? 
THE FRIDAY BURRITO 

"42.7 percent of all statistics are made up on the spot." 

We're back.? We're live.? We're living.? Actually, we are still in limbo 
land.? As of yet, no prez elect.? The week was typical by California 
standards.? The utilities filed their plans to raise rates over the next five 
years, the consumer advocates held a press conference to kick off their holy 
war against electric restructuring, a class action suit was filed for $4 
billion against the generators and the utilities, gas prices hovered between 
$18 and $20/mmcf on day trading, the Secretary of Energy spat on FERC 
regarding the remedies proposed to fix the alleged dysfunctional California 
market, and the Governor announced his options for curing what ails us.? I 
think that pretty well covers it.? It was just another week in paradise. 

I was on KRON TV last week for a couple of 10-second sound bites.? Chomp, 
chomp.? That is what was distilled from fifty minutes of taping.? It was a 
learning experience for me, more so than it was for the general viewing 
public.? The station did an investigative report on California's restructured 
power industry, and the slant was fairly predictable, although it could have 
been far worse.? Two moms on my son's hockey team told me they saw the clips 
on TV, and I used these ladies as my unbiased (?) sample to gather some 
opinions.? There are about twenty families on my son's team, so that means 
(using testimonial math) that about ten percent of the Bay Area watched the 
news piece.? One mom said she saw me, really didn't listen to what the news 
was covering, but that she recognized me. I'm sure that her experience, less 
the recognition, applies easily to half or more of the viewing public. The 
second mom, who I have known for many years, asked me, "So, who is doing the 
gouging?"? This from a person who is well educated, very involved with the 
community, and is part of a routine family (he says) of husband, wife, three 
kids, and a dog. 

Alas, I realized, the battle for California's power market will not rest nor 
be resolved in chaotic meetings at the ISO or AB1890 working groups.? The war 
will be won or lost based on public opinion.? Will Californians support the 
continuation of electric restructuring?? I don't know if they will, but I am 
not at all surprised that the vast majority of people do not understand the 
issues.? As an industry, we have a long, long way to go in educating the 
public.? And I have tremendous doubt that we are going to cough up the 
necessary money to publicly demonstrate a positive image on power 
restructuring.? Nancy Day wrote me last week; "You and your associates must 
'prove' to the policy-makers and the public that, in the long run, 
competitive markets are always better than command and control regulation.? 
How do you do that?? You hire a PR firm ( and you get them to help you shape 
your messages to a variety of audiences." 

Shape a message.? I know that some of you folks think you are doing that 
now.? I disagree.? Individually or collectively we have not made even a small 
dent in the public image for our cause.? There is some name recognition, to 
be sure. The paid TV ads for Enron, and Southern have made those company 
names more familiar.? Green Mountain Energy has done a good job of getting 
its name out, too.? But that is hardly the point.? As an industry of private 
interests, we are kaput on the PR side. 

Imagine this.? Imagine Joe Montana, four-time Superbowl wining quarterback 
for the San Francisco 49ers standing next to the Lombardi Trophy, talking 
into the camera.? He smiles, and says, "Hi. I'm Joe Montana.? I believe in 
competition."? A few side clips, some simple explanations how competition is 
going to more quickly bring prices into line with expectations, and back to 
Joe.? We can also do some follow on ads with Jerry Rice, and Jim Plunket 
(two-time Superbowl QB for the Oakland Raiders), thereby making a connection 
with different factions of California's ethnic and racial makeup.? That is 
what I call PR.? Touching the soul of the public with simple messages from 
credible, well-known, likeable people. 

I'd be interested in hearing your thoughts. 

Here is what is on this week's leftover turkey menu 

Things in the People's Republic of California 
?@@@ Oh when the comments, come marching in( 
?@@@ ISO Super Peak Market books first transaction 
?@@@ Consumers Rattle the Saber for a Ballot Initiative 
?@@@ All Injured Parties form a line to the left( 
?@@@ The Governor's Plan 

Odds & Ends (_!_) 
? 
? 

