FYI.  Finally the Chairman speaks the truth.

Jim

----- Forwarded by James D Steffes/NA/Enron on 01/21/2001 12:25 PM -----

	Mary Hain@ECT
	01/19/2001 05:45 PM
		 
		 To: James D Steffes/NA/Enron@Enron, steve.c.hall@enron.com, Tracy 
Ngo/PDX/ECT@ECT, Christian Yoder/HOU/ECT@ECT, Joe Hartsoe@Enron
		 cc: 
		 Subject: In formal, opinion Hoecker calls for FERC to enjoin California 
state action

I wonder if a court would give this any credence?  
---------------------- Forwarded by Mary Hain/HOU/ECT on 01/19/2001 03:51 PM 
---------------------------


Alan Comnes
01/19/2001 12:58 PM
To: Tim Belden/HOU/ECT@ECT, mhain@enron.com, Susan J Mara/NA/Enron@ENRON, 
Paul Kaufman/PDX/ECT@ECT, Jeff Dasovich/NA/Enron@Enron
cc:  
Subject: Hoecker's Last Word:Calif Must Adopt 'Realistic' Pwr Plan

Nice final flame!

Hoecker's Last Word:Calif Must Adopt 'Realistic' Pwr Plan
  
01/19/2001 
Dow Jones Energy Service 
(Copyright (c) 2001, Dow Jones & Company, Inc.) 


WASHINGTON -(Dow Jones)- California officials have shown "bald disregard" for 
Federal Energy Regulatory Commission authority and are pursuing short-sighted 
policies that will push the state's two largest utilities over the brink and 
into bankruptcy, FERC Chairman James Hoecker said Thursday. 


The remarks by Hoecker, who resigned as chairman effective Thursday, came in 
a highly unusual formal opinion in what represents his blistering last words 
on the rapidly unraveling power crisis in California.


Hoecker lambasted Gov. Gray Davis and state policymakers for allowing the 
state's power crisis to finally succumb to rolling blackouts. 


State officials ignored the commission's Dec. 15 market-restructuring order 
and instead embraced "conspiracy theories, resistance to more realistic 
rates, and calls for palliative price caps...to obscure the issues and delay 
solutions," Hoecker said. 


White House-brokered negotiations to develop power-supply contracts as part 
of a near-term solution are at an impasse due to "unrealistic" demands by 
Gov. Davis that power providers agree to contracts at rates below their cost 
of production, Hoecker said. 


He further called for Davis and lawmakers to relent in their unrealistic 
position that retail rates continue to be frozen at below-present-cost, 
pre-1996 levels. 


Unless state officials agree to pursue realistic policies, Edison 
International's Southern California Edison Co. (EIX) and PG&E Corp.'s Pacific 
Gas & Electric Co. (PCG), will be pushed into bankruptcy by following the 
state's flawed market-restructuring law, Hoecker said. 


"Perhaps bankruptcy can be averted. If it cannot, perhaps it will force 
debtors, creditors and state officials to address the financial problems of 
utilities in a new light, without recrimination and posturing," he said. 


"Let's be realistic," Hoecker said. "Wall Street and consumers share one 
critical trait: Without a reasonable, technically defensible and 
comprehensive set of solutions to such crises, they have no basis for 
confidence that problems can or will be managed or confidence to support 
investment on one hand and political forbearance on the other." 


Hoecker called for state officials to "expeditiously" implement the 
provisions of FERC's Dec. 15 order. 


In particular, he said, the California Power Exchange is making the financial 
situation worse by ignoring the order's provision calling for suspension of 
the single-price auction when prices bid exceed $150 per megawatt-hour. 


"Prices above the level allowed in the Dec. 15 order (have) further 
jeopardized the financial status of California utilities," he said. 


Reaching a deal on forward contracts, as called for in FERC's order, is 
essential, Hoecker said. "An arbitrary bottom-line solution cannot be 
prescribed without regard to costs," he said. 


But Hoecker reserved perhaps his harshest criticism for the state's first 
legislative response to the crisis, which Davis signed into law Thursday, to 
replace the California Independent System Operator's industry-participant 
governing board with a board of political state appointees. 


Such mixing of markets and politics on the ISO, a FERC-jurisdictional entity, 
represents "an unacceptable intrusion...into federally regulated power 
markets," Hoecker said. 


Further, he said, FERC made "mistakes" in allowing AB 1890, the state's 
electricity restructuring law, to usurp the commission's regulatory authority 
over wholesale power markets in the first place. 


"Because the state is now clearly a market participant, the independence of 
the (ISO) board is bound to be compromised. Consequently, the state's 
decisions are no longer entitled to the kind of deference we have accorded it 
since AB 1890," Hoecker said. 


"More than that, this action evinces a bald disregard for federal 
jurisdiction and a rejection of cooperative solutions (called for in FERC's 
Dec. 15 restructuring order)," Hoecker said. "I recommend that the commission 
seek to enjoin this technically flawed and unlawful usurpation of its 
authority." 


Hoecker rejected the state's continuing call for firm price caps in the 
region. "Price caps will only jeopardize reliability, mask problems 
temporarily, and deter or destroy any chance to solve the long-term supply 
challenge," he said. 


Hoecker urged an urgent response by policymakers, regardless of whether the 
utilities enter bankruptcy. 


"We cannot...keep moving from one failure to the next, with no agreed-upon 
objectives. The governor's stated plans are unrealistic and ours' cannot be 
fully implemented without his help," Hoecker concluded. "I urge state 
policymakers to reject the false illusion that going it alone will serve the 
interests of California consumers." 


-By Bryan Lee, Dow Jones Newswires; 202-862-6647; bryan.lee@dowjones.com



 

  
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