USA: EOTT pays $120 mln for assets from Enron affiliate.
Reuters English News Service, 07/02/01

India: The Dabhol controversy revisited
Business Line (The Hindu), 07/02/01

India: Some US cos keen on Dabhol project
Business Line (The Hindu), 07/01/01

No change in Maha govt stand on Enron: CM
Press Trust of India Limited, 07/01/01

Elbows Fly in Contest for New Power Plants
The New York Times, 07/01/01

FOCUS on ENERGY / Deregulation proving a mixed bag elsewhere
Houston Chronicle, 07/01/01

A flood of fund-raisers? / Community wonders how to help as arts groups
assess damage
Houston Chronicle, 07/01/01

Lessons for Asia in California's Energy `Crisis': Patrick Smith
Bloomberg, 07/01/01

Enron Chief Lay May Visit India to Discuss Dabhol, Paper Says
Bloomberg, 07/01/01

Power Plays: The High-Energy Portfolio
SmartMoney, 07/01/01

Global economic spiral to pull India's growth to new lows: analysts by Biman
Mukherjee
Agence France-Presse, 07/01/01

Enron Chairman to visit India on ninth or 10th July
Press Trust of India Limited, 06/30/01

Lenders can run DPC: IDBI chief
Business Standard, 06/30/01

Army chief, ex-Enron exec, will still have say
Houston Chronicle, 06/30/01

Bush aide joined energy talks while holding industry stocks
Houston Chronicle, 06/30/01

No Rove Conflict, White House Says; Bush Aide Sat In on Energy Meetings
The Washington Post, 06/30/01

Army chief, a former Enron exec, won't step away from energy issue
Associated Press Newswires, 06/29/01

Western Wholesale Power Trades Fri Above FERC Price Limit
Dow Jones Energy Service, 06/29/01

USA: EOTT pays $120 mln for assets from Enron affiliate.

07/02/2001
Reuters English News Service
(C) Reuters Limited 2001.

HOUSTON, July 2 (Reuters) - EOTT Energy Partners L.P. said on Monday that it
has paid $120 million for energy assets from affiliates of energy marketer
and trader Enron Corp. .
Houston-based EOTT has bought a hydrocarbon processing complex in Morgan's
Point, Texas and a liquids pipeline grid system, as well as a natural gas
liquids storage facility that was previously operated by an Enron affiliate
under a lease financing arrangement.
At the same time, Eott has entered into a 10-year tolling agreement for
production from the hydrocarbon processing complex. It has also arranged a
10-year storage and transportation agreement for use of the pipeline and
storage systems. The agreements are with an Enron affiliate.
Dana Gibbs, president and chief operating officer of EOTT Energy Corp., a
general partner of EOTT Energy Partners, said in a statement that the
acquisition will add to earnings and provide for stable cash flows without
exposure to the commodity markets or prices.
He also noted that the deal will increase the company's EBITDA (earnings
before interest, taxes, depreciation and amortization), a measure of positive
cash flow, by about $20 million on an annualized basis.

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

India: The Dabhol controversy revisited

07/02/2001
Business Line (The Hindu)
Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) -
Asia Intelligence Wire

THE Dabhol Power Project has been a subject of controversy ever since it
started. This writer was among those who pointed out the rationality of the
negotiations carried out with the Dabhol Power Company, which led to the
Maharashtra Government accepting a very high financial liability.
In an article entitled "Why do Governments twist and turn?" in Business Line
dated January 20, 1997, I had specifically referred to the various changes in
the negotiating stance taken by the Government of Maharashtra.
This was with particular reference to the judgment of the Bombay High Court
on the Enron issue.
Referring to the Committee under Mr Gopinath Munde, the former Deputy Chief
Minister of Maharashtra, the judges of Bombay High Court had quoted the
Committee as saying: "The entire negotiation with Enron is an illustration of
how not to negotiate, how not to take a weak position and how not to leave it
to initiate to the other side."
The Munde Committee had gone hammer and tongs at the lack of competitive
bidding by the Pawar Government. It also hinted darkly at "several unseen
factors and forces, which seem to have worked to get Enron what it wanted..."
Presenting his Deputy's report to the Assembly, the then Chief Minister, Mr
Manohar Joshi had observed with a flourish: "The speed with which this
agreement (what Mr Pawar had got) must be categorised as 'Enron came, Enron
saw and Enron conquered"'.
The Maharashtra Government is now all ready for another bout of negotiations
with the Dabhol Power Company (DPC). The circumstances are, of course,
different now.
As a result of an extremely painstaking analysis by the Madhav Godbole
Committee, a detailed report has been drawn up which, among other things,
recommends a renegotiation to reduce the unconscionably high tariff levied by
the DPC and agreed to by the Government of Maharashtra.
It is important to learn the lessons of the previous negotiations before any
renegotiation is taken up. I am aware that Dr Godbole, with his tremendous
experience in matters of this nature, would not leave any stone unturned to
ensure that the maximum benefit is obtained for the country and the State of
Maharashtra.
I am, however, restating some of the conclusions which I have drawn, based on
my perusal of the judgment of the Bombay High Court and other relevant papers
in regard to the negotiations by the Kirit Parekh Committee.
In particular, the Bombay High Court judgment points out that the speed with
which the renegotiations were conducted by the Parekh Committee showed
amazing alacrity. Let me quote the judgment in extenso: "The speed with which
the negotiating group studied the project, made a proposal for renegotiation,
which was accepted by Dabhol, and submitted its report is unprecedented. The
negotiating group was constituted by the Government of Maharashtra on
November 8, 1995. It was asked to submit its report to the State Government
by December 7, 1995.
The Committee, we are told, examined the project, collected data on various
similar other projects as well as internal bids, including data on a similar
project executed by Enron in the UK, held considerable negotiations, settled
the terms for the project revival, got the consent of Enron and Dabhol to the
same on November 15, 1995, just within a week of its constitution, and
submitted its exhaustive report along with data and details to the Government
of Maharashtra on November 19, 1995, just 11 days after its formation, much
before the December 7 1995 deadline by which it was required to submit the
same.
The speed at which the whole thing was done by the negotiating group is
unprecedented. What would stop one to say, as was said by the Chief Minister
in the context of the original PPA, Enron revisited, Enron saw and Enron
conquered, much more than what it did earlier.
I am confident that this story will not be repeated now. Surely, Dr Godbole
will ensure that thoroughness will not be sacrificed at the altar of speed
this time.
It is obvious that the Maharashtra Government stands to lose substantially if
the tariffs are not renegotiated downwards. At the same time, we must concede
that a negotiated contract is very difficult to go back upon.
In its earlier negotiations, the DPC was assisted by a team of competent
lawyers. It is to be hoped that the Godbole Committee will call on an equally
competent set of lawyers from our side. Negotiations in respect of power
projects are very much the domain of corporate lawyers, who have specialised
on the subject.
The Godbole Committee would do well to utilise the best legal talent
available in the country and, if necessary, from abroad if it is to succeed
in wresting some gains.
It is important to stress that Government and its representatives cannot and
should not wash their hands off the DPC case.
Their counter-guarantee to the payments of the Maharashtra Government and the
MSEB is a perpetual reminder of the fact that, if the Maharashtra Government
defaults, it will be ultimately the Union Government that has to carry the
can.
If the Centre has any reservation on the subject, the right time for raising
doubts was at the stage of giving the counter-guarantee and not now.
The Government reneging on a guarantee can have serious repercussions on the
credit rating of the country itself. It can also affect future FDI flows if
it gets to be known that the word of the Government is not to be trusted.
It is ultimately a test of economic maturity for a country to stand by its
agreements, however mistakenly they may have been entered into - unless they
be entered into through misrepresentation of facts.
It is difficult at this stage to allege misrepresentation of facts by DPC,
when all the presentations by the DPC were fully in the public domain and the
Government walked into the guarantee trap with its eyes open.
If the DPC terminates its contract, not only the Government but also the
financial institutions and banks which have been major lenders to the DPC are
liable to grievous losses. The sums involved run into thousands of crores of
rupees.
The Government has, therefore, to somehow find a way out of the Dabhol
dilemma. No cost is too high to sustain the country's reputation as one which
stands by its solemn agreement.
The Government, through such instrumentalities as the NTPC and Power Trading
Corporation, can definitely arrange to buy power, which is surplus to
Maharashtra State and wheel it to other States in need.
There is admittedly shortage of power, particularly peaking power, in many
States. What is lacking is the transmission capability to move power from
Mumbai to regions, such as Karnataka, Tamil Nadu and so on.
One advantage of Dabhol is that it supplies peaking power, which the country
is short of. It should not be beyond the ingenuity of the experts in the
Power Ministry and the CEA to work out a mechanism by which the Power Trading
Corporation can take power from Maharashtra and supply the same to other
States in need of power, particularly peaking power.
Once this is done, the plant load factor of Dabhol power can be improved, and
the effective tariff charged to MSEB reduced. This involves an act of
financial and electrical engineering, which cannot brook any further delay.
In my view, it is on the successful resolution to the problem of evacuation
of power from Maharashtra to other States and payments, therefore, that the
resolution of the Dabhol dilemma will finally rest.
New Delhi should not be dismayed by the immediate problems involved in the
arrangement for transmission of surplus power from Maharashtra to other
States.
The alternatives to this solution are too costly to contemplate. Let us hope
that out of the Dabhol problem will emerge the unified energy market for
India.
I am stating this possible solution not to oversimplify the challenge before
the Godbole Committee, but rather to point out that the solutions are
possible given the political will and tenacity to pursue them.
The DPC will, of course, be up to all its usual tricks to force the
renegotiators to concede more than they should. But so much of the background
of the dispute is in the public domain that the renegotiators will find it
difficult to make any further concession to the private investor.
The renegotiators must stick to their brief to reduce the tariffs.
In this, there is hope in tripartite solution, in which the Centre, the
Maharashtra Government and the DPC become participants to buy the surplus
power and wheel it to other States. Only such a solution will show a
sustainable way out of the current imbroglio.
S. Venkitaramanan

