Sue Mara
Enron Corp.
Tel: (415) 782-7802
Fax:(415) 782-7854
----- Forwarded by Susan J Mara/NA/Enron on 04/17/2001 03:03 PM -----

	"Weller, Andrea" <AWeller@sel.com>
	04/17/2001 03:01 PM
		 
		 To: "'arem@electric.com'" <arem@electric.com>
		 cc: "'Fairchild, Tracy'" <tracy.fairchild@edelman.com>, 
"'nplotkin@tfglobby.com'" <nplotkin@tfglobby.com>
		 Subject: FW: SENATORS CALL FOR INVESTIGATION INTO EFFECTIVENESS OF FEDERAL  
ENERGY REGULATION

I thought you should all be aware that this call is out there....
 

Andrea Weller 
Market Strategist 
Strategic Energy, LLC 
949.230.3404 
aweller@sel.com 





SENATORS CALL FOR INVESTIGATION INTO EFFECTIVENESS OF FEDERAL ENERGY 
REGULATION 





Senators Joe Lieberman, D-Conn., and Jean Carnahan, D-Mo., have asked the 
General Accounting Office (GAO) to inquire into whether the Federal Energy 
Regulatory Commission (FERC) is carrying out its responsibilities to ensure 
that wholesale electricity sales throughout the country are reasonable and 
that interstate natural gas pipelines are fulfilling their obligations to 
customers. "Under federal law, FERC has the responsibility to ensure just
and 
reasonable prices for interstate wholesale transmission," the Senators said 
in a letter to GAO, "but there is mounting evidence that FERC may not have 
fulfilled this role in the California situation." Following is text of the 
letter: 

April 12, 2001 

Mr. David M. Walker 
Comptroller General of the United States 
U.S. General Accounting Office 
441 G Street, N.W. 
Washington, D.C. 20548 

Dear Mr. Walker: 

We have been watching with dismay as the state of California suffers
sporadic 
rolling blackouts with impacts on electricity supplies and prices throughout

the western United States, a situation that may get worse this summer when 
the demand for electricity increases. We understand that there are many 
factors that have contributed to the current situation, and few short term 
options to create more electricity for this market. At the same time we are 
extremely troubled that California's Independent System Operator (ISO) 
recently asserted that suppliers of electricity in California have allegedly

been charging many times more than what it actually costs to generate the 
electricity, an overcharge amounting to $6.8 billion according to the 
operator. Some experts believe that these high prices reflect a 
non-functioning market that has, in turn, exacerbated the state's
electricity 
shortage.With the possibility of electricity deregulation occurring soon in 
additional states such as Missouri, we are concerned whether there is 
adequate federal oversight to guard against potential abuse of market power 
by suppliers. Without such oversight, the nation may not progress towards 
achieving what many see as the promise of deregulation: lower consumer 
prices, greater reliability, increased choice, and more efficient
generation. 
Deregulation legislation being considered in Missouri would transfer the 
oversight authority from the Missouri Public Service Commission (PSC), which

works closely with the utilities to provide direction if there are capacity 
or reliability concerns and sets appropriate customer rates, to the Federal 
Energy Regulatory Commission (FERC). Under federal law, FERC has the 
responsibility to ensure just and reasonable prices for interstate wholesale

transmission, but there is mounting evidence that FERC may not have
fulfilled 
this role in the California situation. FERC Commissioner William Massey 
recently said: "Ensuring just and reasonable prices in wholesale markets 
requires that we clearly define market power, and aggressively intervene
when 
the markets are not producing reasonable prices. The commission's actions to

date have been insufficient." (March 20, 2001 testimony to the House Energy 
Committee's Subcommittee on Energy and Air quality).We are requesting that 
the General Accounting Office (GAO) assess whether FERC is properly 
exercising its role to enforce reasonable electricity rates. Specifically,
we 
ask GAO to answer the following questions: 

1) Has FERC fulfilled its mandate to ensure just and reasonable rates? Is 
FERC adequately monitoring and appropriately regulating based on its
statutes 
power supply, demand, and pricing in California? In other Western states? In

the Central Midwest and in the Northeast? 

2) Has FERC devoted sufficient resources to carry out its oversight 
obligations in a timely and effective manner? And does FERC have the 
necessary resources to carry out its future oversight role? 

3) Does FERC need additional authority to carry out its mission of ensuring 
just and reasonable prices given that widespread partial deregulation is now

occurring in so many states? 

4) As we understand the situation from some experts, the number of 
transactions in electricity that occur in the deregulated wholesale market 
place is voluminous. This situation may increase the difficulties of
guarding 
against market abuse. Is there a role for another agency or independent 
organization to exercise an oversight role with respect to these 
transactions? If so, what would be an appropriate oversight role? 

5) We have been advised by some experts that greater transparency of prices 
relating to the buying and selling of electricity in a deregulated market 
would help guard against market abuses. We understand the need to keep
prices 
confidential for a period of time to ensure against collusion. After this 
appropriate period of time has passed, would greater transparency be 
beneficial? 

We are also concerned about recent allegations by the California Public 
Utility Commission (CPUC) that market power has been abused in the 
transmission of natural gas, which has in turn contributed to the spiraling 
cost of electricity generation in the state. The CPUC maintains that the 
price of natural gas transmitted by the El Paso pipeline has been
manipulated 
so that prices in California over the last year have been up to five times 
the national average. Because an increasing number of states, including 
California, rely heavily on natural gas fired power plants, any manipulation

of that commodity can have severe consequences. Additionally, because such a

large percent of our future nationwide generation capacity will use natural 
gas, we are concerned that these types of alleged market abuses will have 
even more profound effects. Therefore, we ask GAO to answer the following 
questions: 

1) Has FERC fully met its responsibilities to adequately regulate interstate

pipelines? If not, what areas require improvement? 

2) Is there a continuing role for FERC to play in ensuring equal access to 
the limited amount of space in our current natural gas pipelines? Should
this 
role be enhanced or clarified, and if so, how? 

3) Is there the possibility of this same type of alleged abuse in other
parts 
of the country, aside from California, where the natural gas pipeline 
capacity is similarly limited? Please provide any details.We appreciate all 
the good work that GAO does and we look forward to hearing from you soon. 

Sincerely,J 

oseph I. Lieberman 
Jean Carnahan