The US Supreme Court has decided to hear arguments over the Native Load exception - one of our key policy questions.  While the answer is still many months away, this is a critical decision for Enron.

We will keep everyone apprised of developments.

Jim


----- Forwarded by James D Steffes/NA/Enron on 02/26/2001 12:26 PM -----


	"Ronald Carroll" <rcarroll@bracepatt.com> 02/26/2001 12:02 PM 	   To: <douglass@arterhadden.com>, <gfergus@brobeck.com>, <mmilner@coral-energy.com>, <rreilley@coral-energy.com>, <jprussell@duke-energy.com>, <acomnes@enron.com>, <Christi.L.Nicolay@enron.com>, <daniel.allegretti@enron.com>, <dfulton@enron.com>, <hfromer@enron.com>, <jdasovic@enron.com>, <jhartso@enron.com>, <jsteffe@enron.com>, <linda.robertson@enron.com>, <mary.hain@enron.com>, <rsanders@enron.com>, <smara@enron.com>, <snovose@enron.com>, <jalexander@gibbs-bruns.com>, <mday@gmssr.com>, <dmperlman@powersrc.com>, <hao@quinnemanuel.com>, <gackerman@wptf.org>  cc:   Subject: Fwd: Court Weighs U.S. Power Over Utilities	



----- Message from "Tracey Bradley" <tbradley@bracepatt.com> on Mon, 26 Feb 2001 13:37:22 -0600 -----

To:	<asettanni@bracepatt.com>,<cshoneman@bracepatt.com>, "Deanna King" <dking@bracepatt.com>, <dwatkiss@bracepatt.com>, <gfoote@bracepatt.com>, <jjava@bracepatt.com>, "Justin Long" <jlong@bracepatt.com>, <kcurry@bracepatt.com>, "Minh-tu Nguyen" <NGUYM@bracepatt.com>, "Nancy Pickover" <npickover@bracepatt.com>, <pfox@bracepatt.com>, <pricketts@bracepatt.com>, <rcarroll@bracepatt.com>, <rrich@bracepatt.com>, <rryan@bracepatt.com>, <tbradley@bracepatt.com>	
Subject:	Court Weighs U.S. Power Over Utilities	

Court Weighs U.S. Power Over Utilities 
( February 26, 2001 ) 


WASHINGTON, Feb 26, 2001 (United Press International via COMTEX) -- In a case that could prove pivotal for energy competition, the Supreme Court said Monday it would hear argument next term on whether the Federal Energy Regulatory Commission can regulate the transmission of electricity within a state. 

      At issue is whether FERC regulations can foster competition in the local electricity marketplace. But the case also tests whether the Supreme Court will continue enhancing state power at the expense of the federal government, as it has in a number of decisions in recent years. 

      And far from being a dusty exercise in legal maneuvering, the case is also just one more example of how the actions of the Supreme Court can affect the average American. 

      The financial stakes are huge for the suppliers and distributors of electricity, but the dispute also could have a direct influence on how much consumers pay for electricity. Though California is not a party in the case, the energy crisis in that state and its ramifications in neighboring states have brought concern over electric utilities to the forefront. 

      The Federal Power Act of 1935 gave the federal government the authority to regulate interstate transmission of energy, but largely left an individual state in charge when it came to the energy transmission within that state's borders. In 1935, "most electric facilities were intrastate facilities" operating within a particular state's borders, New York told the Supreme Court in a petition. 

      In 1998, however, "FERC pre-empted state regulation of both the delivery of electricity from a generator to a retail consumer in the same state and the use of local distribution facilities to deliver electricity that is resold," New York representatives said. "FERC envisioned the introduction of competition, not only in its jurisdictional (wholesale) market...but also in the state jurisdictional retail market, and concluded that competition allowed it to expand its jurisdiction in three areas." 

      First, FERC asserted its jurisdiction over retail transactions when states "unbundled," or separated, retail rates into charges for delivery and electricity. Second, "FERC decided that if a seller of unbundled wholesale energy made use of a local distribution system, FERC -- not the states -- would set the rates that the seller would pay for the use of those...facilities," New York said. 

      Third, FERC pre-empted the state's authority to set rates to recoup the costs "incurred by utilities to serve retail customers, that may be 'stranded' (unrecoverable by utilities) due to competition," the state said. 

      The U.S. Court of Appeals for the D.C. Circuit consolidated scores of challenges to the new regulations, including those from nine state commissions, and last June upheld all of FERC's actions. 

      Several losing parties, including New York, then asked the Supreme Court for a review. Monday, the justices combined the New York case with one brought by energy giant Enron Power Marketing and agreed to hear the case sometime next term. 

      In its own brief to the Supreme Court on behalf of FERC, the Justice Department said a section of the Federal Energy Act "explicitly gives FERC jurisdiction over 'all transmission of electric energy in interstate commerce' and 'all facilities for such transmission' regardless of whether the transmission is part of a wholesale or retail transaction." 

      Besides, the department argued, a distinction between interstate and intrastate energy may be meaningless. 

      In a 1972 ruling, FPC vs. Florida Light & Power, the Supreme Court "recognized that when a utility's transmission lines connect to an interstate grid, the utility's energy commingles with that of other utilities so that inevitably some energy is transmitted across state lines and becomes interstate in nature," the department said. 

      The states have argued that they will not "unbundle" the retail sale of energy into the categories of delivery and actual electricity delivered -- a measure designed to help reduce prices for consumers -- "for fear of losing jurisdiction over transmissions associated with retail transactions." FERC's actions therefore actually undermine competition, not foster it, according to the states. 

      In its brief, the Justice Department brushed aside such criticism, saying the argument "assumes that states will not weigh their consumers best interests in deciding for, or against, retail wheeling, but will be concerned only with protecting their own jurisdiction." 

      Though not yet scheduled, the case will probably be heard sometime next fall. 

      (Nos. 00-568, New York et al vs. FERC et al; and 00-809, Enron vs. FERC) 

      By MICHAEL KIRKLAND, UPI Legal Affairs Correspondent 

      Copyright 2001 by United Press International. 

      SUBJECT CODE: 02000000