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

India: Some US cos keen on Dabhol project

07/01/2001
Business Line (The Hindu)
Copyright (C) 2001 Kasturi & Sons Ltd (KSL); Source: World Reporter (TM) -
Asia Intelligence Wire

MUMBAI, June 30. SOME US companies have shown interest in taking over the
Dabhol power project if Enron pulls out, according to the acting Chairman and
Managing Director of IDBI, Mr S.K. Chakrabarti.
Mr Chakrabarti told newspersons after the seventh AGM of the institution that
Dabhol Power Company (DPC) had enough resources to repay its debts till
September. In fact, the company had repaid part of the principal of the first
phase also. He was confident that the asset would remain a standard one.
He said if no buyer was interested in taking over the project and Enron
exits, IDBI would take over the project and appoint an operations and
maintenance contractor to run it.
The institution had pulled up the engineering consultants, Stone and Webster,
for delaying their report on the cost implications of different options of
completing the project. It had also pulled up Enron for not informing it of
the EPC contractors terminating their agreements on time, Mr Chakrabarti
said.
He said the institution was in direct touch with the EPC contractors to get
them back to resume construction work at the project. "We are holding talks
with them on the issue and we are optimistic," he said.
On the Modi Rubber open offer issue, the IDBI chief said his institution did
not have much of a say in it as its stake in the company was very small. "The
decision in that issue is being taken by UTI and LIC, which have substantial
holdings. We are meeting on Monday in Delhi where we will decide on the
future course of action," he said.
Our Bureau

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

No change in Maha govt stand on Enron: CM

07/01/2001
Press Trust of India Limited
(c) 2001 PTI Ltd.

Mumbai, Jul 1 (PTI) Maharashtra (north India) Chief Minister Vilasrao
Deshmukh Sunday said there was no change in the Democratic Front government's
stand on the Enron issue.
Speaking to reporters after an award function here, Deshmukh said his
government continued to adhere to its earlier demand of reduction of power
tariff since it was in no position to purchase all the electricity produced
by the Enron-promoted Dabhol power project (DPC) at the current rates.
He said the seven state governments which have reportedly "agreed" to
purchase power from DPC, had "only displayed a willingness to purchase power
only at a reduced price."
The state government had urged the Godbole committee to decide the issue of
reduced tariff among its other points of reference while dealing with US
power giant Enron, the chief minister said.
(THROUGH ASIA PULSE) 01-07 2001

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

Long Island Weekly Desk; Section 14LI
Elbows Fly in Contest for New Power Plants
By JOHN RATHER

07/01/2001
The New York Times
Page 3, Column 1
c. 2001 New York Times Company

WITH the pressure on to build new power plants on Long Island before rising
demand for electricity outstrips available supplies, a major private energy
company is butting heads with the Long Island Power Authority over where some
of the new power will come from.
The energy company, American National Power of Houston, which goes by the
name Brookhaven Energy locally, wants to spend more than $300 million to
build a 580-megawatt natural gas-fueled power station near Yaphank to supply
what it says would be minimally polluting, low-cost electricity to the region.
''Long Island has at least the second highest rates in the country, and it's
also being served by very old and very inefficient generators,'' said Robert
J. Charlebois, an American National Power vice president. ''We think there's
an opportunity to be the least-cost provider of electricity and compete
favorably.''
But the Long Island Power Authority is resisting the effort.
American National Power says that LIPA, which is supposed to encourage
competition among suppliers in accord with New York's deregulated market, is
actually trying to prevent outsiders from building plants that it says would
deliver electricity more cheaply than the plants operated by LIPA's main
power-producing partner, Keyspan Energy.
''They are motivated to keep the competition out,'' said Joseph S.
Fitzpatrick, American National Power's senior vice president for development.
LIPA denies the accusation, saying American National Power's proposed plant
fails practical tests by being too far east and would cost $100 million to
$150 million to tie into a transmission system geared toward more heavily
populated western Suffolk and Nassau counties.
''There has been no planning on their part for the transmission needs,'' said
Bert J. Cunningham, LIPA's spokesman. ''They are leaving us to pick up the
tab and make their power deliverable.''
LIPA, meantime, is backing a proposal by Keyspan to build a 250-megawatt
gas-powered generator near Spagnoli Road in Melville that would use oil as a
backup fuel. The site, in addition to being near an existing Keyspan gas
line, is next to an electrical substation, minimizing the cost of a
transmission tie-in, Mr. Cunningham said.
Mr. Charlebois said his company estimated that the cost of connecting its
plant to the grid would be less than $10 million. He added that LIPA had been
less than cooperative in supplying information needed for a required
transmission study.
''It's been like pulling teeth,'' he said. ''It's been quite frustrating.''
Mr. Cunningham said LIPA cooperated. ''Maybe they felt our response time was
longer than they anticipated,'' he said.
But another company, Caithness Energy of Manhattan, suggested that it too had
difficulty obtaining timely information from LIPA for a transmission study.
Caithness had proposed a 750-megawatt power station, nearly the size of the
defunct 800-megawatt Shoreham nuclear plant, at a site about a mile from the
American National Power site.
Last week a Caithness manager of project development, Daniel McBrearty, said
the proposal was inactive.
In an exception to its resistance to outside entrepreneurs, LIPA is endorsing
a project by Florida Power and Light to build a 79-megawatt gas unit next to
a Keyspan generating station in Far Rockaway, Queens. The project, which
would be Florida Power and Light's debut in LIPA's service area, would
substitute for a now-lapsed proposal by Enron for a barge-mounted generator
in Far Rockaway.
LIPA, a state agency that holds 15-year contracts to purchase power produced
by former Long Island Lighting Company power stations now owned by Keyspan,
is also seeking proposals for up to 79 megawatts of new generation capable of
using gas and oil at the Shoreham site, which is already connected to the
power grid. A Keyspan proposal for a 250-megawatt plant at the site is also
in the state's regulatory queue.
Mr. Cunningham said the authority planned to promote additional plants of up
to 79 megawatts and one larger plant at sites yet to be announced. The
79-megawatt limit is one megawatt short of triggering intensive Public
Service Commission siting and environmental review, meaning that proposals
for these smaller plants can proceed more quickly.
Long Island's newest electrical generator came on line last week, just in
time to help LIPA squeak through a summer when power supplies may be pushed
to the limit.
But the generator, a 44-megawatt gas-powered unit hurriedly installed by the
New York Power Authority at the former Pilgrim State psychiatric hospital
near Brentwood, will be too small to provide more than temporary relief for
what energy officials say is an impending Long Island power shortage. ''It's
a bridge to get us through until larger plants are built,'' said Joseph
Leary, a state power authority spokesman.
The generating plans at Shoreham and other Eastern Suffolk sites would be
advanced by construction of a gas pipeline from Connecticut under Long Island
Sound to the Shoreham site.
The pipeline, proposed by Islander East Pipeline Company, a partnership of
Keyspan and Duke Energy, would bring natural gas from a major new field near
Sable Island off Nova Scotia to Long Island, competing with current supplies
piped in from the Gulf Coast and western Canada. The companies expect the
pipeline, which would be about 50 miles long, to be in service by 2003.
David J. Manning, Keyspan's senior vice president for corporate affairs, said
the pipeline would strengthen the company's gas system for residential,
commercial and industrial customers on eastern Long Island, where the company
is trying to make inroads in a home heating industry still dominated by oil.
He said the new gas supplies would also increase gas competition and reduce
prices.
Two other operators have also expressed interest in building pipelines
linking Connecticut and the Shoreham site. But Keyspan and Duke appear to be
in the lead and formally applied to the Federal Energy Regulatory Commission
last month for permission to proceed.
Proposed spurs would bring the pipeline to the Yaphank site where American
National Power wants to build and to the former Navy property in Calverton,
where another energy company, AES Long Island, is proposing a 510-megawatt
gas-powered plant. The Town of Riverhead now owns the property.
Harry Davitian, an AES Long Island vice president, said the prospect of new
gas supplies and the availability of sites explained the eastern Long Island
plant proposals. ''It's very difficult to find sites in the western part of
Suffolk, and Nassau is very built up,'' he said. AES Long Island is a
subsidiary of AES, which owns 160 power plants in 22 countries.
Farther west, a proposal by PPL Global, another major energy company, to
build a 300-megawatt gas-powered plant near Kings Park continues to face
stiff local opposition.
LIPA, meantime, must decide as early as this summer whether to exercise a
one-year contractual option that began in May to purchase the aging Keyspan
plants. The plants include units in Northport, Port Jefferson, Glenwood
Landing, Island Park and Far Rockaway that run on natural gas and oil.
The New York Public Interest Research Group has identified the Northport and
Port Jefferson power stations as among the greatest air polluters in the
state. Mr. Manning of Keyspan disputed the assertion, saying more than $60
million was spent over the last 10 years to reduce sulfur dioxide and nitrous
oxide emissions to levels far below state and national averages.
Gordian Raacke, the executive director of the Citizens Advisory Panel, a LIPA
watchdog, described the plants as ''old clunkers'' that would make a bad
investment. But Richard M. Kessel, LIPA's executive director, has said,
''Whoever owns those plants rules the Island.''
As LIPA pondered, American National Power was forging on with its plans for
Yaphank despite lacking LIPA's endorsement. The company filed a formal
application with the New York Public Service Commission last week to build
the 580-megawatt plant on 28 acres south of Exit 66 on the Long Island
Expressway near Yaphank.
The filing sets in motion a 12-month timetable for public hearings leading to
a state ruling on whether the plant will be built. In the long queue of power
companies that have expressed at least preliminary interest in building new
plants on Long Island, American National, which is a subsidiary of British
company with worldwide energy interests, now moves to the front of the line
in New York's regulatory scheme.

