---------------------- Forwarded by Vince J Kaminski/HOU/ECT on 04/27/2001 10:46 AM ---------------------------


"The Alliance of Energy Suppliers" <alliance@eei.org>@listserver.eei.org on 04/25/2001 10:34:40 AM
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To:	"Generation and Power Marketing Executives" <app-ippexecs@listserver.eei.org>
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Subject:	Alliance Info Alert


Dear Generation/Power Marketing Executive:

The following is this week's Alliance Express newsletter, and a special announcement regarding a proposed action by the Financial Accounting Standards Board (FASB).

FASB 133
FASB is considering an exception to Statement of Financial Accounting Standards (SFAS) No. 133 that will exempt energy companies from the requirement to account for capacity contracts as derivatives.  A vote against the exception would result in a significant increase in earnings volatility, and raises other important concerns for energy suppliers.  (Attached is a summary of this issue.)  The Board is expected to vote on this issue during May 2001.  EEI will be taking steps to appraise FASB of our concerns.  If you, or company CFO would like more information about this effort, please contact Richard McMahon, Executive Director of the Alliance of Energy Suppliers, at rmcmahon@eei.org, or at 202-508-5571.


                             Alliance of Energy Suppliers Express?April 25, 2001
INSIDE WASHINGTON

FEDERAL AFFAIRS

***Bill Repealing PUHCA Is Approved By Senate Committee***
The Senate Banking Committee today approved S 206, a bill that repeals the Public Utility Holding Company Act of 1935.  The bill would repeal PUHCA and transfer oversight of public utility holding companies from the Securities and Exchange Commission to the Federal Energy Regulatory Commission and appropriate state agencies.
S.206 was approved with two amendments.  Offered by Sen. Mike Enzi (R-WY), the first amendment would establish the Electric Energy Market Competition Task Force to study competition in the wholesale and retail market for electric energy in the United States. The task force would be made up of representatives of FERC, the Department of Justice and the Federal Trade Commission, as well as non-voting representatives from the Department of Agriculture and the Securities and Exchange Commission. The amendment also contained a provision, co-sponsored by Sen. Paul Sarbanes (D-MD), that would preserve FERC's authority to require that energy rates are reasonable and do not include the pass-through of holding company costs that are unrelated to energy.
Another amendment, offered by Sen. Jon Corzine (D-NJ), initiated a study by the General Accounting Office of the success of federal and state governments in preventing anticompetitive practices by public utility holding companies and in promoting competition and efficient energy markets.

 ***Institute?s Tax Agreement With Public Power Again Introduced on Hill***

The tax agreement EEI reached with the American Public Power Association (APPA) and the Large Public Power Council (LPPC) again has been introduced in the House.  The bill (HR 1459) contains the same provisions as were in a measure (HR 4971), with technical corrections, introduced during the 106th Congress.  HR 1459 was introduced by Rep. J.D. Hayworth (R-AZ) and nine original co-sponsors from the Ways and Means Committee.

HR 1459 contains four key provisions with tax code changes:  1) The tax-free sale or spin-off of transmission assets into an RTO is allowed, 2) Nuclear decommissioning laws are adapted to a competitive market by allowing deductions to a trust fund no longer subject to cost-of service ratemaking, 3) The contributions in aid of construction (CIAC) tax on interconnections to transmission and distribution facilities is eliminated, and 4) Private use tax rules are changed to permit open access to transmission and distribution facilities.

The measure was referred to the House Ways and Means Committee, and EEI has urged Congress to act without delay in moving it forward.  Enactment will help encourage a vigorous but fair competitive environment, the Institute noted.  The same legislation has been incorporated into S 389, Senate Energy Committee Chairman Frank Murkowski's (R-AK) energy security bill, and stand-alone legislation could also be introduced.  Hearings are expected to be held in both the Senate Finance and House Ways and Means Committees, probably after consideration of President Bush's individual tax proposal.

 ADMINISTRATION/FERC

***White House Seeks $2 Trillion Budget In Fiscal Year 2002***

President Bush last week transmitted a $2 trillion fiscal year 2002 budget request to Capitol Hill.  The Administration noted that its proposal *moderates recent explosive growth in discretionary spending to four percent in 2002,* an increase of $26 billion over the preceding fiscal year.  The budget bid contains a $231 billion total surplus in 2002, and projects a $5.6 trillion surplus over the next ten years.

