Note the quote from Sibley - "California is giving deregulation a bad 
name......"
Peggy
---------------------- Forwarded by Peggy Mahoney/HOU/EES on 08/11/2000 01:31 
PM ---------------------------


<fyi@mailman.enron.com> on 08/11/2000 10:19:49 AM
To: <pmahoney@enron.com>, <meberts@enron.com>, <fwanders@enron.com>
cc:  
Subject: Industry News: Despite Woes In California, Other States Push 
<B>Electricity</B> <B>De ...


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Headlines:
Despite Woes In California, Other States Push <B>Electricity</B>
<B>Deregulation</B>

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  Despite Woes In California, Other States Push <B>Electricity</B>
<B>Deregulation</B>

Aug. 10, 2000
Dow Jones Online News
(Copyright (c) 2000, Dow Jones & Company, Inc.)

  CHICAGO -(Dow Jones)- <B>Electricity</B> <B>deregulation</B> has
suffered a setback
in California as the state grapples with short supply and rising prices.
But other states are pushing ahead with opening their <B>power</B> markets
to
competition, saying their approach should avoid the problems plaguing
the state which led the nation down the <B>deregulation</B> path four
years
ago.

  California has seen its <B>power</B> market roiled by heat waves that
left
the state scrambling to meet demand, and by soaring prices in San Diego
and southern Orange County, the first region of the country to have its
<B>power</B> market completely <B>deregulated</B>.

  "California is giving deregulation a bad name," said Texas state Sen.
David Sibley, a Republican who helped craft the bill to deregulate that
state's power industry. "But I still feel good about the bill we passed.
I feel even better about it."
  Deregulation backers outside of California said that state's
experience has been sullied by two basic shortcomings: insufficient
power generation to cover the state's demand and the exposure of retail
customers to market rates before a competitive retail market had
emerged.
  By contrast, Texas expects to have plenty of power generation on hand
when it opens its retail power markets to competition on Jan. 1, 2002.
  Unlike California -- where uncertain market conditions, local
opposition and, until recently, insufficient power prices have kept
power plant developers waiting in the wings -- Texas has attracted
billions of dollars in new power-plant investment.
  More than 10,000 megawatts will be added to the Texas grid before
competition begins, according to reports on new power plants. That's an
increase of about 20% over the state's current generating capacity.
  "The bill they passed did not send the right signals to the market,"
Sibley said of California, a Texas legislators visited before addressing
the issue in 1999. "We learned from California what we did not want to
do."
  Like Texas, Michigan hopes its success in attracting power-plant
developers to the state will help it avoid California's problems when it
allows customers to start choosing their power providers on Jan. 1,
2002. According to Gary Kitts, chief administrative officer at the
Michigan Public Service Commission, attracting independent power
producers is a key element for creating healthy competition and prices
at the retail level.
  Michigan is only in the early stages of writing the rules that will
restructure its power markets, but major developers already have begun
to show interest in building new plants in the state.
  Only days after the state passed its restructuring bills this spring,
Dallas-based Panda Energy International Inc., a privately held company,
announced plans to build a 1,000-megawatt plant by late 2004.
  Two new merchant plants already have broken ground, and three more are
in the planning stage, Kitts said.
  Likewise, Ohio regulators are hoping new power plant development will
spark healthy competition at the wholesale and retail level when
competition debuts Jan. 1, 2001.
  "We have quite a bit of generation going in the next year," said Ed
Hess, chief of the electricity division at the Ohio Public Utility
Commission.
  Ohio companies like Cinergy Corp. (CIN) and FirstEnergy Corp. (FE) are
either planning new Ohio generators or have recently brought new plants
on line.
  Like Michigan, Ohio companies won't have to sell off their plants as a
condition of deregulation and expose themselves to wholesale price
spikes as California utilities have had to do. Also, the state probably
won't see wholesale price caps similar to a $250 per megawatt-hour cap
approved last week by California's grid operator, Hess said.
  While caps can protect consumers from bloated wholesale power prices
in the short term, they can worsen the problem ultimately by deterring
development of the new power plants needed to correct supply shortages,
said Sam Rendazzo, a lawyer who represents an Ohio industrial users
group.
  "You're basically damping the pricing that developers are looking
for," he said. California is "perhaps the most dramatic evidence of a
market that's not functioning."
  In addition to counting on new generation, deregulation advocates
outside California also plan to insulate consumers from wholesale price
swings until competitive retail markets exist.
  Under the Texas restructuring law, utility rates are frozen until the
debut of competition. At that time, rates will drop 6% and hold there
for three years or until a utility has shed 40% of its customers to
competing retail suppliers.
  "There will be no authority to change rates until competition exists,"
said a Texas Public Utilities Commission spokeswoman.
  Michigan will also freeze its rates, Kitts said - for three or five
years, depending on the customer, in hopes giving competitive markets
time to develop.
  Nevertheless, California's high-profile woes are making it harder to
push deregulation elsewhere.
  Oklahoma, for example, has set a target of mid-2002 for the start of
retail competition. But the state has yet to work out the details in
legislation. The Oklahoma House of Representatives defeated a bill in
the final hour of this year's session, and a lawmaker said California's
problems will make deregulation a tougher sell in 2001.
  (Compiled from Dow Jones Newswires and other sources)
  Copyright (c) 2000 Dow Jones&Company, Inc.
  All Rights Reserved.


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