Greetings, Kari.  

Today's installment includes:

Background on Nord Pool
Information on the status of de-regulation in Pennsylvania.

The rumors regarding securitization of utilities' power purchase costs had a 
very positive effect on the utilities' stock today.  Congratulations.  There 
is conflicting information floating around, though.  

Some wires stories say that a state senator will sponsor a securitization 
bill.  Others say that it will be the Governor's bill.  Is securitization 
legislation something that the Governor intends to sponsor/support? 

Though there are clearly some challenges to securitization, we think it 
offers a promising option.

Hope the information is useful.

Best,
Jeff


----- Forwarded by Jeff Dasovich/NA/Enron on 01/04/2001 07:16 PM -----

	"PennFuture" <pennfuture@pennfuture.org>
	01/04/2001 11:12 AM
	Please respond to "PennFuture"
		 
		 To: <Undisclosed-Recipient:@mailman.enron.com;>
		 cc: 
		 Subject: PennFuture's E-cubed -- Price, Policy and Misperception



PennFuture's E-cubed is a commentary biweekly email publication  concerning 
the current themes and trends in the energy market. 

?
January 4, 2001Vol. 3, No. 1
?
Price, Policy and Misperception
?
The ringing in of 2001 marks the completion of the fourth year since  
Pennsylvania,s electricity competition law went into effect on January 1, 
1997,  and the second year since Pennsylvania,s retail market was fully 
opened to  customer choice on January 1, 1999. But nationwide, while 
reliability,  environmental performance, and assistance for low-income 
customers are crucial  factors, the price of power has alone become the main 
standard for judging the  success or failure of competitive transition 
policies. Near hysteria about  prices is yet another fallout of the 
California mess where rates are a daily  nightmare for consumers. 
?
In an effort to broaden electricity policy discussion beyond the myopic  
focus on California, we note that competitive residential retail prices of  
electricity in Pennsylvania this New Year are considerably below what 
customers  were paying for generation and transmission service or embedded 
generation on  January 1, 1997. If you doubt it, compare columns B and D 
below. Just as  interestingly, competitive prices for 100% renewable energy 
products are well  less than what customers of Duquesne Light and PECO Energy 
paid for power  generated from mainly coal and nuclear prior to competition 
(columns C and  D).
?
Comparison of Residential Unbundled Embedded Generation to Retail Power  
Prices (in cents/kWh)A. 2000 Shopping CreditB. Lowest Retail PriceC.  100% 
Green Power Prices?D. Embedded Generation &  
Transmission??????????????????????  A.??????? B.?????  C.???????  
D.Duquesne?????? 4.80???  4.60??? 6.49??? 8.75GPU/Met-Ed??  4.53??? 4.60??? 
7.09???  5.70GPU/Penelec? 4.53??? 4.50???  7.09???  5.40PECO????????????  
5.65??? 4.65??? 6.37???  8.65PPL???????????????  4.61??? 4.30??? 7.09???  
6.26Allegheny???????  3.24??? 5.20??? 6.49???  5.30Note: 2001 shopping 
credits will be moderately higher in some  cases.
?
In most parts of the Commonwealth, current competitive retail prices for  
residential customers are 0.90 to 3.15 cents per kilowatt-hour less than 
what  customers were paying for the same generation and transmission service 
prior to  competition. As a result of stranded cost charges that utilities 
are being  allowed to collect, these substantial competitive savings are not 
fully passed  on to consumers.
?
In fact, were it not for stranded cost charges, Pennsylvania,s residential  
customers would have had their total rates (including distribution and  
transition rates) decline by about 20% in 2000. Generation rates would have  
declined by as much as 40%. These huge price reductions are real but will 
not  fully reach customers during the transition period when utilities are 
allowed to  collect stranded costs.
?
Competitive retail prices are also in most cases less than Pennsylvania,s  
default rates or shopping credits. This is important and encouraging, 
because  Pennsylvania,s current residential default rates or shopping credits 
are in  every case much less than what customers were paying for generation 
service at  the start of the competitive transition. Indeed, current default 
rates are about  one to three cents per kilowatt-hour less than residential 
customers were paying  for the same service from their local utility prior to 
competition.
?
The California fiasco has meant a lot of discussion about the price of  
electricity, but it has not meant a lot of understanding of sensible 
competitive  policies, potential impact on retail prices. Instead, a great 
deal of reporting  reflects understandable misconception of basic price 
benchmarks. For example,  very few stories identify accurately or even at all 
what customers were paying  for generation service prior to competition (the 
pre-competition embedded  generation rate of the incumbent utility). This 
failing can be traced to the  fact that states have not prominently made this 
data available.
?
Worse yet, many press articles mistakenly assume the default rate or the  
shopping credit is equal to what customers were paying the local utility for  
generation service prior to competition, and report that competition will 
lead  to price shock for customers if market prices exceed present default 
rates. But  this dramatic warning is typically wrong.
?
The press, misunderstanding hides an important fact: current default  rates 
or shopping credits are nearly always much less than what customers were  
paying for generation service prior to competition. Total rates after the  
transition to competition will not be greater than they were prior to  
competition, unless competitive retail rates exceed the utility,s  
pre-competition embedded generation rate. 
?
Consequently, if competitive prices are higher than current default rates  
but lower than a utility,s pre-competition embedded generation rate, 
consumers  will have lower total rates once stranded cost charges are removed 
and the  transition period expires. That is, they will if a state creates a 
genuinely  competitive retail market that pulls through competitive prices.

E-cubed is available for reprint in newspapers and other publications.  
Authors are available for print or broadcast. Support E-cubed by becoming a  
member of PennFuture * visit our secure online membership page at 
www.pennfuture.org by clicking on &Support  Our Work.8?PennFuture, with 
offices in Harrisburg, Philadelphia and  Pittsburgh, is a statewide public 
interest membership organization, which  advances policies to protect and 
improve the state,s environment and economy.  PennFuture,s activities include 
litigating cases before regulatory bodies and in  local, state and federal 
courts, advocating and advancing legislative action on  a state and federal 
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in the subject line.
 - Vol3No1_10301.doc