Executive Pay
Business Week, 04/16/01

WORLD BUSINESS BRIEFING: ASIA
ENRON PAYMENT DISPUTE
The New York Times, 04/11/01

Markets / Your Money Cold Weather Fuels Utility Earnings Energy: Natural gas 
and power producers are expected to continue to outshine the market.
Los Angeles Times, 04/11/01

Energy Cost Study Critical of Public Agencies Too Power: DWP is among three 
government-run producers cited as driving prices up. Spokesmen deny any 
market manipulation.
Los Angeles Times, 04/11/01

UK: ANALYSIS-French power trading market starts to emerge.
Reuters English News Service, 04/11/01

BRAZIL: INTERVIEW-Brazil's Copel prime privatisation target.
Reuters English News Service, 04/11/01

Renegotiate both phases of Dabhol: Godbole panel
Business Standard, 04/11/01




	
Executive Pay
	
	APRIL 16, 2001 
Business Week
SPECIAL REPORT 
	
	
	While the CEO gravy train may be slowing down, it hasn't jumped the rails. In 
2000, despite weakening returns, U.S. company chieftains bagged on average a 
princely $13.1 million 

	
	
	
	

	

	
	Joseph M. Magliochetti watched helplessly last year as his market crumbled. 
The CEO of auto-parts maker Dana Corp. (DCN ) saw North American heavy-truck 
production tumble, the Big Three Detroit auto makers scale back production, 
and demand for replacement parts weaken. Despite his best efforts, sales at 
the Toledo company fell 6%, profits plummeted 44%, and Dana's stock lost more 
than half its value, turning most of Magliochetti's stock options into so 
much worthless paper.

By almost any measure, Magliochetti was still rewarded handsomely. The Dana 
board gave him the $850,000 salary it had promised him in December, 1999, 
based on strong sales and profits for that year, and an option grant to bring 
him in line with his peers. But it stripped him of his bonus and stock grant, 
awards that had brought him a cool $1.8 million in 1999. The board cited his 
failure to beat goals for net income growth and return on invested capital. 
In all, Magliochetti's pay in 2000 came to $948,363, down 63% from 1999, 
making him one of only a handful of top executives to bring home less than $1 
million. That's right: In setting Magliochetti's pay, the board in effect 
said: "The company failed to prosper, and we're holding you accountable."

Makes sense, right? Not in the world of executive compensation. In fact, 
Dana's actions are extraordinary compared with the way most corporations 
responded to sluggish performance in 2000. While shareholders got hammered, 
many compensation committees scrambled to cushion their chief executives from 
feeling any real pain, granting massive blocks of new stock options in some 
cases and in others forgiving corporate loans. The average CEO, riding a 
still-hot market for top management talent, earned a stupendous $13.1 million 
last year, according to the results of BusinessWeek's 51st annual Executive 
Pay Scoreboard, compiled with Standard & Poor's Institutional Market 
Services, a division of The McGraw-Hill Companies. Cash compensation for the 
CEOs at 365 of the largest U.S. companies increased 18% in 2000, while total 
pay increased 6.3%. That far exceeds the 4.3% pay hike that salaried workers 
got last year, and it widens still further the yawning gap between the boss 
and the rank and file.

As usual, compensation committees handed out perks like candy. Retirees were 
showered with the standard gifts: lucrative consulting jobs, company cars, 
and hefty pensions. John F. Welch of General Electric Co. (GE ), who is set 
to retire at the end of the year, got a pay package valued at $122.6 million 
in recognition of his "20 years of outstanding service as CEO." And you 
didn't have to leave to be generously rewarded. Apple Computer Inc.'s (AAPL ) 
Steven P. Jobs landed the mother of all bonuses after three years of working 
for free: his own $90 million jet, a Gulfstream V.

IN TEARS. But while the CEO gravy train hasn't run off the rails, it is 
slowing down. The increase in total compensation was the smallest in five 
years, and 2000 was the second consecutive year of slower executive pay 
growth. The reason had little to do with anything decided by boards of 
directors, though: The same market crash that had investors in tears made 
many executives' stock options worthless. An analysis by compensation 
consultants Pearl Meyer & Partners Inc. found that the five hardest-hit lost 
a total of $62 billion in paper wealth. And with far fewer executives able to 
cash in, overall CEO pay growth slowed. Still, there was some evidence that 
more boards, like Dana's, were toying with the notion that CEOs should suffer 
along with their shareholders. Last year, 26% of CEOs saw their cash 
compensation decline, compared with 19% in 1999. Schering-Plough's (SGP ) 
Richard Jay Kogan, Whirlpool's (WHR ) David R. Whitwam, and Texas 
Instruments' (TXN ) Thomas J. Engibous all lost portions of their bonuses.

