US Utilities Are Slow To Make Life Harder For Enron 
Dow Jones Interactive    
November 1, 2001
 
 
Generators say state manipulating power market - They accuse the IPO of sharing inside information with the water agency. 
The Orange County Register
November 1, 2001
 
 
ISO officials go public with testimony
The Sacramento Bee
November 1, 2001
 
 
$1 million to fight S.F. public power / PG&E Corp. against city ballot measures
Dow Jones Interactive
November 1, 2001
 
 
 
 
 
 
 
US Utilities Are Slow To Make Life Harder For Enron 
 
SCOTTSDALE, Ariz. -(Dow Jones)- U.S. utilities are in no hurry to impose strict credit restrictions on future deals with troubled energy trading giant Enron Corp. (ENE), according to utility executives gathered for a national power conference here this week. 

Even as they nervously tracked Enron's stock plunge during coffee breaks Tuesday on their Internet-enabled wireless devices, and lunchtime chat Wednesday turned to the prospects for additional downgrades of the company's debt, executives mostly said they're merely evaluating their relationships with Enron at his point, while hoping for the best. 

After losing more than two-thirds of their value over the past two weeks and falling to their lowest level in a decade, Enron shares rose Wednesday for the first time since Oct. 16, gaining $2.74 to $13.90. 

"We're very interested in their recovery," said David Rozier, senior vice president at Mirant Corp.'s (MIR) Mirant Americas Inc., noting that the demise of such a large player could have a ripple effect on markets. "We're looking at that situation very carefully." 

Aquila Inc. (ILA), which does a significant amount of trading with Enron, likewise "would be reluctant to make changes" to that relationship, said Steve Magness, executive vice president in charge of strategic partnerships. "We would not change due to perception, only for financial reasons." 

"We are constantly monitoring and evaluating the creditworthiness of counterparties (in trading)," added Aquila Senior Vice President and General Manager Brad Nordholm. Should Enron lose its investment-grade rating status, that would affect Aquila's continued willingness to trade with Enron, he said. 

Moody's Investors Service Inc. on Monday downgraded its rating on Enron's senior unsecured debt to Baa2 from Baa1, placing its rating two levels above noninvestment grade, and kept the company under review for a possible further downgrade. Moody's said the downgrade was based on deterioration in the company's financial flexibility following an announced large quarterly loss and reduction of shareholder equity. 

Additional unease has been created by reports about a Securities and Exchange Commission inquiry into certain financial transactions involving Enron. 

European trading partners reportedly are taking a harder line with Enron than U.S. companies, which some here said could be due to foreign companies having less interest in the strength of markets here. 

"Still, we want to trade in stable markets. We don't want to see any major long-term problems," said Trevor Pethick, director of trading with Powergen PLC's (PWG) Energy Trading unit. His company, like its U.S. counterparts, is "reviewing our situation with Enron," he said. 

Coral Energy, a unit of Royal Dutch/Shell, continues to trade with Enron, although debt downgrades do lead Coral Energy to make changes to their business relationships with any trading partner, said Jeff Beicker, senior vice president of trading. 

"I'm not seeing people saying, 'Let's save Enron' or 'Let's pounce on Enron.' It's business as usual," said Beicker. "The market capitalization is where they're getting hammered." 

He and Aquila's Magness, answering questions from conference goers following a presentation on risk management, downplayed the possible impact of such a large trading company as Enron going out of business. Both said they would expect more alternative trading platforms to EnronOnline to emerge quickly and fill any trading voids. 

Beicker further predicted that should Enron go under, trading margins would grow and companies would have to pay more going forward "for warehousing their risk." 

The Worldwide Business Research Power 2001 conference continues Thursday at the Camelback Inn resort in Scottsdale, Ariz. 

 
 
 
 
Generators say state manipulating power market - They accuse the IPO of sharing inside information with the water agency. 
 
SACRAMENTO -- The state Department of Water Resources is demanding and getting privileged information from the state's electricity grid operator that, power generators say, is being used to illegally manipulate the energy market. 

The role reversal - in which power generators are now accusing the state of violating federal laws to manipulate the market - was at the center of two depositions taken Wednesday by a Senate committee investigating the California energy crisis. 

The Department of Water Resources in January started buying energy for the state because the private utilities weren't able to pay their bills and lawmakers feared rolling blackouts would ensue. 

On Wednesday, officers with the Independent System Operator - which schedules electricity onto the state's power grid - told the special Senate committee that the Department of Water Resources buyers have been threatening since spring to stop buying unless they are provided with exclusive information about the grid. 

"We have heard indications that if we failed to provide information, we may not have the backing,'' an ISO vice president, Jim Detmers, said. 

He said the information includes the amount of electricity the ISO is short in what is called the hour-ahead market. The sharing of this same type of information among private generators last year led to accusations of gouging from state officials. 

Water Resources spokesman Oscar Hildago said the information is only used to ensure the buys are a justifiable use of taxpayer money. 

"We have to stand behind those purchases, and the law, AB1X, did not give us the authority to write a blank check to (the ISO),'' he said, referring to the bill that put the state in the power business. 

State Sen. Joe Dunn, D-Santa Ana, who chairs the special committee, said the state is now being accused of using privileged information to schedule controversial, high-priced long-term energy contracts the state secured in the early days of the crisis. 

"The allegations from the generator community have been that DWR has wrested control of the wholesale market from ISO and they did so for purposes of dumping the long-term contracts into the market when there is lower-priced electricity available,'' said Dunn. 