Things in the People's Republic of California 
?@@@ Oh when the comments, come marching in ( 

My mailman is becoming increasingly ticked off at me because the tonnage of 
FERC comments coming to my address weighing four, or five pounds per 
delivery.? He's a mailman, not a pediatrician.? He is leaving small hints of 
his displeasure, such as dropping my mail in the middle of the driveway, or 
delivering the goodies to my neighbor's house.? Most of the copies received, 
I confess, go into the trash bin without a second thought. I don't even break 
the gummy seal on most.? I check the sender's name, and decide if the fortune 
inside the envelope might be worth a read.? I always open the envelopes from 
the CPUC, the Electric Oversight Board, and Steptoe & Johnson (SCE's counsel 
for really important filings).? These filings are the most entertaining of 
the lot. The holiday weekend gave me some time to read a selection of 
comments submitted to FERC regarding the Commission's November 1 Order. 

I don't know whether I should laugh or cry at some of these pleadings.? The 
comments I read from some of my favorite sectors of California's power 
industry are so childish that I wonder if it is a joke.? Or is the joke on 
us?? Take for example, the CPUC's comments.? The first 52 pages are more or 
less what you would expect:? refund our money, change this hearing from a 
paper hearing to a full-blown evidentiary hearing, request a rehearing, the 
CPUC should get copies of everything the MSC and DMA publish at the same time 
FERC gets them, FERC got the soft price-cap issues and just about everything 
else wrong, the State has jurisdiction, etc.? The CPUC claims that there is 
insufficient evidence to support the FERC's conclusions. Since the CPUC also 
lacks sufficient evidence (because the generators and power marketers will 
not comply with the CPUC's data requests), then, well, what the heck, we need 
a lengthy hearing with evidence and cross-examination of witnesses.? This 
line of reasoning sounds very much like the Florida vote recount litigation, 
but I don't want to go there. 

Here is the real kicker.? If you go to page 52 of the CPUC's comments, there 
is the signature block of the CPUC attorneys, dated November 21.? The next 
page begins with the "Separate Statement of Commissioners Duque, Neeper, and 
Bilas".? I did a double take on the title, not understanding, at first, that 
the first 52 pages were never adopted by the CPUC by vote.? Our politically 
hypercorrect couple, Ms. Lynch and Mr. Wood forced it in. 

What do the three Republican Commissioners say?? "We find much to support in 
FERC's Market Order, and are filing this statement to insure that FERC has 
access to our full thinking concerning the technical aspects of the wholesale 
market, which are not the principal focus of the Commission's filing."? I 
remain astounded that, in essence, the CPUC has two replies.? One that 
lambastes the FERC Order, and another that encourages the Order with some 
modifications.? For example, the evil part of the CPUC commentary shakes a 
finger at FERC for ordering elimination of the requirement for the UDCs to 
buy all power through the PX.? That, says the attorneys, is a violation of 
jurisdiction, and you federal people should stay off of our lawn. The trio 
of? Duque, Neeper, and Bilas (DNB) say, "While the state maintains 
jurisdiction, we are willing to cede to FERC temporary jurisdiction over this 
matter."? Which of the two responses sounds more cooperative to you?? I 
wonder (he asks) why the CPUC comments never came to a vote?? Sounds to me 
like the CPUC comments a la DNB would have passed 3-2, quite nicely, thank 
you.? But those days are long gone. 

The CPUC expert witness testimony appended to the CPUC comments includes the 
direct testimony of Michael Scheible, a supervisor of the California Air 
Resources Board staff responsible for energy issues including electricity.? 
This is a person who was part of the development of the RECLAIM program of 
tradable emission credits utilized in the South Coast Air Quality Management 
District (SCAQMD).? Here is what Mr. Scheible testifies.? "The average price 
paid for a NOx RTC went from $1 a pound in January 2000, to $4 in June, to 
$20 in October 2000."? What is he talking about?? He took the year-to-date 
expenditures on NOx credits, and divided the total by the number of traded 
RECLAIM Trading Credits (RTC).? He used the average value, not the marginal 
or incremental price!? NOx credits are today trading in the $40 to $50 per 
pound range. 