All of which raises an interesting question: Will compensation committees 
wield a carrot or a stick as they meet to calculate CEO rewards in 2001? Some 
boards are building tough performance goals into future stock and option 
awards, raising the possibility that some big-name executives who don't meet 
the goals could walk home with much less this year. With the Nasdaq more than 
50% off its high by the end of last year, and the Dow Jones industrial 
average and Standard & Poor's 500-stock index both well off their high-water 
marks, many options will take months, maybe years, to recover. And if 
corporate profits continue to slide, few companies will be able to justify 
giving out big bonuses for great performance in 2001. Says Peter Chingos, 
head of the executive compensation practice at consultants William M. Mercer 
Cos.: "We're seeing a more conservative movement in compensation increases, 
largely because of what happened with stock prices. I don't think this is 
going to go away overnight."

For now, though, pay cuts remain theoretical for most CEOs. The 20 
highest-paid earned an average $117.6 million, up from $112.9 million in 
1999. The biggest pay package went to John S. Reed, the former co-CEO of 
Citigroup (C ). Reed, who left the firm in April after a power struggle with 
co-CEO Sanford I. Weill, brought home $293 million, almost entirely by 
exercising options. As a group, the 20 highest-paid CEOs were almost evenly 
divided between Old Economy and New. Among those making repeat appearances: 
John Chambers of Cisco Systems (CSCO ), Welch of GE, and Michael D. Eisner of 
Walt Disney (DIS ).

Some hard-hit companies caved in when it came time to get tough with their 
underperforming CEOs. Walt Disney Co., for example, gave CEO Eisner a salary 
increase, 2 million stock options in Disney Internet Group valued at $37.7 
million, and an $11.5 million bonus--after three years in which net income 
fell by more than half from $1.9 billion in 1997 to $920 million. Other 
executives exchanged worthless options for new ones, or benefited from 
repricings. At Compaq Computer Inc. (CPQ ), which saw shares tumble by nearly 
half last year, Michael D. Capellas had a $5 million loan from the company 
wiped off the books. He borrowed the money, which will be forgiven over three 
years, to buy Compaq stock. Still others, stuck with huge tax bills from 
unprofitable options exercises, had those transactions canceled. The Internet 
service provider now known as Telocity Delaware Inc. did that for 75 
employees, including a director and six top executives. The company declined 
comment.

INCENTIVES. Still, after years of paying lip service to the idea of pay for 
performance, at least a few companies took extraordinary steps last year to 
link the two. At Coca-Cola Co. (KO ), CEO Douglas N. Daft was granted $87.2 
million in restricted shares--but he will get the full amount only if he 
manages to increase earnings per share by 20% a year for five years, a task 
analysts say may be difficult, if not impossible. Coke compensation committee 
Chairman Herbert A. Allen said that management considers the goals 
"aggressive but realistic," adding, "we'll see in five years." Staples Inc. 
(SPLS ) CEO Thomas G. Stemberg got 100,000 restricted shares, worth $1.4 
million, which vest in 2005--or earlier if earnings goals are met. Says 
Stemberg: "Our philosophy is one of low pay combined with strong equity 
rewards." Of course, low pay is a relative term: Stemberg also took home 
nearly $1 million in salary and bonus. His $2.4 million total pay, while down 
27% from 1999, was hardly a pittance.
	
Lawrence J. Ellison, CEO of Oracle Corp. (ORCL ), took that low-pay 
philosophy even further. After watching his paper wealth decline by nearly 
$10 billion, to $41 billion, in 2000, according to Pearl Meyer, Ellison opted 
to eliminate his salary and bonus through 2004 and take a huge option 
grant--20 million shares--that is supposed to last him for the next three 
years. And at Tyco International Ltd., CEO L. Dennis Kozlowski needs to beat 
tough earnings goals to exercise 900,000 options he was granted last year. 
But he's not worried. "I have all my eggs in this basket," Kozlowski says. 
"But I'm watching this basket real closely."