Chart: ''Power Plants in the Pipeline'' Major electrical generating plants
proposed for Nassau, Suffolk and LIPA's service area in Queens. 1.AES Long
Island 510-megawatt gas-powered plant at site of former Calverton Naval
Weapons Industrial Reserve Plant. 2.Long Island Power Authority Seeking
proposals for up to 79-megawatt gas and oil dual-cycle plant at site of
former Shoreham nuclear plant. 3.American National Power 580-megawatt
gas-powered plant. 4.Caithness Energy 750-megawatt gas-powered plant. 5.PPL
Global 300-megawatt gas-powered plant. 6.New York Power Authority 44-megawatt
gas-powered plant at Pilgrim State property. 7.Keyspan 250-megawatt
gas-powered plant. 8.Florida Power and Light Up to 79-megawatt gas-powered
unit. Map of Long Island highlighting areas of proposed electrical generating
plants.

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

NEWS
FOCUS on ENERGY / Deregulation proving a mixed bag elsewhere
LAURA GOLDBERG
Staff

07/01/2001
Houston Chronicle
4 STAR
1
(Copyright 2001)

California continues to draw headlines as a case study for what can go wrong
with electricity deregulation.
With rolling blackouts, state investigations of power price manipulation and
all the fuss surrounding California, few may realize residential consumers in
a dozen other states have been living under deregulation schemes, a few for
several years, without catastrophic results.
As some Texans get electricity from new companies under a pilot program
starting Friday and others wait until the full market opens Jan. 1, it is
natural to look to other states with questions.
Did residents save on electricity costs? Did consumers rush to try out new
companies? In short: yes and no. But for reasons that might not seem obvious.
Since states have deregulated in distinct ways, are subject to different
economic forces and are part of different power transmission grids, strong
comparisons can't always be made. But it is worth looking at what's happening
elsewhere.
In many states, lawmakers who drafted deregulation schemes figured the change
would take years to work and sometimes built in years- long transition
periods.
Those transitions often come with mandated rate caps or cuts for existing, or
"incumbent," power providers. Those caps and cuts mean residents save on
electric bills but in some cases also made it difficult for new competitors
to come in and undercut longtime electricity providers.
So residents saved, but competition - what backers of deregulation say spurs
lower prices and and better service - didn't thrive.
About 40 million residential, commercial and industrial customers in the
United States theoretically have an option to choose alternative retail
electric providers. Some 1.8 million, representing 4.5 percent, have done so,
according to Cambridge Energy Research Associates, a Massachusetts-based
consultant.
"Many of those 40 million customers have choice in name only, as no one has
signed up to offer an alternative to the utility," said Amy Biehl, an
associate director at Cambridge who specializes in retail electricity issues.
"Because of the way the market is structured, they cannot offer savings or
make a margin."
On Jan. 1, Texans will join the ranks of those able to buy electricity from
competing providers. In Houston, that means consumers can leave Reliant
Energy HL&P. Those who don't switch will keep getting Reliant service but not
under the HL&P banner.
Come January, Texans who don't switch providers will see an immediate rate
cut.
An average residential customer in Texas should save about $78 next year
because of the rate cut, according to a recent report by the Energy Institute
at the University of Houston's C.T. Bauer College of Business.
The way Texas crafted its reduction allows enough room and flexibility for a
competitive market to develop, said Commissioner Brett Perlman of the state
Public Utility Commission.
"If you don't get the prices right on the default service, then the market
doesn't work," he said.
Experiences in Pennsylvania and Massachusetts bear him out. It is especially
true when considering that rising fuel prices make it more expensive to
produce electricity. Pennsylvania, which began consumer choice in early 1999,
is widely cited as one of deregulation's success stories.
The office of Gov. Tom Ridge boasts that the state's electricity rates are
now below the national average. Before, they were 15 percent higher.
Consumers and businesses, the office says, have saved $3 billion on
electricity.
Even though a chunk of the savings is attributable to rate caps, the issue of
competition brought them on, said Glen Thomas, chairman of the Pennsylvania
Utility Commission. Caps were negotiated with utilities as part of the
state's deregulation plan.
Pennsylvania has seen more customers try out new providers than in other
states.
About 550,000 customers, about 10 percent, at any point in time are being
served by competitive providers, said Sonny Popowsky, the state's consumer
advocate.
On top of that, another 250,000 residential customers were assigned to a new
provider.
Popowsky stressed that Pennsylvania hasn't really deregulated, but
restructured: Incumbent providers are selling at capped rates, in some
instances for the next decade.
Popowsky said he believes electricity restructuring in his state has
succeeded "fairly well."
"Because of our rate caps, all of our customers are either better or at least
no worse off than they were in 1996," Popowsky said.
But there have been bumps.
As wholesale electricity prices rose, alternative providers found it more
difficult to compete against utilities' capped rates, and many have left the
market, Popowsky said.
One utility had problems with a cap and asked state regulators for an
increase. The request was denied and a settlement struck.
Another utility said that in some cases it is buying wholesale energy at
higher costs than it can sell it back to customers.
It won't ask for a rate increase but is finding other ways, such as through
new kinds of services, to make up the money.
David Kleppinger, a lawyer who represents the Industrial Energy Consumers of
Pennsylvania, said savings were available through competitive providers in
1999 and 2000. But this year, industrial users began returning to their old
providers as wholesale prices rose.
"There's disappointment right now that wholesale prices don't allow
competitors to really be active in the market," he said. "Presumably, that
will change."
A Procter & Gamble plant in Mehoopany, Pa., that makes consumer goods such as
Bounty and Charmin, switched providers, saving enough money that it was
"worth our while," said Chuck O'Hara, the plant's energy affairs manager.
As a residential consumer, O'Hara signed up with new providers in 1999 and
2000. The first year, he saved money. The second, he found an even better
offer.
But his supplier left the market, and he is back with his original utility
after he couldn't find a better deal.
Last year, he estimated, he saved about a month's worth of electricity costs
by going with a competitive provider.
Was it worth it? O'Hara said that since he deals with energy for a living, he
thought it was. But if he didn't, he said, he isn't so sure it would have
been.
Like in Pennsylvania, consumers in Massachusetts saved money from rate caps -
more than $535 million in 1999.
The state, which started letting consumers shop for electricity in 1998, has
had less competition for residential service: As of March, fewer than 1
percent of consumers were getting electricity from competitive providers.
Consumers' electricity prices, after dropping steadily for 2 1/2 years,
recently increased as the cost of fuels used to make electricity rose. As
most utilities signed long-term contracts to buy wholesale power at good
rates, most would-be competitorshaven't been able to buy wholesale power
cheap enough to compete.
But state officials expect wholesale costs to fall as fuel prices stabilize
and new power plants come on line.
David O'Connor, the state's commissioner of energy resources, also predicted
there soon will be more retail competition because fuel prices also drove up
incumbents' rates.
Massachusetts lets incumbent providers raise electricity prices in the face
of rising fuel prices. Texas will do the same.
Massachusetts' electricity restructuring is working well in ways that aren't
yet apparent to residential customers, O'Connor said.
For one, he said, the state is drastically improving the supply of generating
plants, which should translate to lower prices for consumers.
The state purposely built in a transition period that lasts up to seven
years, he said.
John Hanger, president of Citizens for Pennsylvania's Future and a former
state utility commissioner, said success takes time.
"I don't think you can do this in a big-bang way," he said. "It requires,
really, leaders who are committed to building competitive markets and
understand there is actually a need for an active government role in order to
do that."
The trick, he said, is knowing when to be hands-off and when to be hands-on.
Gene Lockhart, president and chief executive officer of the NewPower Co.,
which is offering retail service across the United States, is "quite
optimistic and bullish" about the pace of energy deregulation.
He said he isn't surprised that switching rates are slow to take off, as much
time and education are needed.
"People just don't wake up and switch overnight," he said, adding that
sign-ups with NewPower, a joint venture of Enron Corp., IBM and AOL Time
Warner, for Texas' pilot program are ahead of expectations.
The outlook on deregulation isn't positive everywhere.
"It's really kind of a hot topic here again," said Terrence Mercer, a
spokesman for the Rhode Island Division of Public Utilities and Carriers.
"Three years into it, what was promised really hasn't come to fruition."
The idea was competition and lower rates. Instead, "the bills are slightly
higher, and there is no competition to speak of," he said.
Mark Cooper, director of research for the Consumer Federation of America,
argues the promises of deregulation were "bogus."
Electric restructuring was pegged to assumptions about natural gas, used to
make electricity, being cheap, he said. As natural-gas prices rose, the
so-called benefits, he said, went up in smoke.
"It hasn't done the harm that we've seen in California, but it hasn't done a
lot of good anyplace," he said.
In California's wake, states including Oklahoma and Nevada halted plans to
let consumers select electric companies.
One big difference from California that officials in Texas - and other states
- often cite is power-plant supply. Texas has a surplus of generating
capacity, while California doesn't.
Reliant hasn't participated in retail electricity markets outside of its home
state for two reasons. It wanted to focus on Texas, where it is marketing to
consumers outside of Houston.
And rules elsewhere don't allow for sufficient profit margins to warrant the
investment, said Waters Davis, president of Reliant Energy Retail Services.
"The future of retail electricity in the U.S. is based largely on the success
of the Texas market," Davis said.
"A number of other states in the last six to 12 months have put their
deregulation efforts on hold until they can find a successful model to
follow. I believe that Texas today has the best chance of any state."
...
State of deregulation
Schedule for the start of competition for residential customers:
Ariz. Early 2001
Ark.* 2003
Calif. Early 1998
Conn. Mid 2000
Del. Late 2000
Ill. Mid 2002
Maine Early 2000
Md. Mid 2000
Mass. Early 1998
Mich. Early 2002
Mont.* Mid 2004
Nev.* On hold
N.H. Mid 2001
N.J. Mid 1999
N.M.* Early 2007
N.Y. 1998-2002
Ohio Early 2001
Okla.* On hold
Pa. Early 1999
R.I. Early 1998
Texas Early 2002
Va. 2002-2004
W.Va.* On hold
*These states delayed their deregulation plans. New beggining dates are
listed.