But he doesn't stop there.? He takes another leap at the impact of the RTC 
prices on electricity prices.? "( RECLAIM affects only thermal power 
generating units in the SCAQMD.? These units account for about 20 percent of 
the power generating capacity in the State( Thus, the market price of RTCs 
was a factor for only a relatively small percentage of the State's generation 
capacity in 2000".? Markets? What are markets?? This is the basis upon which 
the State hopes to persuade FERC that the markets are not working because one 
cost factor only affects 20% of the State's capacity.? Okay, it is your 
turn.? Do you want to laugh, or cry? 

I reviewed one of the UDC proposals, PG&E.? PG&E's comments included three 
expert witness affidavits that in total were about one inch thick.? PG&E asks 
the FERC to replace the $150/MWh soft cap with a cost-based load 
differentiated cap; pay as bid for bids accepted over the load differentiated 
cap; force in-state generators to bid into the California PX before seeking 
to participate in other markets; penalize both load and generation if either 
does not sufficiently participate in forward markets; and return to 
cost-of-service ratemaking in California for an interim period.? In their 
proposed relief for electricity prices realized after October 2, 2000, PG&E 
requests a waiver of the payment provisions of the ISO and PX Tariffs, 
requests that the utility only be required to pay based on 1999 levels, and 
that after refund claims are adjudicated, PG&E will pay the extra amounts 
that may be ordered. 

Shakespeare couldn't have said it any better.? To sleep.? To sleep, perchance 
to dream. 

Things in the People's Republic of California 
?@@@ ISO Super Peak Market books first transaction 

Ziad Alaywan of the ISO talked with me today during my attendance at the ISO 
Governing Board meeting.? He had a sad face as he told me, "We made our first 
transaction using the Super Peak Market instead of issuing an out-of-market 
(OOM) order.? It was for 100 MW."? Grand, says I.? Why the long face?? He was 
disheartened because the accepted bid was higher than the price cap of $250.? 
I said to my man Ziad that bids either above or below the price cap are not a 
reason to be upset.? What do you want the bidders to do, I asked?? He 
confessed that it troubles him when all the offers are above the cap, but, 
nevertheless, he is going to maintain the request for bids every day for the 
remainder of December. 

In case you haven't seen the form of the ISO request for bids, it is 
dispatched via e-mail, and looks like this: 
? For operating day XXXXXX, 2000 the CAISO will be participating in its 
"Seasonal Super Peak Day of Market" via the Automated Power Exchange? (APX). 
This Market will close at 0915(.? Purchase may be made during this time for 
the peak hours of 1700 through 1900. It is the intent of the CAISO to reduce 
the amount of Out-Of-Market purchase for XXXXXX, 2000 through this "Seasonal 
Super Peak Day of Market".


I encourage marketers and generators to look closely at this market in which 
to post offers.? The Super Peak Market is the best hope we have to bring 
order to the otherwise somewhat chaotic method by which the ISO operators go 
hunting for out-of-market energy.? I told Ziad that the more the ISO accesses 
the Super Peak Market, the more offers he is likely to see, and the more 
competition there will be to bring prices down.? Markets do not develop 
overnight.? I don't think offers below the cap are either unlikely or 
illogical.? Anyone disagree? 

Things in the People's Republic of California 
?@@@ Consumers Rattle the Saber for a Ballot Initiative 

I told you it was going to occur.? Harvey Rosenfield, President of the 
Foundation for Taxpayer and Consumer Rights (FTCR), a consumer watchdog 
group, held a press conference last Tuesday to announce the kick off of a 
campaign to influence the Governor and the State Legislature to enact 
measures that will reverse the progress of electric competition, or face? on 
the November 2002 ballot (no butterflies) an initiative to achieve the same.? 
He tried this tactic two years ago when he launched Proposition 9.? It 
failed, but the in-state utilities spent $42 million in advertising to 
educate the public regarding the ills of old-time religion. 
? 