Those were the exceptions. Overall, the link between CEO pay and company 
performance remained fuzzy. The top spot for shareholder return relative to 
pay went to David M. Rickey of Applied Micro Circuits Corp. (AMCC ), who 
delivered a giant 4,751% for a mere $4.5 million in pay from 1998 through 
2000--in marked contrast to last year's winner, David S. Wetherell of CMGI 
Inc. (CMGI ), who was paid $1 million less and delivered returns nearly three 
times as good. Rickey also sold millions of dollars' worth of stock in 
December and January, and the stock has since lost 80% of its value. At the 
bottom of the performance heap, Charles B. Wang of Computer Associates 
International Inc. (CA ) earned $698.2 million from 1998 through 2000 and 
produced a dismal shareholder return of -63%, making last year's loser, 
Eisner of Walt Disney, look like a bargain. Eisner was paid $60 million less 
from 1997 through 1999 and earned 28% for shareholders during the same 
period. CA says Wang helped increase shareholder value 901% in the 1990s. He 
also agreed to return more than 20% of his 1998 pay--2.7 million shares, or 
$150 million, according to the company--to settle shareholder lawsuits over a 
special grant of stock to Wang and other top company executives.

CA was among several companies that said their CEOs were worth every penny of 
their pay. Some complained that it was unfair to count options exercises as 
compensation, as BusinessWeek does, since most were granted several years 
earlier. Others said CEOs don't realize options riches unless all 
shareholders benefit from a soaring stock. Another criticism was that our 
performance criteria are too narrow, in some cases not reflecting outsized 
shareholder returns or a company's profit growth. At American Home Products 
Corp. (AHP ), where former CEO John R. Stafford topped the list of companies 
with the worst return on equity relative to pay, spokesman Lowell B. Weiner 
said our analysis is distorted by the heavy costs related to lawsuits filed 
over the Fen-Phen diet drug controversy. During the same period, AHP logged a 
75% return to shareholders. Says Weiner of the analysis: "It makes us look 
bad, and in reality we've got a lot of good stuff going on."

Compensation consultants say the growing gap between pay and performance is 
partly the result of companies' using new measures to gauge performance. By 
using comparisons such as earnings per share and return on equity, a CEO 
whose stock is going to the dogs can still sometimes come out ahead in pay. 
Case in point: CMGI. The Internet incubator more than doubled Wetherell's 
bonus, to $481,400, on the strength of operating income--even though the 
company ended its 2000 fiscal year in July with a $1.3 billion net loss and 
with the stock down 18%. CMGI says Wetherell was underpaid compared with his 
peers and deserved the boost based on the prior year's performance. Says 
Scott Olsen, leader of the executive compensation practice at consultants 
Towers Perrin: "If the board likes a CEO, it's likely to do whatever it takes 
to keep him."

But rewarding a CEO when the stock is plummeting presents its own set of 
dilemmas. For one thing, option grants have to be bigger: A $10 million grant 
costs a company only 100,000 shares when the stock is trading at $100, but 5 
million shares when it's trading at $2. And few institutional investors are 
willing to put up with that kind of dilution. A showdown is brewing over the 
issue. This year, institutional investors have filed more than 50 shareholder 
proposals targeting executive pay that will be voted on at annual meetings.

At the same time, top executives who have been burned by the market are 
starting to demand tangible rewards in the here and now: more cash, bigger 
bonuses, and other perks to offset the risk of options. In a booming economy, 
options were the incentive of choice because gains could be astronomical, and 
they belonged to the executive whether he stayed at the company or left. Now 
there's a new favorite: restricted shares, which typically vest after several 
years provided the executive remains employed at the company, and are safer 
than options because they always retain at least some value. A few years ago, 
says consultant Olsen, executives would hold out for the biggest option 
grants possible. Cash and bonuses were viewed as positively dowdy. "I don't 
hear as many people saying that now," Olsen says.

When the economy and stock markets were roaring, CEO pay rocketed along as 
well. Now that the longest expansion in U.S. history has ground to a halt, 
though, few companies seem eager to transfer the pain to executive paychecks. 
If anything, the market for top-flight CEOs is as tight as ever, says Patrick 
S. Pittard, CEO of executive search firm Heidrick & Struggles International 
Inc., as troubled companies seek would-be saviors. "It has never been more 
expensive," he says. Still, if shareholders continue to suffer the kinds of 
market losses dished out in the first quarter, even the thickest-skinned 
boards may have a hard time upping the pay for underperforming CEOs in 2001. 
In that case, look for the gravy train to creak to a halt. 
	






The Top-Paid Chief Executives...And 10 Who Aren't CEOs 


The Top-Paid Chief Executives...



