This is the best I have seen yet on the going-forward cost of power.  
Assuming 60% of term at $80/MWh this summer, the weighted average CDWR price 
would be $240/MWh.  Using 75% term in winter, the CDWR average price would be 
$129.

Harry or Robert: Can we re-run MRW's rate model using these nunbers?  Right 
now I think they have in there $80/MWh.

Alan C.
---------------------- Forwarded by Alan Comnes/PDX/ECT on 03/22/2001 10:57 
AM ---------------------------


"Robert Weisenmiller" <rbw@mrwassoc.com> on 03/21/2001 07:01:05 PM
To: Alan.Comnes@enron.com, Jan Smutny-Jones <smutny@iepa.com>
cc:  

Subject: wow


Power Deals Only Cover 33% Of Calif 2001 Needs -Official Updated: Wednesday, 
March 21, 2001 06:31 PM ET Email this article to a friend! 
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NEW YORK (Dow Jones)--Power contracts announced early this month by 
California Gov. Gray Davis will only cover one-third of the electricity the 
state needs to buy in 2001, according to a report by the state's chief 
negotiator. 
That coverage is far less than California officials originally led observers 
to believe they had secured, and the gap raises questions about whether the 
state will be able to afford to keep the lights on this summer. 

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Even counting power covered by agreements in principle, the state will be 
about 40 million megawatt-hours short of the 60 million megawatt-hours it 
will need to buy this year for customers of California's nearly bankrupt 
utilities, according to a report prepared by David Freeman, general manager 
of the Los Angeles Department of Water and Power and the state's lead 
negotiator on the deals, and obtained Wednesday by Dow Jones Newswires. 
California will have to cover those megawatt-hours in the market, where they 
will be expensive, assuming they are available at all. The current forward 
price of power for the balance of the year is about $325 a megawatt-hour, 
which would put California's spot-market bill at $13 billion for the 
remainder of the year. That figure is likely too low, however, because the 
state will be far shorter in the summer, when demand and prices are much 
higher, than in the winter. The forward price of power for delivery this 
summer is now averaging about $480 a megawatt-hour. Moreover, the shortfall 
could grow if some of the agreements in principle don't mature into actual 
deals, Freeman wrote. 
On March 5, Freeman said the state had lined up contracts to cover 60% to 70% 
of the state's "net short" position this summer. The net short position is 
the difference between the power consumed by California's three largest 
utilities and the power those utilities generate themselves or have under 
contract. At that time, Freeman told Dow Jones Newswires that the summer 
deals were only agreements in principle and not firm contracts. Freeman 
wasn't immediately available Wednesday for comment. 
In his March 15 report to DWR Director Ray Hart, Freeman says the DWR has 
entered into 19 final power contracts, with seven suppliers, and more than 25 
agreements in principle. In 2001, the state's deals cover at most 6,502 
megawatts at any given time. Of that, only 2,247 megawatts are covered by 
signed contracts. Even that figure, however, is just an approximation, as 
some power is contingent upon availability or the completion of power plants 
that might not be built in time, Freeman wrote. 
Coverage for 2002 so far is also slim, according to Freeman's report. The 
deals cover at most 7,500 megawatts at any given time, and the state will 
still face an uncovered short position of about 40 million megawatt-hours. 
California put itself in the power markets in mid-January, when the 
deteriorating finances of PG&E Corp. PCG, news, msgs) unit Pacific Gas & 
Electric Co. and Edison International (EIX, news, msgs) unit Southern 
California Edison left them unable to purchase power for themselves. 
The state's idea was to sign lots of long-term deals, thus locking in 
supplies and bringing down spot-market prices by reducing the level of panic 
buying at the last minute. The hope was also that by spreading out the cost 
of power over several years, the state could secure the electricity it needs 
without raising consumers' rates. 
Those hopes are unlikely to be realized. As reported, California state 
Treasurer Phil Angelides has said a planned $10 billion municipal bond issue 
- the largest in U.S. history - will only cover the state's power purchases 
through September if prices stay where they are. The California Department of 
Water Resources, which is handling the state's power purchases, has already 
spent about $3 billion on power, a total that is growing by about $45 million 
a day. 
California lawmakers and regulators are increasingly saying consumers' rates 
will have to rise to cover the cost of power bought on their behalf. 
The West, heavily dependent on hydropower, is having one of its driest years 
on record. A number of officials and analysts see blackouts as a certainty 
this summer, as California comes up short in its scramble for power. 
-By Andrew Dowell, Dow Jones Newswires; 201-938-4430;