Graph: 1. State of deregulation (p. 24, TEXT); Map: 2. Map of the United
States (p. 24)

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

LIFESTYLE
Shelby Hodge
A flood of fund-raisers? / Community wonders how to help as arts groups
assess damage
SHELBY HODGE
Staff

07/01/2001
Houston Chronicle
2 STAR
2
(Copyright 2001)

SOON after the city's performing-arts groups began tallying losses suffered
in the wake of Tropical Storm Allison, a number of community-minded people
began thinking fund-raisers.
Would there be black-tie dinners and benefit luncheons to help replace what
was lost? Would the bar be raised for gala chairs? Could we expect a flurry
of invitations to flood-relief events?
Actress Vanessa Redgrave sent a letter to the Alley Theatre offering her
services for flood-related fund raising.
The Houston Symphony, the Society for the Performing Arts, the Alley, Houston
Grand Opera and Houston Ballet each had losses of varying degrees. While
exact figures are yet to be determined, development directors and executive
directors agree that budgets are sure to be strained.
How these groups go about recovering from the financial loss varies.
The Society for the Performing Arts and Houston Ballet are both considering
holding benefits.
"At this moment, we are discussing what additional funding we are going to
need and what additional fund-raising events we can do. I would like to say
that we will probably do at least one," said Toby Mattox, SPA executive
director.
SPA, which had adjoining office space with the symphony in the basement of
Jones Hall, lost furniture, equipment, computers, current business records
and some subscriber records.
Even with losses in the hundreds of thousands of dollars anticipated, Mattox
said SPA would not ask major foundations for aid.
"We are going to need them to help us on a regular basis with our continuing
programs of education and outreach and presentation," he explained.
Further, SPA does not expect chairs of the annual fall luncheon and spring
gala to ratchet up their goals.
"I think it might be unfair to ask them to accept greater goals. There are
already very challenging goals as it is," Mattox said.
Houston Ballet managing director C.C. Conner and development director Patsy
Chapman are considering adding a fund-raiser, something apart from the
Nutcracker Market in November and the ball next spring.
Costumes and wigs from productions of "Giselle, Swan Lake" and "Cleopatra,"
as well as fabric for the ballet's 2002 production of "Peter Pan," were
damaged in the flooding at Wortham Theater Center. Several Houston Ballet
Orchestra instruments were lost, as well as "pointe" shoes, handmade ballet
boots and makeup.
As a result of inquiries, the company has established the Houston Ballet
Water Damage Relief Fund. Information is available at www.houston ballet.org.
Likewise, the Alley Theatre has posted information for those wishing to make
donations on its Web site at www.alleytheatre.org. Unsolicited offers of
service and contributions have been flowing in despite the Alley's low-key
approach to recovery.
"We don't want to actively solicit for flood relief . . . because we have
already been working on plans for changes in our theaters and renovations in
our theaters. We want to try to find the silver lining in this disaster and
continue moving forward on the plans that we already have in place," said
Paul Tetreault, Alley managing director.
The Alley's scene shop and Arena Theater were totaled by waters that entered
through the downtown tunnel system.
"It's not the way we were intending to renovate the Arena Theater, but we're
moving forward with it," Tetreault said.
The Houston Symphony was hardest hit of the performing-arts groups. Its
headquarters was under 28 feet of water for four days. In addition to losing
offices, floodwaters destroyed valuable music scores and irreplaceable
instruments.
Part of the staff is temporarily working at Three Allen Center in space
donated by Enron, with office supplies provided by PricewaterhouseCoopers.
In a written statement, Houston Symphony executive director and CEO Ann
Kennedy said, "The Houston Symphony is currently sorting through a myriad of
offers from artists around the world who want to help us. Houston will be
very excited when we announce our plans."
Pianist Andre Watts is one who has offered services.
Leslie Bennett, 2002 symphony ball chair, has upped the ante for her event
next March, saying, "It would make sense to put forth a superhuman effort for
this once-in-a-lifetime tragedy. . . . There is an underlying importance to
the ball that was not there before."
Houston Grand Opera continues tallying losses from production elements that
were stored in the soggy Wortham Theater Center basement and in underground
offices. The estimate is $1 million. But the company has no plans to organize
additional benefits, according to HGO development director Jon Gossett. He
said the time and effort required to stage a fund-raiser make it impractical.
"We feel that a more efficient way to deal with our financial losses is to
make fairly strategic requests of some people who can help us with the
situation," he said.
HGO general director David Gockley is optimistic that with insurance, the
city's rebuilding plans and FEMA programs, the company should recoup 60
percent to 70 percent of its losses.

Photo: Houston Ballet costumes get an airing after Tropical Storm Allison.
Several of the city's performing-arts groups suffered losses that will strain
their budgets this year.

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

Lessons for Asia in California's Energy `Crisis': Patrick Smith
2001-07-01 17:00 (New York)

Lessons for Asia in California's Energy `Crisis': Patrick Smith

     (Commentary. Patrick Smith is a former correspondent in Asia
and the author of `Japan: A Reinterpretation.' The opinions
expressed are his own.)

     Norfolk, Connecticut, July 1 (Bloomberg) -- India struggles
on with Enron Corp., Indonesia with P.T. Paiton and two dozen
other private-sector power providers. In one way or another, so
do Pakistan, the Philippines, and other emerging countries across
the globe, from Brazil to Russia. One hopes they're watching
California, for there's a lesson in the state's recent energy
crisis that is fundamental to all of them.
     It is hard to decide at this point which is worse: the onset
of California's energy problems or the unseemly way they have
begun to evaporate now that regulators have intervened with price
caps and increased scrutiny. Supplies are suddenly up, prices are
coming down, and the prospect of rolling blackouts appears to be
fading. Crisis? What crisis? Let's score an espresso before
heading back to the beach.
     It is plain enough by now that California's electricity
scare had much to do with manipulative interests in the energy
industry -- gas suppliers, pipeline operators, and the power
generators themselves. The experiment with deregulation in
California got under way with the swift, thoughtless passage of
industry-backed legislation in the autumn of 1996. It took less
than five years for the experiment to fail.

