---------------------- Forwarded by Carla Hoffman/PDX/ECT on 08/15/2000 08:17 
AM ---------------------------
   
	Enron Capital & Trade Resources Corp.
	
	From:  "Pergher, Gunther" <Gunther.Pergher@dowjones.com>                      
     08/15/2000 06:33 AM
	

To: "Golden, Mark" <Mark.Golden@dowjones.com>, "Leopold, Jason" 
<Jason.Leopold@dowjones.com>
cc:  (bcc: Carla Hoffman/PDX/ECT)
Subject: DJ Calif Pwr Producers Urge FERC Reject Price Cap Petition 





12:15 GMT 15 August 2000
DJ Calif Pwr Producers Urge FERC Reject Price Cap Petition  (This article
was originally published Monday)  WASHINGTON (Dow Jones)--California power
producers urged federal regulators Monday to reject a petition for price
caps in the state, arguing that intervention in the market would be
counterproductive by discouraging needed investment in new power supplies.
The petition was filed Aug. 2 with the U.S. Federal Energy Regulatory
Commission by San Diego Gas & Electric Co., a unit of Sempra Energy (SRE).
It alleges that California's first-in-the-nation competitive power market
suffers from design and structural problems.  Surging power prices plaguing
the state this summer "do not reflect legitimate forces of supply and
demand," SDG&E said, calling on FERC to impose across-the-board electricity
price caps in California of $250 per megawatt-hour indefinitely until the
market flaws are corrected.  But the power producers rejected SDG&E's
analysis of the market problems as "simplistic," and called the imposition
of price caps on all California power sales an unwarranted response to the
power supply shortage.  "SDG&E asks the commission to take unreasonable and
unprecedented action that would effectively rescind every California
supplier's authority to sell energy and ancillary services at market-based
rates," complained Southern Energy California, a subsidiary of Southern Co.
(SO).  "A strict cap will only exacerbate the current supply shortages in
California," Southern Energy and the other power suppliers argued.  "The
imposition of this cap by FERC may discourage power developers from choosing
to serve California markets," said Dynegy Power Marketing Inc. (DYN).  "The
cap may also convince (electricity users they) need not participate in
load-reduction programs, since paying the $250 price cap is cheaper than
shedding load," Dynegy told the commission.  "The imposition of caps on
every California market, and the increased uncertainty as to when - if ever
- they might be removed, sends precisely the wrong message to potential
suppliers of energy in California," Southern Energy said.  The arguments of
the individual power producers in the state were echoed by the Electric
Power Supply Association, the national trade group representing competitive
power producers and marketers.  Imposing price caps in California's volatile
electricity prices would "suffocate markets" and do nothing to address the
chronic power-supply shortages causing prices to spike, EPSA told FERC.
"The relief SDG&E seeks would actually prolong and intensify California's
difficulties," EPSA said.  Price caps would discourage electricity imports
and investment in new power plants to supply the state, while discouraging
price risk management, liquidity and accurate price signals, EPSA said.
FERC has already allowed the California Independent System Operator to cap
the price it is willing to pay for power, which it uses to assure the grid
operates properly and to make up "energy imbalances" on the system.  The ISO
recently lowered its purchase price cap to $250 per megawatt-hour. The SDG&E
petition asks FERC to extend that cap to the state's power exchange, or PX,
which operates as a clearinghouse for wholesale power sales in California.
"A PX bid cap is unnecessary because the ISO purchase price cap has
historically acted as a de facto cap on the PX markets," Dynegy told FERC.
-By Bryan Lee, Dow Jones Newswires; 202-862-6647; 
bryan.lee@dowjones.com
Copyright (c) 2000, Dow Jones & Company Inc


G_nther A. Pergher
Senior Analyst
Dow Jones & Company Inc.
Tel.  609.520.7067
Fax. 609.452.3531

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