The alleged purpose of the proposal/ballot initiative it to protect 
California consumers and small businesses against higher electricity bills. 
Rosenfield submitted a concept draft of their proposal to the Governor and 
Legislature that you can review on the web site 
http://www.consumerwatchdog.org/utilities/pr/pr000842.php3

? 

? 

FTCR's Key Points of Reform: 
? 

requires refunds to San Diego customers of excessive electricity charges 
through a windfall profits tax on profiteering power generators;
requires oversight of electricity rates by the Public Utilities Commission 
(PUC);
institutes an integrated resource planning process to address future energy 
needs;
creates a state power authority to ensure the fulfillment California's energy 
needs, promote conservation, and construct and operate power plants, 
transmission and distribution facilities;
facilitates the authority of local and state government to exercise the power 
of eminent domain if necessary; and
creates strong accountability mechanisms for state agencies.


The advocates expressed doubt concerning whether state officials were willing 
to defy the powerful energy lobbies. And they warned elected officials 
against another bailout of the utility companies at the expense of taxpayers 
and consumers. 

If there is any part of the proposal I like, then it is the organization 
asked the Governor and legislators to refuse any campaign contributions from 
utility or power companies during the consideration of legislative 
proposals.?? According to Rosenfield, "(history shows that whenever elected 
officials must choose between the interests of the private utility/power 
companies and protecting the public interest, they will choose to protect the 
utility and energy companies. That is how we got into this mess. Whether the 
public officials currently in office are willing to do so -- especially in 
the? midst of a ratepayer revolt -- remains an open question. " 

You know, windfall profit tax aside, the more I read the proposal, the more I 
am intrigued.? The proposal boxes in the utilities, and you can easily expect 
that the utilities will come slugging back in two directions, 
simultaneously.? First, the utilities will slug back with the bankruptcy 
argument if they are stuck with the under-collection risk.? Second, the 
utilities will step up their accusations against the generators for 
"gouging."? The opportunities for schizophrenic behavior will be legion, 
because the utilities are less and less the largest sources of earnings for 
their corporate holding companies. 

Stay tuned.? It promises to be interesting. 

Things in the People's Republic of California 
?@@@ All Injured Parties form a line to the left ( 

In the Chinese calendar, it is the Year of the Lawyer.? When I first heard 
about the $4 billion class action suit against the generators and utilities 
in California, I wanted to make a public statement to express my outrage.? 
However, I was too busy handing out free cigarette samples to school age 
children. 

Between endless squabbles over presidential vote counting, and pot shots at 
the restructured electric system in California, it always seems the lawyers 
come out ahead.? You know what I am saying?? Our litigation bills for WPTF in 
October almost hit $100,000, a new monthly high. 

So, what is this class action suit all about?? You can read the suit as filed 
on the web site of the filing attorneys at 
http://www.krausekalfayan.com/reliant.htm 

However, here is a summary. 

In the Superior court of the State of California for the county of San 
Diego?? a suit has been filed on behalf of Pamela R. Gordon in a class action 
complaint for violations of California business and professions code, and 
antitrust and unfair business practices.? The defendants are? Reliant Energy, 
Inc.; Southern Company; NRG Energy; Dynegy, Inc.; AES Corporation; Williams 
Energy; Duke Energy North America; And Does 1 Through 100, Inclusive, 
? 

FIRST CAUSE OF ACTION: Violation of Sections 16720 and 16726 of the 
California Business and Professions Code Trust In Restraint of Trade or 
Commerce in Violation of the Antitrust Act
SECOND CAUSE OF ACTION: For Violations of the Unfair Trade Practices Act 
Based Upon Violations of the Antitrust Act
THIRD CAUSE OF ACTION: For Violations of the Unfair Trade Practices Act Based 
Upon Defendants' Unfair Business Acts and Practices
FOURTH CAUSE OF ACTION: Violations of the Consumers Legal Remedies Act
FIFTH CAUSE OF ACTION:? Unconscionability


It is that fifth cause of action that has me wondering.? Were we not 
conscious during this whole episode, with the possible exception of SDG&E 
when they didn't hedge their summer energy procurement? 

