FYI.  This is the presentation that the Brattle Group---a consulting group 
that Edison has long used on gas issues in California---gave last week to the 
legislative committee investigating wholesale gas prices at the California 
Border.  The day following this presentation (which was followed by a 
presentation by the California PUC's FERC lawyer), the committee called El 
Paso and Dynegy to respond to Brattle's and the CPUC FERC lawyer's 
presentations.  Also attached is the best synopsis of the hearing that I've 
seen in the press.

Best,
Jeff
******************************************************************************
****************************************************
Competing evidence clouds Calif. investigation

Prompted in part by the California Public Utilities Commission, the 
California Assembly
has been scrutinizing the role that interstate pipelines have played in the 
state,s current
energy crisis. In the efforts to find a smoking gun, legislators have leaned 
heavily on a
report prepared by The Brattle Group, a consultancy commissioned by utility 
Southern California
Edison to dig up evidence of market power abuse.

But the state,s biggest transporter of gas to California -- El Paso Natural 
Gas -- is not
ready to take the rap. The pipeline has commissioned its own study, which it 
recently presented
as evidence that it has not circumvented any laws or regulation.

As reported in both the trade press and national media, SoCal Ed and the CPUC 
are pointing
the finger of blame at El Paso for alleged manipulation of California border 
prices through
affiliate deals and capacity hoarding. And exhibit A in their case against El 
Paso is The Brattle
Group,s study of the California market.

Richard Zeiger, a spokesman for Assembly Member Darrell Steinberg, chairman 
of the
California Assembly Judiciary Committee, told Gas Daily that The Brattle 
Group,s market
study proved that the surge in gas prices at the California border was not 
caused by normal
market forces (GD 4/20). His remarks followed an oversight hearing during 
which Assembly
members questioned Dynegy and El Paso officials about their involvement in 
the California
market.

El Paso presented a different version of events to the Assembly. In a report 
presented to
legislators, a research group hired by El Paso concluded that a convergence 
of factors, not a
conspiracy, caused the price run-up.

Lukens Consulting Group, a Houston-based consultancy, was retained by El Paso 
to conduct
work on several fronts. In its study of the California market, Lukens 
concluded that the
increasing convergence of the gas and electricity businesses was one of the 
main culprits in the
California gas price imbroglio.

Assemblyman John Campbell, a Republican member of the oversight committee, 
said he
"didn,t see any smoking gun" in either report.

"We had our committee hearing, and we certainly had a lot on the Brattle 
Study and a little
on the Lukens study. To some degree, I,m not sure that the California 
legislature is the best
place to adjudicate the differences between these two studies," Campbell 
said. "I believe FERC
is looking at this situation " and it would seem to me that that,s the 
appropriate place."

Campbell said that the CPUC had been prodding the California legislature to 
give support
to its claims of market power abuse by pipelines. "It,s being pushed 
basically by the Public
Utilities Commission here, which believes that there was collusion" by 
pipeline companies to
push up gas prices in California, he said.

The CPUC, Campbell suggested, sought satisfaction before the California 
assembly when
it had failed on the federal level: "There,s a concerted effort, not just on 
natural gas but on other
things here in California, for entities and organizations here to point the 
finger elsewhere for
the problems that we,re having in this state and I think you,re seeing some 
of that with the
public utilities commission."

Whether either report wins over the public incensed by high natural gas 
prices is a different
matter entirely. In the meanwhile, the dueling California market studies seem 
to have taken
on a life of their own.

The Brattle Group Study, for instance, has become the center of a heavily 
litigated effort to
force FERC to compel the release of market data by California market 
participants. Following
on a request by SoCal Ed, which said it needed additional data to round out 
The Brattle Group
report, FERC Chief ALJ Curtis Wagner issued subpoenas to the other three 
major pipelines that
serve the state as well as to Sempra Energy Trading.

Several parties resisted FERC,s call for market information, saying the 
requested data
contained commercially sensitive information. FERC allowed the discovery 
process to move
forward but only after attaching strict data protection rules restricting 
access to evidence
(GD 4/23).

Critics of the pipeline industry have already suffered one setback in their 
case. The commission
recently dismissed the CPUC,s claim that El Paso rigged the auction of a 
large block of
pipeline capacity in favor of affiliate El Paso Merchant Energy. In 
addressing the California
Assembly, representatives of Dynegy said that FERC,s recent ruling on the 
California border
controversy obviated the need for more investigation.

The controversy, however, is far from over. FERC last month also ordered a 
hearing into
whether El Paso Natural Gas and its affiliates manipulated capacity to drive 
up the price of gas
delivered into California (GD 3/29). That hearing is likely to take place 
this summer. (RP00-
241, et al.) NH

----- Forwarded by Jeff Dasovich/NA/Enron on 04/26/2001 05:23 PM -----

	Douglas.Porter@sce.com
	04/19/2001 11:36 AM
		 
		 To: jeff.dasovich@enron.com
		 cc: 
		 Subject: Sacramento Pres Final 4_13_01(projected).ppt


Per your request, attached are the presentation slides from yesterday.

Douglas Porter, Senior Attorney
Southern California Edison Company
(626)302-3964
(626)302-3990(fax)
douglas.porter@sce.com(See attached file: DRT2486.PPT)
 - DRT2486.PPT
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