---------------------- Forwarded by Roger Yang/SFO/EES on 12/07/2000 08:35 AM 
---------------------------


Scott Stoness
12/06/2000 06:29 PM
To: Mona L Petrochko/SFO/EES@EES
cc: Roger Yang/SFO/EES@EES, Gordon Savage/HOU/EES@EES, Steven J 
Kean/NA/Enron@Enron 
Subject: We should lobby for relaxation of emmission limits 

Getting the government to declare stage 2 continuously (or temporarly 
relaxing the emmission during periods of cold) for the remaining month could 
significantly reduce the problems in CA.

We should see what press we can make over this.  See bolded below:  11,000 MW 
of generation off line due to unplanned outage and emmission limits.

Scott

Calif Price Cap Driving In-State Power To Oregon, Wash
 By Mark Golden and Jason Leopold
   
 12/06/2000 
 Dow Jones Energy Service 
 (Copyright (c) 2000, Dow Jones & Company, Inc.) 

 NEW YORK -(Dow Jones)- California's wholesale electricity price cap is so 
far below free-market prices in the Northwest that large
 amounts of the state's electricity will be exported Wednesday to the 
Northwest, raising the risk of blackouts in California. 

 On Tuesday, electricity in the Northwest for delivery Wednesday traded at 
$370-$390 a megawatt-hour, well above the California
 Independent System Operator's price cap of $250/MWh. California utilities, 
which buy most of their power in the California Power
 Exchange's day-ahead market, refuse to pay more there than the ISO's 
$250/MWh limit. Nor do sellers bother to offer power at more
 than $250 in the CalPX market.

 Seeing an opportunity for arbitrage profits, Northwest utilities and 
electricity trading companies appeared in CalPX's market Tuesday as
 buyers, even though California utilities are usually the only buyers there, 
a CalPX market source said. They bought power through the
 exchange at $400/MWh at the California-Oregon border hub - $250/MWh for the 
power and $150 per megawatt to import the power -
 leaving the state with less electricity for Wednesday and leaving 
California's independent power producers wondering who gets the
 difference between the $250/MWh maximum price they get from the CalPX and 
the $400/MWh CalPX charges buyers in the Northwest. 

 Transmission lines that carry power into and out of California were 
congested Tuesday because of the imports and exports of power. Due
 to the congestion, the charge to use the lines was $150/MWh, CalPX market 
sources said. 

 California looks to be priced out of the market for the next couple of 
months. Forward contracts for electricity in Washington state peaked
 Tuesday at $750/MWh for deliveries in January, before falling to $650/MWh. 
For the balance of December in Washington state, power
 traded at $1,200/MWh. 

 Of course, California could get back into the market by abandoning its price 
cap, which has been breaking down for the week due to
 skyrocketing wholesale prices for natural gas. 

 Quietly, the ISO has been purchasing power at prices above its cap outside 
of its computer-based market in deals struck orally with
 out-of-state utilities. The resolution setting up the price cap allows for 
such out-of-market purchases if needed in a supply emergency - but
 only from out-of-state sources. 

 The ISO declared a Stage 2 electrical emergency Wednesday as reserves dipped 
below 5%. It was the third consecutive Stage 2
 emergency this week, which has seen the state teeter on the brink of rolling 
blackouts due to less than adequate supply. 

 On Monday, the ISO said the state would face an 11,000 MW deficit every day 
for the remainder of the year because several power plants are off line for 
planned or unplanned maintenance, or because they have exhausted their 
pollution credits. 

 In the CalPX's hourly market Tuesday, prices peaked above the cap for only 
the second time in the CalPX's three years of operations,
 CalPX spokesman Jesus Arredondo said. 

 Some traders said that California utilities are effectively conceding that 
the ISO price cap, which the utilities and state politicians pushed
 through the ISO governing board this summer, is no longer enforceable 
because natural gas prices have pushed generating costs above
 $250/MWh. 

 Cash prices for natural gas in California hit $40 per million British 
thermal units Wednesday. At $22/MMBtu, once the costs for
 maintenance and emitting nitrous oxide are added in, generating costs rise 
to near $300/MWh. 

 -By Mark Golden, Dow Jones Newswires; 201-938-4604; mark.golden@dowjones.com