If we are still open to changes I would suggest adding a sentence (in
brackets below) to the paragraph about retail competition that supports a
reasonable proposal by the ISO  market survailence committee. We all hope
that the market will do it anyway but in a disfunctional market certain
things need to be mandated.


".....Second, California should not abandon its goal of fostering retail
competition.  New competitors need the ample, stable and reliable
electricity supplies that a reformed market system will promote.  Retail
competition can help bring new types of contracts and metering systems, and
better awareness of environmental effects as entrants introduce "green"
packages, and demand-side innovations.  This is another reason why consumers
must pay the real cost of electricity, as retail competition cannot thrive
in an environment in which supply companies lack retail pricing freedom.  As
a consequence, companies involved in retail supply, including the California
utilities, should be allowed to pass-through their energy costs in a
competitive environment. [At the same time retail customers should be
guaranteed the option of locking in a fixed fair price by the default
supplier and not be exposed to market volatility should they choose to do
so.]

Finally, oversight of the electricity business will always be needed.  The
cornerstones of electricity regulation must be oversight of the distribution
function, and ensuring that any anticompetitive behavior by suppliers is
circumscribed. "


----- Original Message -----
From: "Philip K. Verleger" <PVerleger@compuserve.com>
To: "James L. Sweeney" <jim.sweeney@stanford.edu>
Cc: "David Teece" <teece@haas.berkeley.edu>; "Robert Michaels"
<rmichaels@fullerton.edu>; <steven@stoft.com>; <mcfadden@econ.berkeley.edu>;
<joseph.mullinix@ucop.edu>; <pjoskow@mit.edu>; <rschmidt@lecg.com>;
<richard.rumelt@anderson.ucla.edu>; <borenste@haas.berkeley.edu>;
<william_hogan@harvard.edu>; <lfried@uclink.berkeley.edu>;
<jdasovic@enron.com>; <john_chandley@lecg.com>; <berk@haas.berkeley.edu>;
<phillip_mcleod@lecg.com>; <mwilk@wilkandassociates.com>;
<spiller@haas.berkeley.edu>; <jscadding@wilkandassociates.com>;
<scott_harvey@lecg.com>; <yellen@haas.berkeley.edu>;
<gilbert@econ.berkeley.edu>; <cdanner@wilkandassociates.com>;
<george_barker@lecg.com>; <willrichm@aol.com>;
<shmuel@euler.me.berkeley.edu>; <tom_campbell@law.stanford.edu>;
<tyson@haas.berkeley.edu>; <pverleger@compuserve.com>
Sent: Friday, January 26, 2001 7:36 AM
Subject: Re: FINAL VERSION (Revised)


> David:
>
> Jim's comments are on point.  We really do not know whether the current
> increase is due entirely to the workings of a workably competitive market.
> Some of the participants believe it is, some believe it is not, and others
> like myself are really not sure.  Similar, but smaller price increases
have
> been observed in other commodity markets which were later found to be
> "workably competitive."  For example, there has been no showing that the
> doubling of heating  oil prices last year in the east resulted from
> anything other than the normal working of supply and demand.  However,
> there have been other instances of smaller price increases where it has
> been shown that the markets were not "workably competitive."  Until we
have
> more actual market data we really cannot - and should not be so bold.
>
> While I have strongly urged you to resist making large numbers of changes
I
> think Jim's advice should be included if you have time.
>
> Phil
>
>