                                 2000
                                SALARY     LONG-TERM             TOTAL
                               & BONUS    COMPENSATION *******    PAY
                               ---------------MILLIONS----------------



1       JOHN REED*               $5.4         287.6              293.0
        Citigroup



2       SANFORD WEILL            19.9         204.9              224.9
        Citigroup



3       GERALD LEVIN             11.2         152.6              163.8
        AOL Time Warner



4       JOHN CHAMBERS             1.3         156.0              157.3
        Cisco Systems



5       HENRY SILVERMAN           7.6         129.1              136.7
        Cendant



6       L. DENNIS KOZLOWSKI       4.2         121.2              125.3
        Tyco International



7       JACK WELCH               16.8         105.8              122.6
        General Electric



8       DAVID PETERSCHMIDT        0.7         106.9              107.6
        Inktomi



9       KEVIN KALKHOVEN**         0.7         106.2              106.9
        JDS Uniphase



10      DAVID WETHERELL           1.2         102.5              103.7
        CMGI



11      JOSEPH NACCHIO            2.8          94.6               97.4
        Qwest



12      DOUGLAS DAFT              4.4          87.3               91.7
        Coca-Cola



13      W.J. SANDERS III          6.6          85.1               91.6
        Advanced Micro Devices



14      STEVE JOBS               90.0           0.0               90.0
        Apple Computer



15      LAWRENCE ELLISON          0.2          75.0               75.2
        Oracle



16      PHILIP PURCELL           13.5          60.6               74.1
        Morgan Stanley Dean Witter



17      LOUIS GERSTNER           10.1          63.5               73.6
        IBM



18      STEPHEN CASE***           2.2          71.2               73.4
        AOL Time Warner



19      MICHAEL EISNER           12.3          60.5               72.8
        Walt Disney



20      JEFFREY SKILLING          6.5          66.0               72.5
        Enron






...And 10 Who Aren't CEOs



1       RAYMOND LANE****          3.2         230.7              233.9
        Oracle



2       JEFFREY RAIKES            0.6         144.8              145.5
        Microsoft



3       KENNETH LAY               8.7         132.1              140.8
        Enron



4       RONALD LEMAY              1.0         127.4              128.4
        Sprint FON Group



5       DAN PETTIT*****           0.4         121.3              121.6
        JDS Uniphase



6       KENNETH ODER              0.7         85.9               86.7
        Safeway



7       JEFFREY HENLEY            2.2         76.3               78.5
        Oracle



8       RAY STATA                 2.0         68.3               70.4
        Analog Devices



9       MARK SWARTZ               2.2         59.4               61.6
        Tyco International



10      ROBERT HERBOLD            1.0         56.8               57.8
        Microsoft






* Retired Apr. 2000
** Resigned May 2000
*** 18 months of compensation due to fiscal year change
**** Resigned July 2000 *****Retired Sept. 2000
******* Includes exercised options, restricted shares, and long-term incen-
tive payments; does not include the value of unexercised option grants



Data: Execucomp, provided by Standard & Poor's Institutional Market Services,
a division of The McGraw-Hill Companies






Business/Financial Desk; Section W
WORLD BUSINESS BRIEFING: ASIA
ENRON PAYMENT DISPUTE
By Celia W. Dugger

04/11/2001
The New York Times
Page 1, Column 1
c. 2001 New York Times Company

The financial woes of the Dabhol Power Company in India, 65 percent owned by 
the Enron Corporation, have deepened with the government of India's refusal 
to pay the $22 million that the company says it is owed under its contract 
with the Maharashtra State Electricity Board. Both the state and central 
governments had guaranteed that they would pay the bills for the huge power 
plant if the electricity board failed to do so, but are refusing on the 
ground that the company owes a penalty for a technical failure to meet other 
contractual terms. The dispute now goes to a conciliation panel, and, if that 
fails, to arbitration in London. American diplomats have warned that the 
government's failure to live up to the guarantee could endanger future 
foreign investment in India. The Dabhol project is the largest foreign 
investment ever made in India. Celia W. Dugger

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


Business; Financial Desk
Markets / Your Money Cold Weather Fuels Utility Earnings Energy: Natural gas 
and power producers are expected to continue to outshine the market.
Reuters

04/11/2001
Los Angeles Times
Home Edition
C-4
Copyright 2001 / The Times Mirror Company

