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SCIENTECH IssueAlert, November 8, 2000
As Presidential Election Hangs in Balance, So Do Key Energy Issues
By: Will McNamara, Director, Electric Industry Analysis
===============================================================

After a tumultuous Election Day full of constant changes in the projections,
the identity of the next president of the United States was still unknown
as of Wednesday morning, Nov. 8. The identity of the next U.S. president
will be determined by a vote recount in Florida, which must be completed
by the close of business Thursday, state election officials said. Tuesday's
national vote count is so close, as is the number of electoral votes won
by GOP candidate George W. Bush and Democrat Vice President Al Gore, that
the presidential election is too close to call. It is also possible that
one candidate could win the Electoral College vote and the other win the
popular vote, which hasn't happened in a hundred years.

ANALYSIS: Well, it certainly has been a history-making Election Day. I
was prepared to analyze the future of the energy industry, based on which
presidential candidate had been elected yesterday. As the candidates have
such polarized platforms with regard to energy issues, it is not an 
overestimation
to say that many critical energy issues hinge on this election. As we await
the final (and accurate) announcement of who is the next U.S. president,
which may not come for another day or so, it is a good time to review how
each candidate intends to address low domestic supplies of oil and natural
gas, the status of deregulation, the development of renewable energy, and
the high cost of energy due to recent price spikes.

Throughout the campaign, Bush criticized the Clinton-Gore Administration
for not developing a comprehensive energy policy. Rather than developing
an effective energy policy, Bush accused Gore of raising gasoline taxes,
discouraging domestic production of oil and natural gas, and failing to
anticipate the oil and natural-gas price spikes that have occurred this
year. Bush also was very critical of President Clinton's decision to tap
into the Strategic Reserve Fund in September and release 30 million barrels
of crude oil from the nation's emergency oil stockpile.  As the United
States now enters a so-called "energy crisis," brought about primarily
as a result of rising demand and diminishing supplies, Bush has outlined
an energy policy that includes more than 20 initiatives. I can't address
all of them, but have identified the key policies that will likely unfold
under a Bush administration. Perhaps the best summary of Bush's energy
policy is that he supports a comprehensive approach to ensuring U.S. energy
security, and intends to accomplish this by expanding domestic resources,
using a range of fuels and technologies, supporting ongoing deregulation
of the industry, and providing energy assistance to low-income households.


Reduce American dependence on foreign supplies of oil. Bush repeatedly
made the case that, since 1960, U.S. energy demand has more than doubled,
far outstripping domestic production. Today, the United States consumes
approximately one-third of the world's energy, and approximately 28 percent
of our usage comes from foreign sources. Bush contends that U.S. dependence
on foreign oil has increased from 50 percent in 1993 to 56 percent today,
and that oil imports are projected to increase to 15 million barrels per
day by 2010. To remedy this, Bush supports the development of domestic
sources for oil, natural gas and renewable energy. Specifically, Bush has
proposed opening 8 percent of the Arctic National Wildlife Refuge to 
"environmentally
responsible and regulated exploration," with the intent of replacing the
oil that the United States now imports from Iraq. Regarding natural gas,
Bush will examine whether certain promising natural-gas reserves in federal
lands should be opened for exploration. Yet, it's important to note that
Bush is not suggesting that domestic supply of oil and natural gas will
be sufficient. Rather, he recognizes that access to an adequate supply
of foreign oil and gas is strategically important to the United States
and the global economy. However, instead of relying predominantly on Iraq*
especially
as Saddam Hussein threatens to reduce production*Bush will work more closely
with Canada and Mexico to increase cross-border flows of oil, natural gas
and electricity within North America.

Support new pipeline construction. As domestic production of oil and natural
gas increases to meet growing demand, Bush also supports the construction
of new pipelines, and would expand refining capacity by tearing down 
"regulatory
hurdles." Bush has referenced the National Petroleum Council's estimates
that the gas industry will require 38,000 miles of new transmission pipelines
and 255,000 miles of distribution lines by 2015. Bush sees a need for new
pipelines and distribution lines in the Midwest in particular, where 
traditional
coal plants should ultimately be replaced by gas-fired plants.

Support the growth of renewable energy. Bush supports the development of
renewable and low-emission fuels, and has committed to investing $2 billion
over 10 years to fund "clean-coal technologies" and $1 billion over 10
years to help utilities purchase nuclear plants. At the same time, Bush
will propose legislation requiring utilities to reduce harmful emissions
from their generation plants, and offer tax credits for power produced
from alternative or renewable fuels. However, Bush recognizes that while
renewable energy is important, it currently accounts for less than 4 percent
of the total U.S. energy consumption. Consequently, for the foreseeable
future, Bush contends that hydrocarbons*oil, coal and natural gas*will
continue to play the primary role in meeting the growing energy needs of
Americans.