                            Bottom Line

     Given California's reputation as the vanguard state, where
everything happens first and everyone insists on maximum
individual freedom and minimum government interference, the
message couldn't be more ironic. While this isn't the death of
the deregulation god, California's crack-up has already begun to
bring it down from the heavens.
     Developing nations ought to take note: Deregulation is not a
panacea; turning the chronic, apparently intractable problems of
economic advancement over to private-sector corporations
preaching the marketplace's magic does not assure their solution.
Market-based strategies will have their place on the shelf,
certainly. But as an economic model, the approach will be one
among others from which to choose.
     This truth is the latest thing to go global, it seems to me.
In Europe, even British Prime Minister Tony Blair is stepping off
the ideological bus. It doesn't matter whether an enterprise is
public or private, he declared repeatedly during his recent
election campaign, as long as it gets the job done. It's
capitalism's version of Deng Xiaoping's old dictum about black
cats, white cats, and the catching of mice.

                         Driven by Fashion

     Even Enron might be thinking that idea over at this point.
In part because of its troubles in India, in part because of the
unwinding of the mess in California, where it has been a major
player, Enron's stock is down some 44 percent so far this year.
One does have to wonder if a limit hasn't been reached.
     It would be difficult to forget how dramatically the
privatization wave swept Asia 15 years ago -- a spinoff of the
Thatcher-Reagan revolution in the industrial democracies. You
could see even then that as a trend in government policy it was
too driven by philosophic fashion, had too little hard thinking
behind it -- and made almost no reference to local economic
conditions. It's ironic, given Prime Minister Mahathir Mohamad's
more recent attacks on the West, but Malaysia was especially keen
on turning everything down to its expressways over to private
operators.
     All too fast and too often ill-considered. In Indonesia, the
Wahid government is now saddled with agreements made under the
Suharto dictatorship that it can't possibly live up to. The worst
of them is with P.T. Paiton, a joint-venture generator that was
up to its ears in the cesspit of Suharto-era corruption,
according to an audit conducted late last year. In a market where
the state utility's average charge is 3 cents per kilowatt-hour,
Paiton's original contract -- since renegotiated -- gives the
company a kilowatt-per-hour tariff of 8.5 cents.

                      Expensive Distinctions

     Then there is Enron and its $3 billion Dabhol Power Co.
plant in Maharashtra state. A disputatious deal from its
inception nine years ago, it stands at this point as a metaphor
for the trend in policy that produced it: The once-solvent state
electricity board is headed toward bankruptcy, nobody else can
afford Dabhol's power, compromises are being negotiated, and
regulatory jurisdictions are still unclear.
     The fundamental problems are clear enough, at least, and so
are some of the solutions. Like California and many others who
hopped on the free-market train in the power sector, India leapt
before looking closely. Politically and administratively it
simply wasn't ready for Enron -- as the now-evident corruption
involved in getting the Dabhol deal signed attests. Neither did
India do its homework on the distribution side: Like Indonesia,
it never bothered to distinguish between those who genuinely need
power subsidies and those who don't but get them anyway.
     This last can be solved -- and the solution may involve
still more private-sector participation. A panel of experts now
recommends splitting state power distributors into rural and
urban suppliers and selling off the latter, so that subsidies can
be maintained where needed and otherwise removed. The date on
this report is May 2001 -- roughly a decade late, but let us not
dwell upon the timing.

                          White Elephants

     There are also now calls to investigate the Dabhol deal from
its origins onward: Who vetted this thing, who agreed to what,
when, and why? But along this long trail the story is more or
less universal. Little is likely to come of these demands, as
Anindya Mukherjee, my colleague in Bloomberg's New Delhi bureau,
advises. ``Too many people wanted this white elephant,'' he tells
me.
     Americans will have a hard time acknowledging the failure of
deregulation in California -- they are too wedded to the ideology
behind it. But India and other nations should be freer to draw
conclusions, and they can use California's crisis-that-wasn't-a-
crisis as their textbook.
     Industries, they should recognize, can't be expected to
regulate themselves -- all the less for the extreme emphasis now
placed on shareholder value. The notion that this is possible, to
say nothing of prudent, is a figment with few hard examples of
success, if any, to back it up. Without an adequate level of
oversight, California here we come.
     Equally, if there is to be a public benefit derived from
privatization, a competitive environment must be either preserved
or created. Whether this is even possible in the power sector, or
whether the industry is a natural monopoly, is an outstanding
question -- one that is especially important in developing
nations, where the need to balance social obligations in choosing
policies is most acute.

                             Monuments

     In the end, projects such as Dabhol may stand as monuments
to an era gone by anyway. As the power industry is deregulated
around the world, according to a recent report from Stratfor, the
Internet forecasting group, the search for maximum profits and
minimum risk will leave developing nations in the cold -- or the
dark. Long term, India, Indonesia, and numerous nations in the
same predicament -- rising demand, scarce capital -- will drop
out of the privatization game and revert to re-nationalized power
generators.
     The outline is already in place. AES, the U.S. power
provider, pulled out of a $2 billion project in Brazil in May;
Enron might eventually drop Dabhol and leave India -- as
Cogentrix, Electricite de France, and others already have.
Meantime, large, integrated power suppliers are pouring
investment into safer, more stable nations such as the U.S.
     That's the picture, Stratfor says. And it's grim. On the
other hand, is it time to look for a new model in any case -- to
conclude that what doesn't work in California may not work in
less developed economies, either?

Enron Chief Lay May Visit India to Discuss Dabhol, Paper Says
2001-07-01 01:09 (New York)

     Mumbai, July 1 (Bloomberg) -- Enron Corp. Chairman Kenneth
Lay may visit India in the second week of July to discuss the
future of its Indian unit, which is involved in a dispute with the
provincial government of Maharashtra, the Economic Times reported,
citing Madhav Godbole, the state-appointed chief negotiator.
     Dabhol Power Co., 65 percent owned by Enron, and the
Maharashtra State Electricity Board, have been locked in a row for
the past seven months over unpaid bills.
     India and the Maharashtra government may have to foot a 170
billion rupee ($3.6 billion) bill because of payment guarantees
and loans, if Enron carries through with its notice to cancel the
project.
     The Dabhol project may hold the key to further overseas
investment in India's power industry. Four foreign power
companies, including Electricite de France, Europe's largest, have
pulled out of Indian power projects worth $3 billion, citing long
delays and the slow pace of reforms.

Power Plays: The High-Energy Portfolio
By Jersey Gilbert, Odette Galli and Russell Pearlman

07/01/2001
SmartMoney
79
(c) 2001 SmartMoney. All rights reserved.

