Grid Lock Our energy transport system is horrible. Just the way many 
utilities like it.
Forbes, 05/11/01

US Sen. Feinstein Urges Hearings On FERC 'Improprieties'
Dow Jones Energy Service, 05/11/01

U.S. Physical Gas Cash Prices Fall; No Load Weekend
Dow Jones Energy Service, 05/25/01

FOCUS Brazil real to remain pressured due to energy crisis/political concerns
AFX News, 05/25/01

Vice Pres Cheney Sees Wood As New FERC Chairman - NYT
Dow Jones Energy Service, 05/25/01

INDIA: Enron's woes make Indian power firms anxious.
Reuters English News Service, 05/25/01

Enron Unit's Sales, Costs Rise With Power Prices, Paper Says
Bloomberg, 05/25/01

India Enron Panel Lacks Authority to Solve Dispute, Expert Says
Bloomberg, 05/25/01



Companies People Ideas
Grid Lock Our energy transport system is horrible. Just the way many 
utilities like it.
BY Daniel Fisher and Lynn Cook

06/11/2001
Forbes
080
Copyright 2001 Forbes Inc.

Our energy transport system is balkanized and horribly inefficient. 
Unfortunately, many of the incumbent utilities want to keep it that way. 
The Bush energy plan hits hard on increasing production. That alone won't 
solve the nation's power crunch. "Supply is not the only issue," says 
Michelle Michot Soss, director of the Energy Institute at the University of 
Houston. "The issue is bottlenecks."
Some of these bottlenecks are political. A lot of them are created by 
incumbent utilities that do not welcome competition. 
Florida, for example, whose demand for electricity is growing at about 3.7% a 
year, is a net importer of energy. It generates around 24% of its power in 
aging oil-fired plants that should be replaced with more efficient 
combined-cycle generators. These burn natural gas in a turbine and use the 
hot exhaust gases to create steam, which spins a second turbine; they spew 
out less particulate and consume about a third less energy. 
So why doesn't Florida get efficient power plants? First, the state has only 
one main gas pipeline, though others are working their way through the 
regulatory process. More vexing is a state law, zealously defended by Florida 
utilities, that bans outside competitors from building combined-cycle plants 
larger than 75 megawatts--enough to juice 75,000 households--on the dubious 
theory that they waste water. Duke Energy tried to challenge the law with a 
500-megawatt plant in New Smyrna Beach. FPL Corp. (parent of Florida Power & 
Light) fought the plant all the way to the Florida Supreme Court and won. 
Florida's screwy power-plant law is just one example of the byzantine 
regulations that stymie efforts to make the nation's energy grid more 
efficient and prices more competitive. From laws that protect utilities 
against more efficient rivals to outdated state regulations that discourage 
the construction of transmission lines, these choke points either waste 
energy or make it impossible for energy to get where it should go. 
A series of state laws in the 1920s laid down the monopolies on grids. They 
were codified in the Public Utility Holding Company Act of 1935, a populist 
law that identified bigness with badness in the electricity business: To 
avoid federal scrutiny and regulation, most utilities decided not to operate 
outside their own state boundaries; rate setting fell to the states. But even 
as wholesale electricity markets have been deregulated, utilities can still 
bat away outsiders by reserving their own transmission lines for "native 
load." This allows them to keep an open lane on the energy highway, as it 
were, to rush electricity to certain customers when their demand suddenly 
spikes. 
In such areas as the Southeast, the owner of a transmission line has a pretty 
free hand in calculating what its native load is. So Southern Co., which owns 
utilities in Georgia and four neighboring states, can determine how much 
power to let into its territory. 
Southern Co. defends the rule, saying its primary job is ensuring customers 
get all the power they need. "The marketers would like to schedule another 
10,000 megawatts of power to go across our lines tomorrow," says William 
Newman, a senior vice president. "It's not going to happen. The system wasn't 
designed for it." 
Enron disagrees. Utilization of its natural gas pipeline system increased 50% 
