Kenny's comments are absolutely false or, at best,  grossly misleading.  We 
need to respond to him.

The NUMBER ONE problem we have in California that is delaying our proposed 
power plant developments is securing ERCs.  My discussions with Calpine 
indicate that ERCs are their biggest problem as well.  (And in case someone 
hasn't noticed, the two most active developers in CAlifornia are Enron and 
Calpine.)  Air quality laws are definitely slowing us down, and slowing 
others down, which keeps the new, cleaner plants from being developed.  As I 
have mentioned before, this is actually making air quality worse in that the 
older, dirtier plants are running more.  Further, if you do the math, we will 
probably never make up for the dirty air that is created by keeping the dirty 
plants in business because of grandfathering, while the clean plants don't 
get done because of ever more rigorous BACT standards and lack of ERCs.    

Having said that, I do not agree that we should send a message that we want 
to relax or suspend the standards.  (However, getting 2ppm plants on line, 
which will put out of business the 100+ppm plants - as Calpine indicated to 
me happened in Texas - makes the point that maybe a relaxation or suspension 
is the environmentally appropriate thing to do.)  All in all, though, I 
believe that sucha common sense approach will go nowhere in California 
because the little people in the regulatory positions as well as the public 
will make sure that we pay for such a message.  Having said that, I will 
repeat the key things that we should be promoting, in my opinion:  1.)  stop 
the EPA from tightening the BACT standards to ever increasing levels of 
insanity.  (GE will not guarantee the present, and new, EPA requirement of 
2ppm, which EPA "determined" with no new operating data.  They just did it 
because they could.)  2.)  Stop making up rules for RACT adjustments.  (Kelly 
Brodbeck is working very hard, for example, to develop a program in the Bay 
Area to retrofit boats with clean burning engines to create ERCs.  A high 
level staff guy at BAAQMD "believes" that we should be RACT adjusted, 
probably making the program uneconomic.  There isn't even unanimity for this 
position on his staff.  However, this position if it sticks is irresponsible 
in light of the fact that the boats can just keep on doing what they are 
doing.  We are creating ERCs, which the BAAQMD will take a portion of in 
their haircut, and in using the ERCs, we will eventually put out of business 
the dirtier plants.  So, our program gets RACT adjusted and the air gets 
dirtier...)  3.)  Allow for payment of mitigation fees in lieu of buying 
ERCs.  There is precedent for that, but this has to be run through the SIP 
and the EPA.  Again, the in-lieu fees can be used for gov sponsored ERC 
developments (e.g., electric lawn mowers, electric water heaters, etc.), 
which will clean the air.  I am aware that Sandy is working with the CA 
legislature on this.  Go Sandy!




	Sandra McCubbin@ENRON
	05/11/2001 09:32 AM
		 
		 To: Samuel Wehn/HOU/ECT@ECT, David Parquet/SF/ECT@ECT
		 cc: 
		 Subject: California says clean air not power crisis cause

so what is the problem? CARB says there isn't one!   Think we need to 
schedule some educational meetings?
----- Forwarded by Sandra McCubbin/NA/Enron on 05/11/2001 09:30 AM -----

	Mary Schoen
	05/04/2001 12:37 PM
		 
		 To: 
		 cc: 
		 Subject: California says clean air not power crisis cause




Friday, May 4, 2001
?

California regulators told congressional lawmakers on Thursday that clean air 
regulations are not to blame for the state's electricity shortages and said 
new legislation seeking to ease air quality rules was unneeded. 
Speaking at a House Commerce Energy and Air Quality Subcommittee hearing, the 
head of the California Air Resources Board repeatedly said environmental 
regulations should not be suspended for the sake of electricity. 
"Air quality laws are not interfering with California's ability to bring new 
generation on line and run existing power plants at maximum capacity," said 
Michael Kenny, executive officer of the board. 
When asked by Democratic lawmakers on the panel about a provision in a 
pending electricity bill, the California regulator said the state did not ask 
for a relaxation of clean air rules and did not need the change. 
"We believe that air quality-related sections of the legislation are 
unnecessary," Kenny said. 
Rep. Joe Barton, the Texas Republican who chairs the energy subcommittee, 
said the measures allow flexibility to states for the temporary suspension of 
environmental laws. He said the key point of his bill is to ensure the lights 
stay on in California this summer. 
The Golden State expects to face threats of blackouts starting this month, 
when air conditioning use accelerates. 
Objections raised by Kenny to the Barton bill included disagreement on a 
section allowing the U.S. Environmental Protection Agency to waive, when 
asked by a state, the requirements of the federal Clean Air Act pertaining to 
nitrogen oxide emissions. 
Kenny said the state already gives flexibility on the issue and contended the 
legislation would go too far and be problematic. 
"The waiver applies to all new generation facilities in the state and does 
not allow for consideration on a case-by-case (generating plant by generating 
plant) basis, where unique local factors can be weighed," said Kenny.