This is what the suit claims.? That, 
? 

Defendants charged rates for wholesale electricity that were unconscionable 
given their cost of production, the newly emergent markets for that product, 
and the consumers' need for electrical power.
Defendants' rates were inherently excessive, invalid and unconscionable, 
particularly in light of the deceptive and manipulative practices they used 
to inflate the market prices and the vital need consumers and businesses have 
for electrical power.
Defendants' unconscionable prices were passed through to Plaintiff and the 
majority of the Class in the retail electricity rates charged by SDG&E and 
thereby directly damaged Plaintiff and the Class.


Things in the People's Republic of California 
?@@@ The Governor's Plan 

Well, we have had quite a week, haven't we?? Top it off with this.? Today, 
Governor Davis of California will float his proposals for fixing the 
California electricity market.? It is reassuring to know that so many people 
are rushing in to fix our problems. 

Here is what Jason Leopold of the Dow Jones Newswire reported about the Gov's 
draft plan.? It will include options to: 
? 

Develop a state power authority to build power plants and own and operate 
transmission systems
Eliminate the California Independent System Operator
Extend the freeze on retail electricity rates
Require utilities to retain existing generation and to build new power plants
Consider re-asserting state authority over the operation, maintenance and 
safety practices of all in-state generating facilities for public health and 
safety purposes
Authorize utilities to purchase the majority of their power in forward markets
Pressure the FERC to implement a regional price cap on wholesale energy that 
varies by time of day and year
Lobby for refunds for "unjust and unreasonable" rates.


We will have a more detailed report on the proposals next week, assuming we 
survive that long. 

Odds & Ends (_!_) 

Jim Kritikson sent me an e-mail that has 54 different thought-provoking 
sayings, such as the by-line header at the top of today's Burrito. The one I 
selected is among my favorites.? Every week I will rotate a new by-line from 
the list Jim provided me, thereby lengthening the pure joy these morsels 
bring, rather than blowing the whole wad in one Burrito. 

Speaking of learning new things, I mentioned in the introduction that my 
experience being interviewed on TV gave me a world of insight into the 
phrases and words that get through the media filter.? I am becoming a student 
of the sound bite, as any reader of these Burritos will attest.? I am 
compiling a list of key words that either work, or don't work when talking 
with the media or the press.? For example, if you are talking to a reporter 
and you say, "The day-ahead ancillary service markets are too illiquid and 
the price is highly variable," then you will not only strike out with the 
media people, but you will go to the back of the sound-bite class.? On the 
other hand, if you say something like, "Of course they are gouging," then I 
can assure you they will take your bite to print or video. 

I have developed a simple chart of words and phrases either to embrace, or to 
avoid when addressing members of the press, the public, or when mingling with 
people at holiday cocktail parties with whom your spouse works, but you can't 
stand. There are In-words (they are good), and Out-words (to be avoided like 
the plague).? Feel free to add to the list as you learn new terms. 

In-words: 

1. generator 
2. manipulate 
3. gouging 
4. market power 
5. demand response 
6. consumer rights 
7. under-collection 
8. excess profits 
9. abuse 
10. utilities 
11. competition 
12. withholding 

Out-words 

1. default provider 
2. markets 
3. high price 
4. ancillary services 
5. penny loafers 
6. Eric 
7. scarcity 
8. interruptible customer 
9. stakeholder 
10. outages 
11. investments 
12. Burrito 

Now, here is how you utilize the system I have invented.? You pick three 
numbers, randomly.? Let's take today's hourly electric price, say, $249/MWH.? 
So, the numbers are 2, 4, and 9.? You can select any three numbers, it really 
doesn't matter.? So, for example, if you want to create a quotable quote, 
then you take the words (2) Manipulate, (4) Market Power, and (9) Abuse, and 
put them in a sentence; e.g., "The abuse of market power is an attempt to 
manipulate price."? See how easy that was?? The press will eat it up. 