Despite the front page news of California's two financially troubled 
utilities, the lion's share of U.S. utility companies will have strong 
first-quarter results as cold weather created favorable dynamics for both 
natural gas and power producers. 
"A vibrant and volatile natural gas market, combined with strong electricity 
and heating demand in the Midwest because of cold weather, led to very 
favorable power and gas dynamics well beyond the California market," said 
James Yannello, analyst with UBS Warburg.
Utility earnings will provide a beacon to investors amid a stormy sea of 
profit warnings and are expected to continue to outshine the overall market 
into 2002, analysts said. 
"Overall we expect everyone to do very well. For the most part, those who 
have extra power to sell in wholesale markets or have wholesale trading 
operations will do quite well," said Paul Patterson, analyst with Credit 
Suisse First Boston. 
"Dynegy Inc. [ticker symbol: DYN] did very well in its Midwest generation 
portfolio given how cold it was in the first quarter," he said. 
Lower winter temperatures helped push average spot natural gas prices for the 
quarter to $6.45 per million British thermal units (mmBtu) versus the $2.46 
averaged in the first quarter of 2000. This winter was 24% colder than last 
year, which was unseasonably warm. 
Enron Corp. (ENE), North America's biggest buyer and seller of electricity 
and natural gas, also is seen reporting sterling quarterly results. The 
Houston-based company's Web-based trading system, EnronOnline, completed its 
first full year of operation in 2000, executing about $336 billion of trade. 
"It would be very difficult for Enron not to have a strong quarter," Yanello 
said. 
Wholesale merchants and traders PPL Corp. (PPL), Entergy Corp. (ETR), Exelon 
Corp. (EXC) and Wisconsin Energy (WEC) all will post solid results, Patterson 
said. (All of these stocks rallied Tuesday, helping to drive the Dow Jones 
utility average up more than 3%.) 
Already Pennsylvania-based PPL said it expects earnings this year and in 2002 
to meet or beat estimates while New Orleans-based Entergy has said it expects 
to best first-quarter analyst estimates by 10 to 15%. 
Market research firm First Call/Thomson Financial says while estimates call 
for earnings of the S&P 500 as a whole to fall by 8.6% for the first quarter, 
it expects utility profits to grow 11%. 
"I suspect that the utilities will be beating estimates by more than usual 
based on the last four quarters," said Chuck Hill, director of research. 
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC) 
Power Surge 
Utility stocks have rebounded on reports that the nation's cold winter will 
result in strong first-quarter results for many power companies--the problems 
of California's utilities notwithstanding. 
Dow Jones utility average, weekly closes and latest 
Tuesday: 386.57, up 12.78 
Source: Bloomberg News


GRAPHIC: Power Surge, Los Angeles Times; 

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



Metro Desk
Energy Cost Study Critical of Public Agencies Too Power: DWP is among three 
government-run producers cited as driving prices up. Spokesmen deny any 
market manipulation.
ROBERT J. LOPEZ; RICH CONNELL
TIMES STAFF WRITERS

04/11/2001
Los Angeles Times
Home Edition
A-1
Copyright 2001 / The Times Mirror Company