In the energy area, the Administration noted the federal government?s *longstanding and evolving role* in the sector, pointing out that most federal energy programs and agencies have no state or private counterparts.  It proposed about $2.8 billion in discretionary spending for energy programs, and about $2.1 billion in tax benefits, *mainly to encourage development of traditional and alternative energy sources.*  DOE?s budget request was $19.2 billion, including $2.3 billion for energy resources programs.  This later figure represents a decrease of $196 million, or 7.9 percent, from fiscal year 2001.

In the environmental sector, the Administration sought some $7.3 billion in discretionary funding for EPA, including a $3.7 billion operating program focused on implementation of most federal pollution control laws.

 ***Success of Restructuring Tied to Energy Strategy, FERC?s Massey Asserts***

Electric restructuring may be in jeopardy, and its success *is in the hands of regulators and policymakers,* FERC Commissioner William Massey has asserted.  Speaking at a recent National Governors Association policy forum in Philadelphia, Commissioner Massey urged officials to pay attention to the key elements of a national energy strategy.

First, he specified, there is a need for an adequate supply of the energy commodity.  Turning to a second element, Commissioner Massey told forum attendees that *all the supply in the world won?t help unless it can be delivered over an adequate, efficient, non-discriminatory network.*  Commissioner Massey identified market structure as the third essential element of a national energy strategy, while citing an inherent difficulty: that *good structure cannot be easily parsed between wholesale and retail jurisdictions.*  Accordingly, he said, FERC and the states must work together on market structure.

The final element of a successful energy strategy, the commissioner specified, is the need for aggressive FERC intervention when markets fail to do their job.  *If the states cannot depend on the wholesale market regulator to ensure reasonable prices for consumers,* he cautioned, they *will surely think twice before heading down the restructuring path.*

NEW GENERATION

***Dynegy To Build Second Plant in Kentucky***

Dynegy has announced plans to construct a new 330 megawatt plant adjacent to the Riverside Generating project in Lawrence County, Kentucky.  Dynegy will sell the power generated at the plant in the wholesale market.  Commercial operation is expected to begin first quarter of 2002.

***PPL To Expand Generation Capacity***

PPL Corporation this week said it would build a 540 megawatt power plant near Chicago and would increase the capacity of its Susquehanna nuclear plant by 100 megawatts.  CEO William Hecht said the Illinois plant is expected to be in service by the summer of 2002.

***Constellation Energy Group Announces Eight New Plants***

Constellation Energy Group  this week announced that the company is scheduled to bring four peaking power plants on line this summer.  Additionally, four larger power plants are scheduled to enter service in the following two summers.   The four peaking plants are located in Illinois, Pennsylvania, Virginia and West Virginia.  The larger power plants are under construction in California, Florida, Illinois, and Texas.

*We?re building in these seven states because they serve regions where wholesale electricity is needed and where we can provide energy to support our national power marketing business,* said Constellation Energy Group Chairman and CEO Christian Poindexter.

***California Energy Commission Approves Construction of Otay Mesa Generating Plant***

PG&E Corporation?s National Energy Group (NEG) last week announced that the California Energy Commission (CEC) has approved construction of the Otay Mesa Generating Plant in San Diego County, which the NEG has developed.  The 500 megawatt project will produce enough electricity to power about 1,000 homes.  After the development process is completed, Calpine Corporation will assume ownership of the project and will construct and operate the plant.  NEG will contract for up to half the plants output.

ENERGY DATA

*** Weekly Electric Output (Week 15)***

Electric output reached 63,528 GWh for the week ending April 14 (Week 15), with the highest increase over 2000 levels in the South Central states, which both had a 12.6 percent increase over 2000 for week 15.  Year-to-date, the Rocky Mountain region experienced the greatest increase in output (7.6 percent) over 2000. For more information, email alliance@eei.org.

The Alliance Express is a free news service sponsored by the Alliance of Energy Suppliers.  This document can be redistributed.  Please send questions, comments, or requests to alliance@eei.org, or telephone 202/508-5680.




Nancy Tarr
Manager, Business Development
EEI Alliance of Energy Suppliers
701 Pennsylvania Ave., N.W.
Washington, D.C.  20004
Telephone:  202-508-5680
FAX:  202-508-5600
www.eei.org/alliance


ntarr@eei.org
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 - FASB-The Impact on Energy Companies of Treatment of Capacity C