          |
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| Regulatory Commission. "The ISO shall not         |
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| discriminate between generating units, system     |
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| units, loads and system resources other than      |
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| based on price and the effectiveness (location    |
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| and ramp rate) of the resource concerned to       |
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| respond to the fluctuation in demand or           |
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| generation."                                      |
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| Fishman acknowledged that the "market is not      |
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| working as it is designed to," but he said the    |
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| ISO would not respond to specific questions       |
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| related to the possibility that the agency has    |
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| violated its federal tariff or other issues       |
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| related to the operation of the ISO market.       |
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| "We are looking into a variety of issues          |
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| surrounding that dysfunction and in due course we |
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| will answer those issues," he said.               |
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| Agency Fails To Reveal Price Data For DWR Power   |
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| Moreover, the ISO has failed to disclose on its   |
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| web site the price of the DWR power, which is     |
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| also required under federal regulations.          |
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| Jan Smutny-Jones, executive director of the       |
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| Independent Energy Producers Association, a trade |
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| group representing large and small power          |
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| producers, said there is "absolutely no           |
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| transparency in the ISO market. No one knows what |
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| they're paying for."                              |
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| The DWR, which started buying power in lieu of    |
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| California's ailing utilities in January, signed  |
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| $43 billion in long-term supply contracts over    |
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| the past six months at prices that now exceed the |
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| spot market price for electricity.                |
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| The DWR at times has had a surplus of electricity |
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| and has sold some of it into the spot market at a |
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| $115 million loss over the last three months. As  |
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| a result, the ISO has ordered the Mohave          |
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| Generating Station, a coal-fired power plant in   |
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| Nevada capable of producing electricity at        |
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| roughly 2 cents a kilowatt-hour, to reduce output |
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| at the facility, Fishman said.                    |
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| The 1,500-megawatt Mohave unit is majority owned  |
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| by Edison International (EIX, news, msgs) unit    |
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| Southern California Edison.                       |
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| Fishman said last week that the ISO is            |
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| investigating the circumstances that led the grid |
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| operator to order the units to "ramp down."       |
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| -By Jason Leopold, Dow Jones Newswires;           |
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| 323-658-3874; jason.leopold@dowjones.com          |
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