Government-owned utilities, including the Los Angeles Department of Water and 
Power, were influential in driving wholesale electricity prices to levels 
that helped ignite California's exploding energy crisis during the summer and 
fall, according to public and confidential records. 
For months, Gov. Gray Davis, legislators and consumer advocates have chiefly 
blamed a few private power companies for throwing the state into darkness and 
economic chaos.
But they are just part of the equation. 
A confidential document obtained by The Times names power providers that have 
allegedly manipulated the electricity market. While the document does 
identify out-of-state merchants criticized for gouging, it also discloses for 
the first time the extent to which public entities allegedly have maximized 
profits in the volatile spot market. 
The document--which decodes the identities of unnamed suppliers in a recent 
state study--singles out three government-run agencies as consistently trying 
to inflate prices. They are: the DWP, the federally owned Bonneville Power 
Administration in the Pacific Northwest and the trading arm of Canada's BC 
Hydro in British Columbia. 
Like a number of privately owned generators, these three producers offered 
power at a range of high prices and, sometimes, in large amounts when the 
state was most desperate. They also helped saddle California's three largest 
utilities with billions of dollars in debt--leading one, Pacific Gas & 
Electric, to seek bankruptcy protection last week. 
The study by the California Independent System Operator, or Cal-ISO, analyzed 
thousands of hours of bidding practices for 20 large suppliers in the spot, 
or "real-time," market from May to November. The study accounted for factors 
such as rising production costs, increased demand, periods of scarcity and 
profits that would be earned in a healthy, competitive market. 
Money earned above that was called excess profits. 
No entity--public or private--earned as much in alleged excess profits as 
British Columbia's Powerex, the state records show. 
"They were the most aggressive bidders," said Anjali Sheffrin, author of the 
coded study. 
"They had the most amount to bid and the most freedom to bid it in," said 
Sheffrin, who did not discuss any companies by name. 
The Canadian agency reaped $176 million in alleged excessive profits--several 
times the amount collected by all but one of the private generators. Second 
on the list was Atlanta-based Southern Co. Energy Marketing, now called 
Mirant, which collected nearly $97 million in alleged inflated earnings. 
BC Hydro and Mirant--along with the DWP and other producers--say they played 
by the rules established under California's flawed deregulation plan and did 
not exploit the state's troubles. 
But BC Hydro officials acknowledge that they did anticipate periods of severe 
power shortages and planned for them by letting their reservoirs rise 
overnight and then opening them to create hydroelectricity, which could be 
produced inexpensively but sold for a premium. 
"It was the marketplace that determined what the price of electricity would 
be at any given time," said BC Hydro spokesman Wayne Cousins. "We helped keep 
the lights on in California." 
And the rates low for their own customers. During the past year, BC Hydro has 
stashed hundreds of millions dollars in a "rainy day" account to ensure that 
it has among the lowest rates in North America. 
Los Angeles' Department of Water and Power, although eighth on the list of 
alleged profiteers, was among those singled out for seeking high prices 
during periods of high demand that helped inflate costs across the entire 
spot market, where emergency purchases are made. 
This, according to state documents, was accomplished by offering power at 
incrementally higher prices that would rise substantially with even modest 
increases in demand. The strategy also helped prop up prices, keeping them 
from falling. 
The DWP's average hourly bid, or asking price, for electricity ultimately 
bought topped such private sellers as Reliant Energy of Houston and 
Tulsa-based Williams Cos., two major players in the national energy market. 
In addition, the DWP submitted other bids at far higher prices that could pay 
off handsomely with even small bumps in demand, the report said, referring by 
code to DWP and four other suppliers. "The data shows they clearly exercised 
market power to inflate prices further at higher load conditions." 
DWP General Manager S. David Freeman called the report's findings 
"outrageous," insisting that the utility never tried to inflate prices. 
"These charges go under the heading there is no good deed that goes 
unpunished in this state," Freeman said, noting that DWP power helped avert 
more blackouts across the state. 
He did acknowledge, however, that the agency has charged high prices for 
surplus power at the 11th hour but said that was only because it cost more to 
produce. 
"We have consistently charged [Cal-ISO] our cost, plus 15%," he said. "It's 
not as though we're up there peddling a bunch of power to jam it down their 
throats." 
Freeman said that when his staff reviewed the coded report, they never took 
it personally. "If you're innocent," he said, "you don't look at the criminal 
file." 
Yet another public agency criticized for its behavior in California's 
deregulated market was the U.S. government's Bonneville Power Administration, 
a nonprofit agency that sells wholesale electricity produced at 29 federal 
dams in the Columbia-Snake River basin. 
Bonneville actually bid slightly lower than the DWP, records show, but reaped 
millions more in alleged excessive profits, apparently because it supplied 
greater amounts of power during the period studied. Bonneville was in the top 
five accused of taking excessive profits. 
Bonneville officials say some of its profits are used to pay back federal 
construction loans and fund an internationally recognized salmon recovery 
program. 
Stephen Oliver, a Bonneville vice president, said his agency did not act 
improperly and has asked Cal-ISO for detailed information on how it reached 
its conclusions. He said the grid operator often came to Bonneville pleading 
for last-minute electricity and offering to pay high prices. 
"From our point of view, we bid what we had when we had it and we operated 
precisely within the terms of their rules," Oliver said. 
Those rules--and the bidding practices criticized by Cal-ISO--so distorted 
the market that Aquila Power Corp. of Missouri, which tried to act 
responsibly, has bailed out. 
It offered the lowest average hourly price of any supplier studied--slightly 
more than $8 per megawatt-hour, compared to Mirant's $138, the highest. 
But the spot market, as initially designed, made sure that all suppliers 
offering power received the highest price paid in any hour. 
The result: Aquila collected $171 an hour for power it was willing to sell at 
a single-digit price. 
"They weren't the culprits," said Cal-ISO's Sheffrin. "Someone else drove 
that up." 
Aquila spokesman Al Butkus said the company pulled out of the California 
market because it was too unpredictable. Although the company made money, he 
said, it also could have lost because of possible downward swings. 
"We looked at it and we didn't feel very comfortable with what we saw," he 
said. 
The market has since been adjusted to prevent high bids from setting the 
price for everyone. But Sheffrin said it hasn't made much difference because 
the overall prices are still excessive. 
"We're saying the patient is sick," Sheffrin said of California's electricity 
market. "It needs help [and] may die." 
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC) 
Top 10 in Profits 
The California Independent System Operator says that a total of $505 million 
in extra profits was reaped by power suppliers from May to November 2000 in 
California's volatile spot market. The alleged excess profits were generated 
by high bids and high-volume sales during periods of peak demand. 
* 
British Columbia Power Exchange: $176.2 million 
Southern Co. Energy Marketing (renamed Mirant): $96.8 million 
Reliant Energy Services $35.5 million 
Dynergy Electric Clearing House $32.1 million 
Bonneville Power Administration $30.0 million 
Enron Energy Services $27.9 million 
Duke Energy Trading $18.4 million 
Los Angeles Dept. of Water and Power $17.8 million 
Sempra Energy Trading $14.9 million 
Pacific Corp. $13.6 million 
Source: Public and confidential government records