Support electric deregulation. Bush supports deregulation of the energy
industry and prefers to let "markets, and not government officials*determine
investment decisions" and "give customers a choice of suppliers." Toward
this end, Bush believes that federal restructuring legislation is needed
to "assure the reliability of the nation's electrical grid, and to promote
consumer choice by removing federal barriers to competition." While he
supports consumer choice, Bush recognizes that often low-income families
face high electricity prices (as was found in San Diego this summer). 
Consequently,
Bush supports the Low Income Home Energy Assistance Program (LIHEAP), the
largest direct expenditure energy subsidy program, which has about $155
million left in funding to support emergency funding for cooling and heating
assistance. In addition, Bush will expand the Weatherization Assistance
Program, which supports about 76,900 homes by spending $1.4 billion for
Weatherization programs over the next ten years.

As noted, the presidential candidates are proposing very different platforms
with regard to the energy industry. Thus, it is not surprising that Vice
President Gore disagrees with most everything that Governor Bush is proposing.
Essentially the most striking difference comes down to conservation. While
Bush supports the exploration of domestic fuels, Gore believes the United
States should focus on doing more with what we already have, and protecting
the environment for future generations.

Of course, Gore carries the legacy of his Clinton-Gore administration,
one that as noted has been criticized by Bush for not developing a 
comprehensive
energy policy. Thus, it is not completely clear how Gore would depart from
what has been his administration's approach to energy issues over the last
seven years. It is likely that Gore's administration would follow much
the same path that the Clinton administration traveled, although Gore 
certainly
has made the environment one of his core platforms (for example, his 1993
book, Earth in the Balance). Thus, is not surprising that "creating a clean
environment and stable climate" is one of the key foundations on which
Gore has established his energy platform.

Beyond that, Gore has said that his "new" energy policy will focus on five
goals: 1). Saving energy, reducing pollution, promoting a higher standard
of living and creating high-wage jobs. 2). Reducing the nation's dependence
on unreliable imported oil. 3). Protecting children against the threat
of pollution nationally and globally. 4). Dramatically reducing the threat
posed by global warming. 5). Curtailing brownouts by increasing the 
reliability
of the power grid.

Perhaps the central initiative that Gore has proposed is the creation of
the National Energy Security and Environmental Trust Fund. Designed to
"bring revolutionary change to our transportation and energy infrastructure,"
the Fund would help consumers purchase energy-efficient vehicles, homes
and appliances, promote clean and reliable sources of electric power, and
encourage long-term solutions to reduce U.S. dependence on imported sources
of oil. Gore would provide consumers with a tax credit up to $2,000 to
purchase energy-efficient new homes or up to a $1,000 credit to upgrade
the efficiency of their current homes. Gore also supports expanding the
current 10-percent tax credit provided to homes or businesses that use
solar energy to generate electricity or heat water.

Gore opposes drilling in federal land, and instead aims to protect the
U.S. environment, increase reliance on low-pollution fuels and focus on
energy-efficiency / lower consumption programs. Articulating the Democratic
position on this issue, Senator Joe Lieberman made the following comments
in the vice presidential debate: "There are more resources within the United
States. If we can get three miles more per gallon from our cars, we'll
get a million*we'll save a million barrels of oil a day, which is exactly
what the refuge, at its best, in Alaska, would produce(We've got to develop
fuel cells, alternative energy. We've got to encourage people to conserve..."
Gore supports tapping into the Strategic Petroleum Reserve Fund, as President
Clinton did in September, to increase oil supplies, prevent winter shortages
of home heating oil and stabilize oil prices.

Perhaps the only issue on which the two candidates agree is deregulation
of the energy industry as a whole. This process is of course occurring
on a state-by-state basis, although many states have begun to resist 
competition
due to current low prices in their states and fear of sudden price spikes
as occurred in California this summer. Bush clearly supports a national
restructuring law, while it unclear if Gore supports this as well, or prefers
to let states continue to deregulate on their own or opt out from this
process.

One thing is clear in all of this uncertainty. The future of the energy
industry hangs in the balance and will continue in one of two drastically
different directions as the final outcome of this election is determined.
As supply and demand issues continue to generate concern across the country,
it is certain that energy issues will remain on the radar of whichever
candidate is elected president.
===============================================================
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===============================================================

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Sincerely,

Will McNamara
Director, Electric Industry Analysis
wmcnamara@scientech.com
===============================================================
Feedback regarding SCIENTECH's IssueAlert should be sent to 
wmcnamara@scientech.com
===============================================================

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