---------------------- Forwarded by Karen Denne/Corp/Enron on 11/10/2000 
10:09 AM ---------------------------


Karen Denne
11/10/2000 10:09 AM
To: jkradin@marathon-com.com, rlichtenstein@marathon-com.com, 
syamane@marathon-com.com
cc:  

Subject: FERC coverage

The last FERC panel sounds like it had quite a few testy exchanges....


Calif Officials Tell FERC To Face 'Political Reality'

11/09/2000
Dow Jones Energy Service
(Copyright (c) 2000, Dow Jones & Company, Inc.)

By Bryan Lee 
OF DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--The political uproar generated by the Federal Energy 
Regulatory Commission's decision that it had no legal authority to order 
refunds in California's high-flying power market washed up on the agency's 
doorstep Thursday. 
California's governor and other government leaders banded together to 
criticize FERC at a public meeting Thursday, one week after FERC issued an 
order proposing market reforms for California. 
California Gov. Gray Davis delivered a stinging rebuke of the commission via 
videotape, as state legislators testified that FERC must act quickly or the 
state's voters may take things into their own hands with a ballot initiative. 
Davis summed up the discontent by noting that FERC had concluded that prices 
in California's first-in-the-nation deregulated electricity market were 
neither just nor reasonable, but "you are not willing to do anything about 
it." 
Instead, Davis said, FERC is asking the state to "knuckle under" to high 
prices for the next few years while the economy suffers. "I cannot allow you 
to do that," Davis said, without elaborating on what recourse he intends to 
take. 
Other state officials, in a give-and-take that at times bordered on acrimony, 
insisted FERC was wrong in interpreting the Federal Power Act as limiting the 
commission's authority to order refunds. 
State Sen. Debra Bowen, who chairs the utility committee, called for FERC to 
recognize the "political reality" within the state of its decision not to 
order refunds or to firmly regulate prices until the power crisis is abated. 
"We will have a political revolt on our hands," Bowen warned, once all the 
state's retail consumers, and not just those in San Diego, are exposed to the 
market's uncontained price volatility in the near future. 
Congress never repealed FERC's mandate under the power act to assure that 
prices are just and reasonable, said state Sen. Steve Peace, who warned that 
the commission's "credibility" was at stake in not ordering refunds. 
FERC clearly has the authority to order refunds retroactively, and the courts 
will support such an interpretation, Peace argued. 
San Diego Board of Supervisors Chairman Diane Jacob accused the state's 
unregulated power providers of "white collar crime." 
San Diego County, which has privatized its trash collection and 
telecommunications assets, has voted to pursue forming a municipal utility to 
get out from under the yoke of the FERC-regulated market, Jacob said. 
Jacob called on FERC to reconsider the scope of its authority to order 
refunds. "Your grant of market-based rate authority rested on the premise 
that was adequate to assure just and reasonable rates," she said. 
Peace predicted that unless FERC takes stronger action, California voters 
will pass a ballot initiative to condemn the state's electricity system and 
make it government owned. 
"We'll build the damn power plants if we have to," Peace said. 
"This is going to end up in a lawsuit no matter what you do," Peace said, 
urging the commission to be sued by power providers, rather than state 
consumers. 
"We're playing by the rules," said William Hall, asset management vice 
president for Duke Energy North America's Western region (DUK). 
"We're not doing anything wrong and we're confident we can't be ordered to 
provide refunds," Hall said. 
The state officials rejected arguments against price caps and re-regulation 
of the market voiced earlier in the day by power marketers and generators, 
who warned that price controls will only worsen the state's power supply 
problems by serving as a disincentive for investment in new power plants. 
New generation is coming on line in California despite existing price caps, 
the state officials said. Five power plants are set to go on line next year, 
and another three are in the pipeline for 2002, said William Keese, 
California Energy Commission chairman. 
"Plenty of people are not being chased away who will build supply," said 
Michael Kahn, chairman of the California Electricity Oversight Board. 
"There is a very long line of those willing to step into the place of Enron," 
said Peace, referring to the company's testimony earlier that it scuttled 
plans to build 300 megawatts of peaking power in the state because of price 
uncertainty. 
"Supply is being addressed. What's not being addressed is pricing," said 
Loretta Lynch, president of the California Public Utility Commission. 
The session threatened to become acrimonious as Peace repeatedly directed 
verbal jabs at FERC Commissioner Curtis Hebert Jr., the lone Republican among 
the four sitting commissioners and an ardent opponent of price controls and 
market intervention. 
The governor's critical taped remarks ended with a pointed barb that FERC's 
market-restructuring order last week undermined the state's authority, but 
"apart from that, I think you're a fine group of people." 
Peace then retorted to Hebert: "I don't think he included you in his 
comment." 
Hebert stood his ground and fired back at Peace. 
"I understand your emotions, therefore I don't take offense at your shots at 
me," Hebert said. "I didn't set up the infrastructure (of California's power 
market). There are people in this room who did," he said, alluding to Peace. 
"You want us to intervene as you see fit, not as we see fit. You quite 
frankly made some decisions that got the state of California into trouble," 
Hebert rejoined. 
Bowen urged FERC to think of itself as the Alan Greenspan of California's 
power market and "temper irrational exuberance." 
"I agree that Alan Greenspan is the guy. I don't think you'd like what he'd 
tell you to do," countered Hebert. 
"Our job isn't to populistically say things that will inflame the people of 
California. Our job is to set markets," Hebert said. 
FERC Chairman James Hoecker closed the session with remarks illustrating his 
skepticism regarding the call for regulating prices and ordering refunds 
until the market can be corrected. 
"I'm not sure how we get there," Hoecker said. "I'm not sure we have the 
option of going backward (in order to go forward) without getting run over," 
Hoecker said. By Bryan Lee, Dow Jones Newswires, 202-862-6647, 
bryan.lee@dowjones.com

Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.