---------------------- Forwarded by Phillip K Allen/HOU/ECT on 04/10/2001 
05:50 PM ---------------------------
   
	Enron North America Corp.
	
	From:  Stephen Swain                           04/10/2001 11:58 AM
	

To: Phillip K Allen/HOU/ECT@ECT
cc: Tim Heizenrader/PDX/ECT@ECT, Tim Belden/HOU/ECT@ECT, Matt 
Motley/PDX/ECT@ECT, Michael M Driscoll/PDX/ECT@ECT, Chris 
Mallory/PDX/ECT@ECT, Jeff Richter/HOU/ECT@ECT, Robert Badeer/HOU/ECT@ECT, 
Sean Crandall/PDX/ECT@ECT, Mark Fischer/PDX/ECT@ECT, Bill Williams 
III/PDX/ECT@ECT, Diana Scholtes/HOU/ECT@ECT 
Subject: CAISO demand reduction

Phillip et al.,

I have been digging into the answer to your question re: demand reduction in 
the West.  Your intuition as to reductions seen so far (e.g., March 2001 vs. 
March 2000) was absolutely correct.  At this point, it appears that demand 
over the last 12 months in the CAISO control area, after adjusting for 
temperature and time of use factors, has fallen by about 6%.  This translates 
into a reduction of about 1,500-1,600 MWa for last month (March 2001) as 
compared with the previous year.

Looking forward into the summer, I believe that we will see further voluntary 
reductions (as opposed to "forced" reductions via rolling blackouts).  Other 
forecasters (e.g., PIRA) are estimating that another 1,200-1,300 MWa (making 
total year-on-year reduction = 2,700-2,800) will come off starting in June.  
This scenario is not difficult to imagine, as it would require only a couple 
more percentage points reduction in overall peak demand.  Given that the 6% 
decrease we have seen so far has come without any real price signals to the 
retail market, and that rates are now scheduled to increase, I think that it 
is possible we could see peak demand fall by as much as 10% relative to last 
year.  This would mean peak demand reductions of approx 3,300-3,500 MWa in 
Jun-Aug.  In addition, a number of efforts aimed specifically at conservation 
are being promoted by the State, which can only increase the likelihood of 
meeting, and perhaps exceeding, the 3,500 MWa figure.  Finally, the general 
economic slowdown in Calif could also further depress demand, or at least 
make the 3,500 MWa number that much more attainable.

Note that all the numbers I am reporting here are for the CAISO control area 
only, which represents about 89% of total Calif load, or 36-37% of WSCC 
(U.S.) summer load.  I think it is reasonable to assume that the non-ISO 
portion of Calif (i.e., LADWP and IID) will see similar reductions in 
demand.  As for the rest of the WSCC, that is a much more difficult call.  As 
you are aware, the Pacific NW has already seen about 2,000 MWa of aluminum 
smelter load come off since Dec, and this load is expected to stay off at 
least through Sep, and possibly for the next couple of years (if BPA gets its 
wish).  This figure represents approx 4% of the non-Calif WSCC.  Several 
mining operations in the SW and Rockies have recently announced that they are 
sharply curtailing production.  I have not yet been able to pin down exactly 
how many MW this translates to, but I will continue to research the issue.  
Other large industrials may follow suit, and the ripple effects from Calif's 
economic slowdown could be a factor throughout the West.  While the rest of 
the WSCC may not see the 10%+ reductions that I am expecting in Calif, I 
think we could easily expect an additional 2-3% (on top of the 4% already 
realized), or approx 1,000-1,500 MWa, of further demand reduction in the 
non-Calif WSCC for this summer.  This would bring the total reduction for the 
WSCC, including the 2,000 MWa aluminum load we have already seen, to around 
6,500-7,000 MWa when compared with last summer.

I am continuing to research and monitor the situation, and will provide you 
with updates as new or better information becomes available.  Meantime, I 
hope this helps.  Please feel free to call (503-464-8671) if you have any 
questions or need any further information.