GRAPHIC: Top 10 in Profits, Los Angeles Times; 

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



UK: ANALYSIS-French power trading market starts to emerge.
By Stuart Penson

04/11/2001
Reuters English News Service
(C) Reuters Limited 2001.

LONDON, April 11 (Reuters) - Undeterred by reams of red tape and the 
dominance of state utility Electricite de France, a group of energy companies 
is quietly creating a market for trading wholesale power in France. 
"More and more companies are looking at the French market and would like to 
do more trades there," said Morten Helle, a power trader at Germany's HEW .
Buoyed by success trading the liberalised German power sector and helped by 
the auctioning of access to the UK-France interconnector cable, utilities are 
prising their way into France and building up liquidity in a previously 
closed market. 
The planned launch of a power bourse in Paris in July is expected to further 
boost liquidity. 
Free trading in power across Europe is hotting up as energy markets open up 
to competition in line with a European Union Directive on liberalisation. 
But France lags behind other markets as the government drags its heels in 
moving towards full competition, hindering new entrants and preserving EdF's 
grip on the generation market. 
EdF controls about 95 percent of French power generation. In a step towards 
opening its market, the company plans to make 50 terawatt hours a year of its 
output, about 10 percent, available to competitors later this year. 
EIGHT MAIN PLAYERS SO FAR 
A core of about eight companies regularly trade power in France, with several 
more on the periphery, traders said. 
Regular participants include TXU Europe , Enron , HEW , RWE , the Endesa 
/Morgan Stanley trading alliance, Electrabel and TotalFinaElf , traders said. 
They added Swiss utilities are also active. 
EdF annnounced last month it is about to start trading in the French market 
through its London-based unit EdF Trading. 
"We are seeing about 30 deals a week," said a trader for a U.S. energy 
company, who declined to be named. 
Most deals involve short term physical contracts for delivery to the French 
grid, defined by the grid operator RTE as "exchange of blocks" trades. 
Traders said they have yet to settle on standard contract terms. 
French oil giant TotalFinaElf, which recently did its first power deal in 
France, said day ahead and monthly deals are common. 
"There isn't a trade every day and you can't trade calendar year contracts 
but you can do 25 megawatt deals for two or three months forward," 
TotalFinaElf's Gas and Power Trading Manager Etienne Amic told Reuters. 
Many of the trades revolve around import and export deals, although limited 
cross-border interconnection with France's neighbouring markets limit volume. 
Traders said the auctioning through competitive tenders of capacity in the 
UK-France subsea electricity interconnector cable, which started recently, 
had sparked more interest in the French market. 
GRID OPERATOR RTE SETS TARIFFS 
The cost of moving power to and from France's borders is set out in tariffs 
published by grid operator RTE, based on a flat "postage stamp" system. 
Not all deals involve cross border transaction. Some companies, such as 
Spain's Endesa, have bought generation in France and therefore have a natural 
long position in the market against which to trade. 
Endesa trades under a joint venture with investment bank Morgan Stanley. 
"But overall there's a scarcity of uncommited power available to trade in 
France," said Amic. 
Over-the-counter prices in France are similar to German levels, traders said. 
"I would say on the day ahead, prices range from flat on Germany to a premium 
of 0.4 euros a megawatt hour," said one. 
Traders said signing the various contracts with RTE needed to start trading 
the market was often a lengthy process. 
"You have to sign a balancing management agreement and import/export 
agreements, and then everytime you want to deal with a new counterparty you 
have to notify RTE," said a trader.