in the five years after the gas market was deregulated. Steven Kean, head of 
government regulations at the Houston-based giant, thinks similar gains are 
possible in electricity if companies like Southern are forced to hand over 
control of the grid to independent regional boards that will determine how to 
allocate power flows and where to build new lines. The utilities "don't want 
to accept the economically pure solution," he says. "Once utilities have been 
adequately compensated for their stranded costs, then it's time for them to 
shut up, sit in the corner and let the economists and lawyers work out the 
details." 
Lawyers and economists making decisions for us? That doesn't sound like 
deregulation. But there is a case to be made for separating control of power 
lines from control of other utility assets. Phillip G. Harris is chief 
executive of PJM (it stood for Pennsylvania-Jersey-Maryland), a regional 
power line organization. Since this independent system operator was formed in 
April 1997 and six local utilities ceded control over transmission lines, 
reliability has gone up and prices down, he says. Where Southern Co. will 
only add transmission capacity if it has a firm contract in hand, PJM can 
order lines to be built. Its member companies are spending $311 million over 
the next three years on new lines to increase the flow from power-rich to 
energy-poor areas. 
Last May temperatures hit the highest levels since 1930 at the same time as 
15,000 megawatts of PJM's 59,000 megawatts were out of service for 
maintenance. As the peak load rose to 51,000 megawatts--7,000 more than was 
available within PJM--power streamed in over a dozen entry points. Prices 
topped out at $432 a megawatt hour. That's about four times what you are 
probably paying for residential service, but it stands in contrast to spikes 
in the thousands of dollars in California and the Midwest during similar 
crises. 
Unfortunately, what works inside PJM doesn't transfer to Los Angeles, much 
less to Manhattan. Different rules regarding electricity transactions and a 
shortage of transmission lines make it difficult to export electricity across 
the Hudson River. When Hydro-Quebec tried to build a power line across Long 
Island Sound in 1999, Connecticut nixed the idea. Ostensible reason: the 
possibility of harm to oyster beds. Real reason: Folks in New Haven asked, 
what's in it for us--and didn't see any clear benefit to them. There is, 
unfortunately, no mechanism for buying off losers in these deals, such as 
property owners near, but not under, the power line. So they hire lawyers and 
talk solemnly about oysters. 
California's bottleneck is on Path 15, a 500,000-volt transmission line that 
links the northern and southern halves of the state. Path 15 can't 
accommodate the flows of power needed when the weather is cool in San 
Francisco and hot in L.A. But the legal and financial chaos in California, 
with the state on the verge of taking over much of the transmission system, 
discourages investors from backing an increase in capacity. "If we put in 
good rules on how to operate transmission systems, you would see investment," 
says Lawrence Makovich, an analyst with Cambridge Energy Research Associates. 
"The problem is right now there is no such plan." 
Enron is trying to force the Federal Energy Regulatory Commission to take 
charge, so far to little avail. In a case pending before the U.S. Supreme 
Court, Enron accuses FERC of abdicating its responsibility to do for 
interstate trading of electricity what it did for trading of gas. 
But forcing FERC down that path will be difficult. Natural gas producers 
needed interstate pipelines to get to big markets in the North, which needed 
the gas. But incumbent (and politically connected) electric companies have no 
such incentive to stimulate a national market in electricity. "There's not a 
single incentive in the entire U.S. to relieve congestion," states Jeanine 
Hull, president of Strategic Energy Advisors and a former power-company 
lawyer. "Ask yourself this question: If you had a chance today to retain your 
monopoly or compete, which would you choose?"

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


US Sen. Feinstein Urges Hearings On FERC 'Improprieties'

