---------------------- Forwarded by Carla Hoffman/PDX/ECT on 08/24/2000 01:18 
PM ---------------------------
   
	Enron Capital & Trade Resources Corp.
	
	From:  "Pergher, Gunther" <Gunther.Pergher@dowjones.com>                      
     08/24/2000 01:14 PM
	

To: "Leopold, Jason" <Jason.Leopold@dowjones.com>
cc:  (bcc: Carla Hoffman/PDX/ECT)
Subject: FW: Calif Gov Hopes To Get New Rate-Freeze Bill Unveiled Thursday





> -----Original Message-----
> From: Golden, Mark
> Sent: Thursday, August 24, 2000 4:02 PM
> To: Pergher, Gunther
> Subject: Calif Gov Hopes To Get New Rate-Freeze Bill Unveiled
> Thursday
>
> Calif Gov Hopes To Get New Rate-Freeze Bill Unveiled Thursday
>
>   NEW YORK (Dow Jones)--California Gov. Gray Davis and leading state
> congressional representatives hope to introduce in the State Assembly
> Thursday
> new legislation designed to stabilize the cost of electricity in San Diego
> County.
>   "Staff are trying to finish writing the bill now. We're hopeful that it
> can be
> introduced (Thursday). There are only eight days left in the congressional
> session," Gov. Davis' spokesman, Steven Maviglio, said.
>   The bill is the result of a compromise reached late Wednesday among Gov.
> Davis, San Diego's State Sen. Dede Alpert and the city's State
> Assemblywoman
> Susan Davis.
>   It replaces a bill passed unanimously by the Senate on August 10 that
> froze
> customers' rates without stipulating who would pay for electricity that
> San
> Diego Gas & Electric Co. must purchase from independent generating
> companies to
> meet its customers' demand.
>   Prices for those purchases, made through the state-run California Power
> Exchange and the California Independent System Operator, have been several
> times
> higher than historical norms this spring and past summer.
>   The new bill (similar to a proposal that the California Public Utilities
> Commission rejected Monday) would cap the price of electricity at 6.5
> cents a
> kilowatt-hour for residential customers and small businesses. That
> translates to
> an average residential bill of $68 a month when transmission and
> distribution
> charges are added in.
>   "Balancing accounts" would be established to make up the difference
> between
> what SDG&E is paying in wholesale markets and what it is getting paid by
> customers under the cap. In non-summer months, when electricity
> consumption and
> market prices are usually lower, customers would still pay 6.5 cents/kWh,
> and
> any money left over would be used to pay down the balancing account.
>   Surging wholesale electricity prices don't look to be coming down any
> time
> soon, however. Contracts for winter supplies this year at the
> California-Oregon
> border, a major trading hub, are at $132 a megawatt-hour, or 13.2
> cents/kWh, and
> rising daily. Supply contracts for all of 2001 at Palo Verde, Arizona,
> another
> major hub for deliveries to California, is at $95/MWh or 9.5 cents/kWh. In
> 2002,
> that price comes down to $69/MWh.
>   The new bill raises the question of whether the balancing accounts would
> ever
> be paid down. Who would pay the difference between the 6.5-cent capped
> retail
> price and the 9.5-cent wholesale market price? That difference over a
> three-year
> period has been estimated to be $1.5 billion for SDG&E, a unit of Sempra
> Energy
> (SRE), if current market conditions persist.
>   "There is a clause for making annual adjustments (to the retail price
> cap),
> and that's one of the things being worked on now," Maviglio said Thursday.
>
>   A much-debated price cap for the state limits prices to $250/MWh for any
> given
> hour, but the ISO has had to break that cap several times since it came
> into
> effect August 7. And average prices have been higher than they were before
> the
> cap.
>   The governor has appealed to the Federal Energy Regulatory Commission
> for fair
> and reasonable prices from independent power generators, who sell power to
> the
> state's utilities, and the FERC has agreed to hold hearings in the state.
>   "As governor, I refused to stand idly by and watch profiteering power
> generators gouge San Diego's families and businesses," Davis said
> Wednesday in
> announcing the agreement on the new bill.
>   But those generating companies have seen their costs skyrocket as well.
> Natural gas, which fuels much of California's power plants, is selling at
> record
> prices. And nitrogen-oxide pollution allowances are adding up to $50/MWh
> to
> costs. Generators have to buy such allowances under the state's
> environmental
> control program.
>   The stabilized rates would be retroactive to June 1, 2000, and extend to
> December 31, 2003. The bill also includes "fast track" authority for
> speeding
> approval of new power generating facilities, and some relief for mid-size
> and
> large businesses is included.
>   Informal talks between the governor's office and generating companies
> have
> been held. Eventually, Maviglio said, a negotiated settlement will have to
> be
> reached, but the governor first will see what the FERC decides to do.
>   -By Mark Golden, Dow Jones Newswires; 201-938-4604;
> mark.golden@dowjones.com
>
>   (END) Dow Jones Newswires 24-08-00
>   1954GMT(AP-DJ-08-24-00 1954GMT
>