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


BRAZIL: INTERVIEW-Brazil's Copel prime privatisation target.
By Walter Brandimarte

04/11/2001
Reuters English News Service
(C) Reuters Limited 2001.

SAO PAULO, April 11 (Reuters) - Brazil's Copel power company, a giant 
integrated electricity generation, transmission and distribution utility, is 
a role model for the sector and its privatisation should spark great 
interest, Copel's president said. 
Ingo Hubert, Finance Secretary of southern Parana state who is also president 
of Cia Paranaense de Energia (Copel) said when the company goes on the 
auction block later this year, competition should be stiff.
Copel serves nine million people in Brazil's fifth richest state. It has 18 
power plants with an overall capacity of 4,550 megawatts (MW) and has 4,200 
miles (6,700 km) of transmission lines. It is the owner of Parana's wholesale 
electricity market, and at the same time has mighty generation units. 
"That's where the great investors' interest comes from. Actually, Copel today 
is what most (power) companies will be five years from now," Hubert said in a 
recent interview. 
"Without generation, distributors become California," Hubert said referring 
to an acute power crisis in the U.S. state, where many power distribution 
companies suffered huge losses due to a hike in natural gas prices. "So, 
integration is the solution." 
He said constantly rising demand for energy in Parana, which even surpasses 
the national power market's annual growth of 4.5 percent a year, had helped 
Copel close 2000 with a profit of 430 million reais ($201 million). 
And privatisation would only improve things: "We see that the model of the 
power sector is incompatible with state companies, which remain small, cannot 
acquire new bases for operation...do not have access to capital markets as 
other firms do." 
Parana state government announced licensing for consulting firms to evaluate 
the company earlier this year, effectively kicking off the firm's 
privatization process. 
The sale should take place in the second half of this year and analysts 
estimate that the government's stake - 31 percent of the company capital 
which includes 59 percent of voting stock - is worth at least 1.4 billion 
reais ($654 million). 
Although the government has not yet chosen consultants to evaluate Copel and 
create a privatisation model, some points are already clear for the 
government. 
The company will be sold off in one chunk of shares with all the core 
business units in generation, transmission and distribution. 
"There is an understanding that privatisation in one bloc boosts the value of 
the company. This is the decision, unless modeling proves otherwise, which I 
think is difficult." 
However, 23 non-core units of Copel, including in telecommunications and 
sanitation, are not up for grabs. Those other assets are united under the 
roof of one company in the Copel holding. 
Hubert noted that he was keeping in touch with many interested companies, 
local and foreign, but singled out Belgium's Tractebel , that already has 
holdings in the region and is interested in an expansion. 
Other big hitters that may be interested in buying Copel are Electricidade de 
Portugal , AES Corp , Duke Energy and Enron Corp. .

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


Renegotiate both phases of Dabhol: Godbole panel
Our Regional Bureau Mumbai

04/11/2001
Business Standard
1
Copyright (c) Business Standard

The much awaited interim report of the Maharashtra government-appointed 
Madhav Godbole committee has recommended that both phases of the Enron
-promoted Dabhol power project be renegotiated. It has also recommended that 
the rate of return be linked to a fixed rupee-dollar exchange rate as this 
would bring down tariffs. 
The report was submitted to Chief Minister Vilasrao Deshmukh today morning. 
In an attempt to preserve confidentiality, only five copies of the report 
have been prepared, political sources in the state said. The copies would be 
submitted to the CM, deputy chief minister, energy minister, minister of 
state for energy and the chief secretary.
The Godbole committee was constituted by the Maharashtra government to review 
the Dabhol power project in the state following criticism that the power 
produced was bleeding the MSEB. 
It is reliably learnt that the committee was split on certain 
recommendations. The basic bone of contention was the various concessions and 
waivers granted to the Dabhol project. The committee is also believed to have 
stated that it was not empowered under the Commission of Enquiry Act or the 
Evidence Act to get all the documents pertaining to the project as well as 
summoning all the people, whose submissions would have made a real 
difference. 
Rumours abound in political circles that the committee had blamed certain 
politicians responsible for bringing the power project to the state. However, 
the committee was divided on the issue but ultimately decided not to name any 
politician, sources said.

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