05/25/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

WASHINGTON -(Dow Jones)- U.S. Sen. Dianne Feinstein, D-Calif., called Friday 
for Senate hearings to investigate "possible improprieties" involving the 
Federal Energy Regulatory Commission's relations with the industry it 
regulates. 
"Despite evidence of manipulation and price gouging in both the electricity 
and natural gas markets in California and the West, and a finding by FERC 
last November of 'unjust and unreasonable' (electricity) rates, the 
commission has failed to take the actions necessary to bring reliability and 
stability to the marketplace," Feinstein said in a letter to Sen. Joe 
Lieberman, D-Conn., seeking hearings by the Senate Governmental Affairs 
Committee.
Feinstein cited a report in The New York Times Friday in which FERC Chairman 
Curt Hebert related a phone conversation with Ken Lay, chairman of Enron 
Corp. (ENE). Hebert alleged that Lay offered to bring his influence to bear 
with the Bush administration to maintain Hebert as chairman if the regulator 
would adopt policy positions favored by Enron. 
Hebert is quoted as saying he was "offended" by the conversation. Lay 
disputed Hebert's account. 
The Times article also quoted Vice President Dick Cheney as saying Texas 
utility regulator Pat Wood has "got to be the next chairman of the FERC" to 
address problems in electricity markets. Cheney's remark is slated for 
broadcast by the public television program "Frontline." 
"While Mr. Lay's account (of the conversation) differs, it is clear that the 
citizens of the United States, especially the people of California, who are 
suffering from FERC's failure to do its job, deserve an investigation and 
full public hearing into what happened," Feinstein said in the letter to 
Lieberman. 
"FERC is a $175 million-a-year agency charged with regulating the energy 
industry, and it would be unconscionable if any of the nation's electricity 
traders or generators were in a position to be able to determine who chairs 
or becomes a member of the commission," Feinstein wrote. 
"Since FERC has refused to fulfill its legally mandated function under the 
Federal Power Act to restore 'just and reasonable' electricity rates, we need 
to ask whether undue influence by the companies that FERC regulates has 
resulted in its failure to act," the letter said. 
Feinstein seeks a broad investigation into FERC, and not just an airing of 
the Lay-Hebert exchange, which Feinstein said she sees as an example of "a 
definite problem," the senator's spokesman, Howard Gantman, said. 
"There are very close relationships between FERC and the industry it 
regulates. Some of those relationships could be improper," Gantman said. 
Lieberman, who has requested that the General Accounting Office investigate 
FERC's response to the California electricity crisis, will become chairman of 
the Governmental Affairs Committee when Democrats assume the Senate majority 
in about two weeks. 
There was no immediate response from Lieberman's office regarding Feinstein's 
letter. 
-By Bryan Lee, Dow Jones Newswires, 202-862-6647, bryan.lee@dowjones.com

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


U.S. Physical Gas Cash Prices Fall; No Load Weekend

05/25/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

HOUSTON -(Dow Jones)- U.S. natural gas physical prices fell Friday ahead of a 
no-load holiday weekend, widening considerably the differential to the New 
York Mercantile Exchange futures board. 
Traders saw storage buying providing the only hint of demand.
Also, several pipelines in Texas, along with El Paso's Tennessee Gas and PG&E 
Citygate, held system-wide operational flow orders on the high inventory 
resulting from storage. Those orders also sent prices downward, traders said. 
Demand remains slight with only hints of sustained hot weather sighted in the 
next two weeks,traders said. 
With few demand fundamentals in place, traders saw few utilities in the 
market. 
The Nymex June futures contract settled at $3.973/MMBtu, down 8.1 cents, the 
first time the front contract has fallen below $4/MMBtu in nearly 10 months. 
Traders pointed to 17,000 option puts at $4/MMBtu supporting the June 
contract. Options expired Friday; the June contract expires Tuesday after the 
Memorial Day weekend. Traders expect a $3.80-$4/MMBtu range on Tuesday for 
expiration. 
Also, Enron Online will keep its trading boards open for the holiday. 
Prices for the June contract are in the same range as they were a year ago, 
when driving heat and competition for gas during May pushed prices upward. 
At the benchmark Henry Hub in south Louisiana, prices were in a 
$3.76-$3.90/MMBtu range, down 25 cents-35 cents. 
Deals at Transcontinental Gas Pipe Line Station No. 65 were done at 
$3.82-$3.94/MMBtu, down 25 cents-32 cents. 
At the Arizona-California border, El Paso's prices fell $1.40-$2.55/MMBtu to 
a $9.80-$11.50 closing range. Western electricity prices weakened again 
Friday for the holiday, and traders said pipelines into California were 
showing high inventories. 
At the PG&E Citygate, prices fell $4.25-$5.50 to a $3.90-$4.40/MMBtu closing 
range on the reported operational flow order. 
Buyers paid $3.74-$3.90/MMBtu at the Katy hub in East Texas, down 23 cents-32 
cents. At Waha in West Texas, buyers paid $3.59-$3.75, down 30 cents-39 
cents. 
-By John Edmiston, Dow Jones Newswires,713-547-9209; 
john.edmiston@dowjones.com