There are a hundred reasons why your electric bills are so high. Why the
price of gasoline is making it feel like 1977 all over again. Why nuclear
power is suddenly no longer just a Homer Simpson joke. You already know most
of them: skyrocketing demand. Power plant shortages. Sport-utility vehicles.
The grid. But there's one thing you really need to know above all else: How
can you profit from the Great Energy Crisis of 2001?
In these pages, we'll show you how to both make and save money. You'll
discover six great stocks poised to thrive in the new energy landscape.
You'll find out about the four best mutual funds that specialize in the
energy sector. You'll learn eight surprising ways to keep your own utility
bills down this summer. (Hint: There's a big guzzler in your garage -- and we
don't mean your SUV.) Finally, you'll witness SmartMoney's makeover of the
most outrageously wasteful house we could conjure up.
And don't worry. You won't have to build your own compost heap. We promise.
The future belongs to companies that are addressing our nation's insatiable
appetite for energy. These six do just that.
Stop what you're doing for a moment and think about wealth -- extravagant,
epic, over-the-top American wealth. Where does that money come from? Sure,
plenty of people have made fortunes in real estate, transportation and high
technology. But when it comes to producing truly epic American fortunes --
your Rockefellers, your Gettys -- you can't beat energy. Somewhere during the
Internet gold rush, investors somehow forgot about this crucial component in
every portfolio. Well, guess what? They've rediscovered it: Energy stocks
came back strongly in 2000; so far this year, the average one is up 9
percent, far outpacing the S&P 500. But the best news is that this
traditionally defensive sector still has lots of room for growth. These
stocks may not make you a Getty overnight, but for the next three or four
years, they have a great shot at outperforming the market. You've heard all
the commotion about brownouts, gas guzzlers and the imminent Californication
of the nation's power supply. This is one problem that won't be solved
overnight. Utility reserve margins are at their lowest levels in decades,
according to the Edison Electric Institute, and even with improved
efficiency, the U.S. will need more supply. If current trends continue, the
shortfall between the projected domestic electric supply and demand will be
32 percent in 2020, according to the Department of Energy. Electricity demand
alone is growing 1.8 percent a year. That means we'll need to generate
410,000 megawatts more per hour by 2020. But as John Hammerschmidt, a
portfolio manager and analyst at Turner Investment Partners, points out,
"Only 90,000 megawatts of new generation capacity has been approved for
construction over the next three years." Translation: Look for a boom in
power-plant construction.
Virtually all of those new plants will be natural gas-fired, resulting in a
35 percent increase in demand for gas used just to generate electricity. That
means that gas will continue to be in great demand, despite the Bush
administration's promotion of coal and nuclear power to solve the electricity
shortfall. After all, it took 15 years to build the last nuclear power plant.
It takes three to five years to build a coal-fired plant. But it takes only
two years to get a gas-fired plant up and running.
What about oil? "The world will need to find an additional 44 million barrels
a day by 2010," says hedge fund manager John Tozzi of Cambridge Investments,
assuming a modest 1.5 percent increase in demand and a 6 percent depletion
rate in known reservoirs. Both growth in demand and depletion rates have been
rising faster than that lately. As the charts on page 85 show, the shortages
of natural gas, oil and electricity we experienced last winter resulted from
conditions that have been building for some time. It will take more than a
few months to reverse those trends.
Sure, there are some potential problems for energy stocks on the horizon.
Some strategists worry that OPEC will jack up production and that California
and other states will lead a backlash against power merchants. Others fret
that high energy prices will slow the economy and reduce demand. But you
shouldn't confuse short-term volatility for changes in the fundamental
outlook. Yes, there will be corrections from time to time -- after all, this
is a sector that traditionally has the kind of volatility that would make a
tech investor feel at home. But we agree with Philip Kehl, Morgan Stanley's
E&P analyst, who says, "With long-term fundamentals as sound as they are,
there will never be a 'last time' to buy these stocks."
So which companies are best positioned to take advantage of all this? The
ones that are solving the shortages. Right now that means
exploration-and-production and oil-field-equipment companies, drillers,
independent power producers, power merchants and electrical-equipment
suppliers.
To find our picks, we looked for those companies that had a leading market
position in their core business or in their regions, but which were selling
at more-reasonable valuations than the best-known names -- Enron,
Schlumberger, Halliburton, Baker Hughes, Calpine -- which have already had a
strong runup. Finally, we looked for growth rates of at least 15 to 20
percent. Here are the six stocks that we deem most promising right now. All
prices are as of May 25, 2001.
Apache (APA) $59.49 Exploration and production is a notoriously risky
business. But many E&P companies pose much less risk to the investor,
especially when you consider that these stocks are among the cheapest in the
energy sector. They trade at a current P/E of 15, even though analysts expect
them to increase profits 45 percent on average this year. The apparent
paradox reflects the prevailing view that gas prices will slip back toward
$3.50 next year and oil will dip toward $25 -- and E&P companies are mainly
valued by the commodity price of their production.
But what if production rates are also increasing? That's the case with the
E&P stocks we like best, among them Anadarko Petroleum and Devon Energy
("Where to Invest in 2001," January). Right now Apache is among the cheapest
of the mid- to large-cap stocks in this group; it trades at a mere 10 times
next year's earnings.
Like its peers, the Houston firm, still run by one of its founders, has been
buying up older, low-volume reservoirs from the major oil companies and
successfully revitalizing them, thanks to its aggressive use of more-intense
methods for stimulating mature fields. With purchases in Texas, Egypt,
Oklahoma, the Gulf of Mexico and western Canada, Apache increased its energy
output more than 140 percent between 1998 and the end of 2000. About 55
percent of the output is natural gas, the fuel source that's in shortest
supply. (The firm has no exposure to fields in the Rocky Mountains or Alaska,
resources that have become dangerously politicized since George W. Bush took
office.)
Like our other favorite E&P companies, Apache also has success discovering
new fields. Its most recent find is the Ladyfern field in northeast British
Columbia, which the company is calling "one of the biggest natural gas
discoveries in western Canada in recent years." Apache and its partner Murphy
Oil are already producing 250 million cubic feet a day for the market.
Apache's track record for risk management is part of the stock's long-run
appeal. It made very few acquisitions in 1996 and 1997, when oil and gas
prices were high. Thus, it emerged from the 1998 "oil wreck" with a strong
balance sheet.
Dominion Resources (D) $65.76 This integrated utility is no Duke Energy. And
that's a good thing. In contrast to Duke's global scope and huge California
exposure, Dominion focuses on just one U.S. region -- "Main to Maine," which
extends from the Mid-America Interconnected Network, up the East Coast, all
the way to, yes, Maine --and has become the dominant energy producer in the
region.
Many of Dominion's states have pursued favorable deregulation policies. Take
Virginia, which accounts for 81 percent of the company's generating assets.
Legislators there allowed Dominion to keep its generating plants in a
nonregulated subsidiary of the company. Claud Davis, an analyst at the
top-performing MFS Utilities fund, says that means Dominion has more
incentive to cut the costs of running its plants because it will be able to
retain the savings instead of simply passing along lower rates.
Currently, Dominion has 21,000 megawatts of electric-generation capacity,
ranking it among the largest producers in the U.S. The company, based in
Richmond, Va., plans to add nearly 9,000 megawatts through a combination of
new plants and acquisitions by 2004. Dominion's boldest move yet was its
acquisition last year of CNG, a large natural gas company. "We've got 3
trillion cubic feet of gas reserves," says Chairman and CEO Tom Capps. "We
can decide each day what we want to do with the gas. Are we going to sell it,
store it, make electricity with it? It gives us a lot of opportunity."
With Dominion, you can get earnings growth of 15 percent per year and a yield
close to 4 percent, all for a P/E ratio of just 14. Compared with its other
peers -- companies like TXU, TECO Energy and American Electric Power
--Dominion has a higher growth rate and a greater percentage of earnings
coming from nonregulated businesses. Best of all, says Davis, "they also have
the certainty of not having to go through deregulation. They've already done
it."
Dynegy (DYN) $50.65 You've got to love Dynegy. Not only is it one of the
leading independent power producers in the U.S., it's also the second most
profitable energy trader and marketer, after Enron, thanks to its combination
of physical assets and merchant expertise. An example: Dynegy had a contract
to sell power from its Kentucky plant to an Ohio utility. But when power
prices suddenly dropped, Dynegy went on the open market and bought cheaper
power for the utility. It was then able to resell the gas it would have used
in the plant at a better profit as well.
You can snap up the Houston-based Dynegy for just 21 times earnings -- not
bad for a leading energy marketer that's also one of the fastest-growing
independent power producers in the U.S., with 17,775 megawatts operating in
high-growth, high-demand regions such as the Midwest, Northeast, Southeast
and California. (By comparison, Enron's earnings multiple is 25.) Chairman
Chuck Watson says the company plans to bring on another 3,920 megawatts this
year through either acquisitions, new plants or expansion of existing
facilities. Dynegy's goal: to own or control 10 percent of the U.S.
generation market.
Dynegy also is one of the nation's biggest marketers of natural gas. As
states across the U.S. continue to deregulate, its services will be in
increasing demand. Mark Easterbrook, a Wall Street Journal top-ranked energy
analyst at Dain Rauscher Wessels, calls Dynegy "the best energy convergence
pure play. There's some great value there." And the company is realizing that
value through its online trading service, DynegyDirect, introduced late last
year. "Since we announced the service," Watson says, "we've done $14 billion
worth of business, 40 percent of which is brand new."
Besides Enron, Dynegy edges out its other major competitors, such as El Paso
and Calpine. El Paso sells at a P/E of just 16 on 2002 earnings but is
growing only 15 percent per year. And the company is facing a lawsuit in
California charging certain of its affiliates with engaging in energy-price
manipulation. Calpine trades at a similar P/E ratio as Dynegy for about the
same growth rate, but it lacks a substantial trading and marketing business.
Mirant (MIR) $40.95 Is Mirant really one of the "biggest snakes on the
planet," as Gov. Gray Davis characterized independent power producers
operating in California? If it is, it's a snake you want to have in your
portfolio. Although about 10 percent of Mirant's business comes from the
Golden State, it ranks only fourth among its peers -- behind AES, Reliant and
Duke -- in generating capacity there. And the company, which was spun off
last September from Southern Co., has already taken a $295 million provision
to cover any lost California revenue.
Most of Mirant's 20,000-megawatt generating capacity is in other deregulated
regions, such as the Mid-Atlantic and New England. Chief Financial Officer
Raymond Hill says the company's plan is to more than double its capacity
between now and 2005 by adding new plants, two-thirds of the permitting for
which has already been completed. That would represent a compound annual
growth rate of 20 percent.
Like Dominion, Mirant has a natural gas advantage. Through a contract with
Vastar, a former Arco subsidiary, Mirant locked up supplies for eight more
years. Since then, the company has contracted for two other major sources of
gas, both in Canada. It plans to double its gas production and transportation
capacity by 2005. And like Dynegy, Mirant is a big player in energy trading
and marketing.
Despite a big runup in its share price from $22 to $41, money managers like
Leslie Rich, who co-manages the top-performing Evergreen Utility &
Telecommunications fund, still think Mirant is a good relative value. "It's
selling at a P/E of 18, but they keep raising numbers," she notes. "My
favorite right now is Mirant," adds Dan Ford, an Institutional
Investor-ranked utilities analyst at Lehman Brothers. "In the long run,
you'll see differentiation in pricing of the energy merchants like Mirant and
Dynegy over the asset-centric players like Calpine and NRG. Right now Mirant
is trading at a discount to both groups."
Noble Drilling (NE) $45.07 John Tozzi, the hedge fund manager, likes to say
that "the only real answer to energy shortages is the drill bit." As long as
we use fossil fuels so liberally to power transportation and
electric-generation plants, he's probably right. And as the major energy
companies reluctantly increase their capital investment in new production,
much of that spending will find its way to the drilling companies.
Noble is Wall Street's favorite midcap drilling company. Fourteen of the 20
analysts covering the oil-field-services company, which drills for both oil
and natural gas, rate it a strong buy, according to Zacks Investment
Research. Salomon Smith Barney's Mark Urness, the dean of drilling analysts,
calls it "one of the most potentially rewarding opportunities in the
offshore-drilling industry."
Can 14 analysts be wrong? Yes. But in this case, we happen to agree. The
company owns the second-largest offshore fleet of high-end drilling rigs and
is one of the biggest players in the Gulf of Mexico, which supplies much of
the U.S.'s natural gas and has been very active for over a year now. Noble
also operates in the Mideast, Nigeria, Brazil and the North Sea, areas that
are getting much more active too. While we've long been fans of the largest
offshore driller, Transocean Sedco Forex, and the largest North American land
driller, Nabors Industries, their forward P/Es have drifted higher. Noble is
still relatively cheap at 13 times 2002 earnings.
Several years ago the Houston-based driller figured out how to convert
out-of-date submersible rigs into much more modern and functional
semi-submersible rigs, in the process doubling its high-revenue deepwater
fleet. Noble's submersibles were fetching $30,000 to $35,000 a day, while the
semi-submersibles now all earn more than $120,000. Thanks to that conversion
program and Noble's traditional caution about debt financing, the company
enjoyed operating margins over 20 percent in the first quarter of 2001 -- in
a sector where the average margin is about 8 percent.
The other intriguing aspect of Noble's business is the timing of its drilling
contracts. Thirty-one of its 49 rigs were scheduled to roll over or have new
contracts negotiated in the second quarter, which means that the third
quarter will reflect the sizable leverage the firm will enjoy, thanks to the
rising trend in offshore day rates.
Quanta Services (PWR) $34.25 By 2020 the nation will need at least 1,300 new
power plants, according to the Department of Energy. But utilities don't
build them by themselves --they hire numerous contractors. Quanta Services is
a Houston-based firm that installs and upgrades power, cable and telecom
lines. Over the next 10 years, hundreds of thousands of miles of power lines
will need upgrading -- and 30,000 more miles of high-voltage wires will need
to be added -- to handle the increased load. So far, only 7,600 extra miles
have been planned, let alone built.
Many local utilities do build and repair their own power lines, but Quanta
can do work across the country. Since power lines are its main business, its
costs are lower. It also owns the U.S. patent on the Linemaster Robotic Arm,
which allows workers to repair or upgrade a power line without shutting it
down. "That is becoming increasingly important, valued and paid for by
utilities," says Raymond James analyst Greg Haas. "Downtime cannot be
tolerated."
Quanta's revenue jumped 56 percent in the first quarter of 2001, to $519
million, and its quarterly net income rose more than 50 percent. The firm has
been buying up smaller, private contractors recently. Chief Executive John
Colson expects the company's electricity business to grow at least 20 percent
over the next five years. He also hopes to get business from the independent
power producers, who need someone to hook up their new generating plants to
the high-voltage transmission lines.
Quanta's business prospects are good, but its valuation -- at 14 times 2002
earnings -- is even better. That's because it has traded like a telecom stock
for years, since about half of its business comes from laying lines for
telecom and cable companies. The stock peaked in June 2000 and fell as many
of its telecom customers delayed or canceled their orders. But the power-
related work has more than picked up the slack. And margins on
electricity-related work, traditionally lower than telecom work, have been
creeping up, thanks to higher demand.