Try it the Out-wordily way.? Using the same three numbers, select the words 
(2) Markets, (4) Ancillary Service, and (9) Stakeholder.? You might get, "The 
Ancillary Service markets are designed by stakeholders."? Dry as bone, and 
essentially useless.? Suitable for ISO Governing Board public comment, but 
you'll never be a press maven.? Keep a copy of these words in your wallet or 
purse.? It could save your life, or the life of an innocent consumer (see, I 
did it again). As the political rhetoric heats up, we, being soldiers of 
fortune, must be prepared at any moment to whip out the handy quote sheet 
necessary to calm the jittery nerves of the masses, lest there be a ratepayer 
revolt. 

As if we didn't have enough problems in California, the rest of the nation is 
in something of a fix.? This week, Dan Douglass sent us a classic piece to 
humor our weary bones.? This makes the phrase "Turning back the hands of the 
clock" seem a bit larger than life. 
=================== 

NOTICE OF REVOCATION OF INDEPENDENCE 
? 
To the citizens of the United States of America: In the light of your failure 
to elect a President of the USA and thus to govern yourselves,? we hereby 
give notice of the revocation of your independence, effective today. Her 
Sovereign Majesty Queen Elizabeth II will resume monarchical duties over all 
states, commonwealths and other territories, except Utah, which she does not 
fancy. Your new Prime Minister (The Rt. Hon.? Tony Blair, MP for the 97.85% 
of you who have until now been unaware that there is a world outside your 
borders) will appoint a minister for America without the need for further 
elections. Congress and the Senate will be disbanded. A questionnaire will be 
circulated next year to determine whether any of you noticed. To aid in the 
transition to a British Crown Dependency, the following rules are introduced 
with immediate effect: 
? 
1. You should look up "revocation" in the Oxford English Dictionary.? Then 
look up "aluminium." Check the pronunciation guide. You will be amazed at 
just how wrongly you have been pronouncing it. Generally, you should raise 
your vocabulary to acceptable levels. Look up "vocabulary."? Using the same 
twenty-seven words interspersed with filler noises such as "like" and "you 
know" is an unacceptable and inefficient form of communication. Look up 
"interspersed." 
? 
2. There is no such thing as "US English." We will let Microsoft know on your 
behalf. 
? 
3. You should learn to distinguish the English and Australian accents.? It 
really isn't that hard. 
? 
4. Hollywood will be required occasionally to cast English actors as the good 
guys. 
? 
5. You should relearn your original national anthem, "God Save The Queen," 
but only after fully carrying out Task 1. We would not want you to get 
confused and give up half way through. 
? 
6. You should stop playing American "football." There is only one kind of 
football. What you refer to as American "football" is not a very good game. 
The 2.15% of you who are aware that there is a world outside your borders may 
have noticed that no one else plays "American" football. You will no longer 
be allowed to play it, and should instead play proper football. Initially, it 
would be best if you played with the girls. It is a difficult game. Those of 
you brave enough will, in time, be allowed to play rugby (which is similar to 
American "football", but does not involve stopping for a rest every twenty 
seconds or wearing full kevlar body armour like nancies). We are hoping to 
get together at least a US rugby sevens side by 2005. 
? 
7. You should declare war on Quebec and France, using nuclear weapons if they 
give you any merde. The 97.85% of you who were not aware that there is a 
world outside your borders should count yourselves lucky. The Russians have 
never been the bad guys. "Merde" is French for "s--t." 
? 
8. July 4th is no longer a public holiday. November 8th will be a new 
national holiday, but only in England. It will be called "Indecisive Day." 
? 
9. All American cars are hereby banned. They are crap and it is for your own 
good. When we show you German cars, you will understand what we mean. 
? 
10. Please tell us who killed JFK. It's been driving us crazy. 
? 
Thank you for your cooperation. 
========================= 
You are very welcome.? Have a great weekend, y'all. 

gba 
?