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


FOCUS Brazil real to remain pressured due to energy crisis/political concerns

05/25/2001
AFX News
(c) 2001 by AFP-Extel News Ltd

SAO PAULO (AFX) - The real is likely to remain under pressure in the 
short-to-medium term due to concerns about the impact of the energy shortage 
crisis on the economy and ongoing political worries, analysts said. 
They said the energy shortage problems are scaring away direct foreign 
investment, while political concerns ahead of the presidential elections next 
year are expected to come much more to the forefront once the Argentine debt 
swap operation is completed at the start of next month.
The real was at 2.3480 against the dollar in afternoon trade, down about 20 
pct from the end of last year. 
Analysts said the weakness of the real combined with a generally-accepted 
slowdown in GDP growth as a result of the energy crisis has complicated the 
task of the central bank's monetary policy committee Copom. 
The Copom raised its base interbank Selic rate to 16.75 pct from 16.25 pct 
earlier this week, in what was regarded by many analysts as a preventive move 
against the inflationary impact of the real's depreciation. 
In a recent report, Banco Santander Central Hispano SA said it has revised 
its forecast for Brazil's 2001 GDP growth to 2.2 pct from 4.1 pct previously 
due to the possible impact of the government's energy rationing plan. 
BSCH said it is also cutting its 2002 GDP growth estimate to 3.0 pct from 4.5 
pct previously. 
BSCH also revised its forecast for the real's level against the dollar to 
2.30 by end-2001 from 2.13. 
"Argentina's problems and their effects on the flow of capital to Brazil... 
added to energy rationing and stronger perceptions of political risk hinder a 
significant appreciation of the real, although we consider a possible gradual 
solution to the Argentine crisis," BSCH said. 
Analysts said central bank intervention yesterday and today in the foreign 
currency market in an effort to stem the real's depreciation is clear 
evidence of the central bank's concerns about the local unit. 
The central bank today sold 2.0 mln dollar linked-bonds maturing on March 14, 
2002 after selling 1.0 mln dollar-linked bonds yesterday. 
"We don't know how far the real will go. Everything points to a situation in 
which the dollar will move to the 2.45 level against the real in the short 
term and never return to the 2.0 level it was at at the start of the year," 
Brazilian Institute of the Economy (IBRE) director Renier Garcma said. 
Direct foreign investment has slowed down this year as a result of the 
concerns surrounding Brazil. 
The government has already revised its estimate of direct foreign investment 
in Brazil this year to 19 bln usd from 24 bln previously. Direct foreign 
investment in the four months to April was 6.6 bln usd, about half the levels 
posted a year earlier. 
Enron Corp recently suspend investments of 600 mln usd in the Brazilian 
energy sector, citing regulatory concerns, while the government decided to 
postpone indefinitely the privatisation of Cia Energetica earlier this month 
due to the energy crisis. 
The minimum price for the sale of Cesp Parana was set at 1.7 bln reals, with 
a number of foreign companies lined up to bid. 
"Investors are shying away from carrying out operations in the country. The 
energy crisis has had a disastrous impact on Brazil's image; the country risk 
has risen and companies are opting for saver markets," IBRE's Garcma said. 
Analysts said the energy crisis has strongly affected the image of President 
Fernando Henrique Cardoso and has therefore strengthened the opposition's 
position ahead of next year's presidential elections. 
They said corruption allegations involving former and current senior 
officials in the government and the alleged breach of vote secrecy rules at 
the Senate resulting in proceedings for the dismissal of former Senate 
chairman Antonio Carlos Magalhaes and senator Jose Roberto Arruda have 
complicated the political scenario. 
Yesterday, Senator Arruda resigned from the Senate, while a local TV news 
channel reported Magalhaes will resign next week and attack Cardoso. 
"The government seems to have lost direction," one analyst said. 
Earlier this month, Congress rejected a petition presented by the left-wing 
Workers Party (PT) to set up a joint Congress-Senate commission to 
investigate corruption in the private and public sectors after 20 
parliamentarians belonging to parties within the ruling coalition withdrew 
their support for the motion. 
Opposition deputy Aloizio Mercadante at the time said the PT was preparing 
legal action against the government and the deputies who withdrew their 
support for the petition, alleging they were offered financial incentives to 
do so. 
Analysts said fears remain that the opposition will attempt to revive the 
corruption commission issue, further complicating the governability of the 
country in an already delicate moment. 
bl/cdo/lbc/as For more information and to contact AFX: www.afxnews.com and 
www.afxpress.com