Seize the Power
Six energy plays with strong growth potential and reasonable prices.

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

Global economic spiral to pull India's growth to new lows: analysts by Biman
Mukherjee

07/01/2001
Agence France-Presse
(Copyright 2001)

NEW DELHI, July 1 (AFP) - A global economic downturn is likely to pull
India's growth to new lows, analysts said Sunday as latest statistics showed
one of the sharpest falls last year since the 1991 opening of the economy.
Analysts said the growth rate could fall well below last year's 5.2 percent
figure as the industrial slowdown had deepened in the first six months of
2001 and India's main export markets, the United States and Europe, had still
not picked up.
"The economy is performing worse than last year, particularly the
manufacturing and services sector. It will be difficult to keep up with last
year's growth rate," K.N. Memani, chairman of the management consulting firm
Ernst and Young India, told AFP.
In the annual budget in February, the government had said the rate of growth
for the financial year ended 2001 would be six percent, which had been
downsized from seven percent predicted in the previous year's budget.
Memani said that only if good monsoon rains hit this season, the economy's
growth rate could climb to six percent -- still well below the 6.5 percent
set for the financial year ending March 2002 in February's budget.
The Confederation of Indian Industry said a survey among business houses
showed "most of the respondents are optimistic that the GDP growth rate would
be seven to eight percent in the next five years; however, they foresee less
than six percent growth in 2001-2002."
Finance Minister Yashwant Sinha had in the budget set in motion speedier
privatisation and an ease to labour lay-offs, but optimism about these
sensitive reforms has been quickly buried under recent political and economic
scandals.
Memani said one of the biggest bottlenecks was the lack of capital flow,
faced with an overall fall in foreign investment and small investors
unwilling to risk their money in a scam-hit capital market.
"Where will the money come from to drive growth?" asked Memani, adding that
lopsided policies of subsidies had sucked money away from public expenditures
such as building roads and ports that could have otherwise boosted overall
industrial growth.
Memani said the slowdown in developed countries could come as a boon if more
global companies outsourced from India to cut costs, but the weak state of
infrastructure was likely to limit such investments.
Payment disputes between U.S-based Enron Power Corp. and the western Indian
state of Maharashtra -- over which the foreign power company had given a
notice of pulling out of India -- had also clouded foreign investment
sentiments.
The 2.9-billion-dollar Enron power project in the port town of Dabhol would
have been the single largest investment in India and was seen as a litmus
test of India's commitment to economic reforms and globalisation.
India began to open its economy in 1991, but so far only a couple of the 240
state-run firms have been privatised.
Sinha said Saturday he would unveil a raft of measures to boost public
expenditure by October to stimulate industrial growth, but did not elaborate
on the areas where the measures would be taken.
India's apex planning body said the forecast of economic gloom was
exaggerated and expressed confidence the 6.5 percent target for the fiscal
year would be met, saying they were pinning their hopes on good monsoon
rains.
Deputy Chairman of the Planning Commission K.C. Pant said last year's drought
in large parts of rural India had severely affected agricultural growth which
had a spinoff on other sectors such as manufacturing and industry.
He said greater investment in public expenditure would spur the private
sector and eventually the economic growth rate would lift to eight percent
between 2002 to 2007 -- a growth figure seen as vital for absorbing India's
expanding workforce.
Even Pant conceded a host of "politically difficult decisions" such as
downsizing the government, greater privatisation and preventing huge losses
from power theft had to be taken to unleash the economy's true potential.
bm/uc/sct/jmy

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

Enron Chairman to visit India on ninth or 10th July

06/30/2001
Press Trust of India Limited
(c) 2001 PTI Ltd.

Mumbai, Jun 30 (PTI) US energy major Enron chairman Kenneth Lay will visit
India in July second week and hold discussions with Indian government on the
fate of the Dabhol Power Company (DPC), locked in a dispute with the
Maharashtra State Electricity Board (MSEB), even as other states are now
willing to buy its power at an "affordable" price.
"Enron India managing director K Wade Cline has informed me in a
communication that Lay will be in India in the second week of July, either
ninth or 10th, but he will be in Delhi..," chairman of the renegotiation
committee Madhav Godbole told reporters here Saturday after the committee
meeting.
In the 90 minute meeting, several proposals were discussed by the panel with
DPC president Neil McGregor, in the absence of Enron India chief K Wade
Cline, and a specific one being the willingness of other states to offtake
DPC's power, he said.
"We informed the DPC representatives that seven to eight states have evinced
interest in their power and the committee is scheduled to meet the states on
July 26 in Mumbai to assess the situation," Godbole said.
He said the states' meeting would revolve around crucial issues like the
nature of the offtake, "whether it will be for baseload power or peak load,
at what price they were ready to buy and what will be the payment
arrangement".
The fifth round of the renegotiations would be held on July 27, in which the
committee would appraise DPC officials about the states' demands and
expectations, he said.
Godbole said in its set of proposals, the multinational has maintained that
the offtake of power should be at a 90 per cent plant load factor from the
entire 2,184 mw project.
(THROUGH ASIA PULSE) 30-06 2001

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

Lenders can run DPC: IDBI chief
Our Banking Bureau Mumbai

06/30/2001
Business Standard
1
Copyright (c) Business Standard

Industrial Development Bank of India chairman SK Chakraborti today said
lenders to the Dabhol Power Company can run the project if Enron pulls out.
He said this while talking to reporters on the sidelines of the company's
seventh
annual general meeting.
Earlier, at the AGM he said a few other US power producing majors have shown
interest in stepping into Enron's shoes in case the main promoter decides to
get out of the project.
"In case Enron decides to pull the plug, then a few US power majors are
waiting in the wings to step in. It can even be run by a third party," he
told the shareholders. An Enron spokesperson refused to comment on the issue.
Chakraborti said the lenders cannot allow the project to fail as the
balance-sheets of IDBI, ICICI and State Bank of India will be severely
affected in case the project fails. The FIs have pulled up the EPC
contractor, who has stopped work on the project, and are in direct dialogue
for resuming construction work on the project, he added.
IDBI Bank stake with LIC: IDBI is examining the possibility of warehousing
part of its stake (18 per cent) in IDBI Bank with Life Insurance Corporation
of India. "We are discussing the issue with LIC. We are also holding talks
with prospective strategic partners for offloading the stake," Chakraborti
said.
This follows the Reserve Bank of India's insistence that IDBI must pare its
stake in the bank from 58 per cent to 40 per cent. The RBI has given three
months to IDBI to decide on this issue.