In an Oct. 18 filing with the Federal Energy Regulatory Commission, power generators say that this is a violation of the regulations with which the operators must comply. 

"Acting on behalf of the State ... the highly politicized (ISO) is engaged in an organized, deliberate effort to subvert the market mechanisms established by the commission,'' the filing reads. 

Hildago countered: "Quite frankly ... the louder they scream that something is unfair (that) is a measure of the success we have." 

 
 
 
 
ISO officials go public with testimony
 
Two members of the state's electric grid operator chose to give depositions to a Senate committee in public Wednesday despite a Senate resolution calling for them to be kept secret. 

The committee wanted the secrecy to prevent unfounded rumors from becoming public, according to its chairman, Sen. Joe Dunn, D-Santa Ana. 

But Dunn said recently that those subpoenaed to testify could choose to do so in public. 

On Wednesday, two officials from the California Independent System Operator took him up on the offer - Elena Schmid, vice president of communications and strategic development, and Jim Detmers, vice president of operations. 

"We're an organization that's all about openness," said ISO spokeswoman Stephanie McCorkle. "It's part of our culture to want to open things up." 

The testimony, she said, "served the purpose of going back in time and looking at the many factors that contributed to the crisis." 

Other energy officials will also ask the committee for public depositions, she said, including the president and chief executive officer, Terry Winter, who is scheduled to appear Tuesday. 

The Senate Select Committee to Investigate Price Manipulation of the Wholesale Energy Market issued 16 subpoenas to current and former board members and staff of the grid operator. 

But Winter's testimony will be of particular interest. The actions he took Dec. 8 to lift a price cap on wholesale energy cost is at the heart of the committee's investigation. 

Dunn says Winter failed to tell the ISO board or other state officials about his request to the Federal Energy Regulatory Commission to lift the $250-per-megawatt hour cap. It was replaced with a soft cap requiring generators to justify their costs above $250. 

A Senate resolution approved in July spelled out the ground rules for the depositions, saying no one could be present except members and staff of Dunn's committee, the person taking the deposition, an official report, the person being deposed and accompanying counsel. 

But some have questioned the secrecy, saying it could make the testimony prone to manipulation. 

In response to questions from the committee's special counsel, Laurence Drivon, Detmers testified Wednesday about the unraveling of the electricity market in the days leading up to Dec. 8, with dispatchers scrambling every hour to find enough power to keep the lights on. 

 

$1 million to fight S.F. public power / PG&E Corp. against city ballot measures

The corporate parent of PG&E, the bankrupt California utility fighting for financial recovery, has pumped more than $1 million into a campaign to defeat a pair of public power measures on Tuesday's ballot in San Francisco. 

Company representatives say they want to protect their assets in the city, where there are 365,000 Pacific Gas and Electric Co. customers. Independent experts say more is at stake. 

"I'm sure they don't want to see a snowball effect where other cities try to turn them out," said Severin Borenstein, director of the University of California 's Energy Institute. 

Borenstein noted that Los Angeles, the state's largest city, had long been in the public power business. So has Sacramento and a number of smaller cities, such as Alameda and Palo Alto. PG&E serves 4.7 million customers in the state. 

"If you're looking at a major movement, San Francisco is the biggest location where this is being discussed now," Borenstein said yesterday. 

San Diego and San Jose also have been looking at putting their electrical system under public control, but have yet to take action. In San Francisco, two measures on the ballot would pave the way for a publicly owned electricity system. 

Measure I would set up an independent municipal utility district for San Francisco and neighboring Brisbane, governed by state law. Proposition F would create a Water and Power Agency in San Francisco only and retain ties to City Hall. 

In both cases, elected directors would decide whether to seize PG&E's transmission and distribution lines. 

PG&E has said it isn't interested in selling, and for decades has fought at City Hall and in court to derail such efforts in San Francisco. But last winter's energy crisis shifted public attitudes and a more liberal Board of Supervisors pushed the public power proposals forward. 

Still, PG&E vigorously opposes the effort. Campaign finance reports show PG&E spent $1,023,289 through Oct. 20 to defeat the measures. How much more money the company has poured into the campaign since then will not be made public until after the election. 

Other business interests gave nearly $400,000 more through Oct. 20 to fight the ballot measures. The contributors include Pacific Telesis Group ($100,000) and AT&T ($150,000). The companies fear the creation of a MUD would lead the new agency's directors to try to take over the phone and communications operations, too. The Committee on Jobs, a big business group funded in part by PG&E, gave $110,500. 

The money has paid for campaign consultants, mailers, slate cards, polls, phone banks and TV ads. 

PG&E spokeswoman Jennifer Ramp said the spending was warranted. 

"It's perfectly natural that any company -- bankrupt or not -- facing a hostile takeover would fight the measures and get the word out to people that this is not going to solve the energy crisis," Ramp said. 

She added the money used in the campaign did not come from the utility but from its corporate parent company. 

Ross Mirkarimi, who runs the public power campaigns, was more blunt in his assessment of PG&E's campaign contributions. 

"They are going to do everything they can to preserve their monopoly and greed," he said. 

The campaigns in favor of Proposition F and Measure I raised a little more than $90,000 through Oct. 20. Bay Guardian newspaper publisher Bruce Brugmann and his wife, Jean, gave $10,500. The weekly paper, which has long crusaded for public power, provided an additional $38,000 in free advertising. The Vanguard Public Foundation donated another $10,000.