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


Vice Pres Cheney Sees Wood As New FERC Chairman - NYT

05/25/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

WASHINGTON -(Dow Jones)- Vice President Richard Cheney expects Texas Public 
Utilities Commission Chairman Pat Wood to become chairman of the Federal 
Energy Regulatory Commission, according to Friday's New York Times. 
In an interview for an upcoming episode of the PBS series Frontline, Cheney 
says, "Pat Wood's got to be the new chairman of the FERC, and he'll have to 
address" various problems in electricity markets, according to the Times 
article, part of a joint effort with the Frontline program.
The article says current Republican FERC Chairman Curtis Hebert received a 
call from Enron Corp. (ENE) Chairman Kenneth Lay this year prodding him to 
back a national push for retail electricity competition and faster access to 
the power transmission grid in exchange for Enron's support of Hebert in his 
new job. 
It quotes Hebert as saying, "I was offended." 
Lay, one of President George W. Bush's largest campaign contributors, 
provided the White House with a list of preferred candidates for FERC posts 
and had access to the White House energy policy task force chaired by Cheney, 
the article says. 
Wednesday the Senate Energy and Natural Resources Committee approved Wood and 
Nora Brownwell of the Pennsylvania Public Utilities Commission, Bush's 
nominees to fill two empty seats on FERC's five-member board. The full Senate 
has yet to approve them. 
It would be up to the president whether to replace Hebert as chairman. In the 
Times article, Hebert said no one has told him he would be replaced. 
-By Campion Walsh, Dow Jones Newswires; 1-202-862-9291; 
campion.walsh@dowjones.com

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


INDIA: Enron's woes make Indian power firms anxious.
By Himangshu Watts

05/25/2001
Reuters English News Service
(C) Reuters Limited 2001.

NEW DELHI, May 25 (Reuters) - India's private power producers demanded on 
Friday that the federal government intervene in Enron Corp's bitter row with 
a local utility and state clearly if it wants the U.S. energy giant to stay 
in India or quit. 
"The government needs to decide whether we want Enron or not. In case they 
don't want Enron, they should spell out the reasons for it," Harry Dhaul, 
director-general of the Independent Power Producers' Association of India, 
told Reuters.
But Federal Power Secretary A.K. Basu said Enron and the Maharashtra State 
Electricity Board (MSEB) had to resolve their differences over the $2.9 
billion project themselves. 
"Basically the Maharashtra government and Dabhol have to sort it out," Basu 
told reporters after a meeting with Wade Cline, the chief executive officer 
of Enron India. 
Basu stuck to the federal government's stand that it would help implement any 
proposal emerging from negotiations between the Dabhol Power Co, 65-percent 
owned by Enron, and the MSEB. 
Dhaul said the fate of Dabhol, India's largest direct foreign investment and 
biggest power project, would determine the future of domestic and foreign 
private investment in power and other infrastructure projects. 
"It is an important issue. It is a benchmark for all future infrastructure 
investments of $1 billion plus." 
On Thursday, Enron said the MSEB cancelled a disputed power-buying contract 
just five days after the Houston-based energy firm moved to pull out of the 
project. 
WANT PRO-ACTIVE APPROACH 
Dhaul said the federal government should intervene in the dispute between 
Enron and the utility. "We want a pro-active approach in supporting 
independent power producers." 
Basu said the government had advised Enron to thrash out the matter with the 
negotiation committee set up by the Maharashtra government. The committee is 
due to meet on May 29. 
Cline refused to answer questions from reporters and only said the company 
would not renegotiate the power-buying contract on the basis of a committee 
set up by the state government. 
"We won't renegotiate on the basis of the Godbole Committee report," he said. 
The committee, chaired by a former bureaucrat Madhavrao Godbole, has 
suggested that the tariff be re-negotiated to make it cheaper and to remove 
the dollar linkage which resulted in a steep increase each time the rupee 
fell against the dollar. 
Dabhol has come under fire because of the relatively high cost of its power. 
Critics object to it charging 7.1 rupees per kilowatt hour versus 1.5 rupees 
charged by other suppliers. 
Dabhol Power Co is building India's largest power plant with a total capacity 
of 2,184 MW. 
The first phase of the $2.9-billion project with a capacity of 740 MW began 
operating in May 1999. The second phase that will add 1,444 MW of capacity, 
is expected to be completed this year.

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


Enron Unit's Sales, Costs Rise With Power Prices, Paper Says
2001-05-25 13:00 (New York)


     Portland, Oregon, May 25 (Bloomberg) -- Enron Corp.'s
Portland General Electric reported first-quarter earnings rose
10 percent as high electricity prices pushed up both sales and
costs for the Oregon power producer, the Oregonian reported.
     The company earned $43 million, the paper said. Revenue from
wholesale power sales was $480 million, three times the year-
earlier period, even as costs to buy electricity almost doubled.
     PGE's power plants produce less than half the electricity
needed to supply its 728,000 Oregon customers, forcing the company
to buy power on the same markets into which it sells, the paper
said. Dry weather is cutting hydropower resources, and easing
wholesale prices could make it more difficult for the company to
profit from power sales outside the state, the paper said.
     Edison International's Southern California Edison, which has
filed for bankruptcy, and two California agencies, one of which is
now defunct, owe the company $128 million, the paper said. The
company is pursuing collection, the paper said, citing Chief
Financial Officer James Piro.



India Enron Panel Lacks Authority to Solve Dispute, Expert Says
2001-05-25 07:16 (New York)

India Enron Panel Lacks Authority to Solve Dispute, Expert Says

     Mumbai, May 25 (Bloomberg) -- Indian negotiators lack the
authority to solve a dispute that has shut down Enron Corp.'s $3
billion power plant, India's single biggest foreign investment,
said a former member of the negotiating committee.
     The negotiators will meet Enron officials on Tuesday next
week, though any proposals made will not be binding on either
Dabhol Power Co., 65 percent owned by Enron, and the Maharashtra
State Electricity Board, the official said. Maharashtra, Dabhol's
sole customer, has refused to pay some of its power bills.
     ``Where is the guarantee Enron and the government will accept
what the committee recommends,'' said R.K. Pachauri, director-
general at the Tata Energy Research Institute, a research
organization. Pachauri said he quit the committee because it was
being asked to renegotiate the project, when it was set up to
solve the payment dispute.
     Maharashtra yesterday served Dabhol notice canceling the
power purchase contract, six days after Dabhol gave the board
notice it was set to pull out of the project in six months.
     The board has refused to pay Dabhol 3 billion rupees for
power supplied in December and January, saying the bills should
reflect a 4 billion rupee penalty it imposed on the company Jan.
28 for failing to supply power at full capacity.

                            Meeting

     Other India officials said the two parties can't afford not
to negotiate as there is too much at stake.
     Mahrashtra and Dabhol serving each other notices is ``simply
legal maneuvering,'' said Kirit Parikh, an economist on the prime
minister's economic advisory council.
     ``It won't affect the process of finding a solution because
``the ground reality is neither Enron nor Maharashtra can afford
not to find a compromise'' to the dispute, Parikh said.
     The government needs a solution as it could be left footing
the bill.
     India's federal and state governments, which have guaranteed
the board's payments for power and some of the loans to help fund
the project, may have to pay Dabhol more than 170 billion rupees
($3.6 billion) if it terminates the 2,184 megawatt power project.
     ``We are going back to Maharashtra tomorrow to work on the
problem.'' Dabhol managing director Wade Cline said. Cline was in
New Delhi to meet A. K. Basu, secretary to the ministry of power.
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