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

NEWS
Army chief, ex-Enron exec, will still have say
Associated Press

06/30/2001
Houston Chronicle
3 STAR
7
(Copyright 2001)

WASHINGTON - The new Army secretary, whose former employer, Houston-based
Enron Corp., is pursuing contracts to run base utilities, will not completely
remove himself from decisions that could benefit the energy company.
Army Secretary Thomas White will remove himself from involvement in contracts
specific to Enron but not the broader policy that allows private companies -
including Enron - to win multimillion-dollar agreements to run base
utilities, an Army spokeswoman said Friday.
White, a former executive at Enron Energy Services, a subsidiary of Enron
Corp., will step aside from decisions on any specific contracts that would
cause a conflict of interest, Capt. Amy Hannah said.
However, White "is going to execute the Army's privatization program
vigorously," Hannah said.
White sent a letter Friday on the matter to Sens. John McCain, R- Ariz., and
Jean Carnahan, D-Mo., in response to their request that he remove himself
from any involvement with the base utility issue for at least a year.
Roy Temple, Carnahan's chief of staff, said the senator's office, while
pleased White will remove himself from Enron-specific decisions, will seek
more information about the involvement he will have in base utility issues.
Enron has bid to run utilities at nine Texas bases, including the Army's Fort
Bliss.

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

NEWS
Bush aide joined energy talks while holding industry stocks
Associated Press

06/30/2001
Houston Chronicle
3 STAR
7
(Copyright 2001)

WASHINGTON - The White House acknowledged Friday that top Bush strategist
Karl Rove participated in meetings on the administration's energy policy
while he owned stock in energy companies such as Houston-based Enron Corp.
In a letter responding to congressional inquiries, White House counsel Al
Gonzales said "general policy discussions" fall outside the scope of federal
ethics rules that bar an official from participating in a matter in which he
has a financial interest.
"The formulation of national energy policy is a classic example of the sort
of broad policy discussion that is expressly excluded from regulatory
coverage," wrote the White House counsel.
Providing no specifics, Gonzales stated that Rove "did participate in a
number of . . . meetings at which the contours of the administration's energy
policy were discussed." Gonzales said Rove was not a member of Vice President
Cheney's energy task force, which formulated energy policy, and that Rove did
not attend any of the task force meetings.
On a separate issue, the White House counsel said Rove had only "passing
contact" with a proposed high-tech merger that Intel Corp.'s chief executive
and two Intel lobbyists pushed for in a March 12 meeting with Rove.
"Mr. Rove was noncommittal and offered no substantive response" to the Intel
executive's remarks, Gonzales wrote.
An interagency government panel with which Gonzales said Rove "played no
part" approved the merger less than two months after Rove met with the Intel
executives.
Rep. Henry Waxman, ranking Democrat on the House Government Reform Committee,
asked about Rove's meetings after the disclosure this month that he owned
stock in an array of companies with interests before the Bush administration.
Phil Schilero, the congressional panel's minority staff director, said
Gonzales' letter fails to provide Rove's recollection of any views he
expressed.

Mug: Karl Rove, a strategist for President Bush, is a stockholder in such
companies as Enron Corp.

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

A Section
No Rove Conflict, White House Says; Bush Aide Sat In on Energy Meetings
Mike Allen
Washington Post Staff Writer

06/30/2001
The Washington Post
FINAL
A03
Copyright 2001, The Washington Post Co. All Rights Reserved

The White House acknowledged yesterday that President Bush's senior adviser,
Karl Rove, attended meetings that helped shape the administration's energy
policy at a time when he owned substantial amounts of stock in energy
companies.
Administration officials had said earlier that Rove helped determine how to
market the plan but had not been involved in developing it.
White House counsel Alberto R. Gonzales said yesterday in a three-page letter
to Rep. Henry A. Waxman (D-Calif.), who had questioned Rove's actions, that
Rove was not a member of Bush's energy task force and did not attend any of
its meetings.
"He did participate in a number of other meetings at which the contours of
the administration's energy policy were discussed," Gonzales wrote.
Gonzales said the discussions were general and had no direct and predictable
impact on Rove's holdings in any individual company. The letter said the task
force's recommendations "were general in nature, setting forth broad
proposals for action but leaving the specifics to the governmental actors
further downstream."
"The formulation of national energy policy is a classic example of the sort
of broad policy discussion that is expressly excluded from regulatory
coverage," the letter said.
Until June 7, Rove had stock holdings of more than $50,000 each in several
companies with energy interests, including General Electric Co. and Enron
Corp. Rove had been trying to sell the stocks since January but did not
receive ethics lawyers' permission to do so until June 6, the letter said. He
sold all of his individual stock holdings the next day, the letter said. The
letter attributed the delay in clearing Rove's sales to the large volume of
work at the beginning of an administration and the abbreviated transition
because of the Florida recount litigation.
The letter said Rove did not seek an ethics waiver to participate in any of
the meetings. However, Gonzales said Rove was careful to avoid impropriety
and "took care to comply with applicable conflict of interest rules."
"I wish to assure you that this administration remains committed to ensuring
that all members of the White House staff adhere to the highest ethical
standards," Gonzales wrote.
Philip M. Schilero, Democratic staff director of the Government Reform
Committee, of which Waxman is the ranking Democrat, said Waxman is
"definitely going to pursue" the matter. Waxman has sought a committee
hearing from the chairman, Rep. Dan Burton (R-Ind.).
"This letter appears to argue that there are no situations that would present
a conflict of interest, and that's troubling," Schilero said. "If this were a
low-level employee of any federal agency, significant questions would be
raised."
On another matter that had been questioned by Waxman in a June 15 letter to
Rove, Gonzales said Rove did not violate ethics rules by meeting with Intel
Corp. executives on March 12 when he held stock in the company. The
executives raised the matter of a merger in the semiconductor industry that
later received federal approval.
"When Intel executives raised the subject with Mr. Rove during their meeting,
Mr. Rove was noncommittal and offered no substantive response," the letter
said.
Gonzales said that Rove, like all members of the White House staff, had
received ethics training. The letter said Rove and others were briefed on
conflict-of-interest rules on Jan. 29. On Feb. 15, Rove attended an ethics
training session at which the conflict-of-interest requirements were
reviewed.
"On both occasions, Mr. Rove was advised that, with respect to personal
financial holdings, a government official may not personally and
substantially participate in particular matters that would have a direct and
predictable effect on his or her financial interests," the letter said.

http://www.washingtonpost.com

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

Army chief, a former Enron exec, won't step away from energy issue
By SHARON THEIMER
Associated Press Writer

06/29/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

WASHINGTON (AP) - The new Army secretary, whose former employer is pursuing
contracts to run base utilities, will not completely remove himself from
decisions that could benefit the energy company.
Army Secretary Thomas White will remove himself from involvement in contracts
specific to Enron but not the broader policy that allows private companies -
including Enron - to win multimillion-dollar agreements to run base
utilities, an Army spokeswoman said Friday.
White, a former executive at Enron Energy Services, will step aside from
decisions on any specific contracts that would cause a conflict of interest,
Capt. Amy Hannah said.
However, White "is going to execute the Army's privatization program
vigorously," Hannah said.
White sent a letter Friday on the matter to Sens. John McCain, R-Ariz., and
Jean Carnahan, D-Mo., in response to their request that he remove himself
from any involvement with the base utility issue for at least a year.
They said he should take that step to avoid the appearance of a conflict of
interest, even after selling his Enron stock.
Roy Temple, Carnahan's chief of staff, said the senator's office, while
pleased White will remove himself from Enron-specific decisions, will seek
more information about the involvement he will have in base utility issues.
"We believe the question that is not answered in the letter is how extensive
a role he believes he can play in the privatization efforts with regards to
utilities without creating the appearance of a conflict," Temple said.
Carnahan and McCain asked White to remove himself from the utility issue in
response to a June 19 story by The Associated Press about White's connections
to Enron.
Until this year, White served as vice chairman of Enron Energy Services.
While at Enron, he played an active role in pushing for base utility
contracts.
The AP reported that as Army secretary, White has been pressing to shift
control of more military base utilities into private hands, a business Enron
continues to pursue.
To save money, the Pentagon in December 1998 ordered the Army and other
branches of the service to hire energy companies to run the electric, natural
gas and other utilities on military bases.
White said earlier this month that the program should be moving faster. He
noted that the Army's Fort Hamilton in New York is the only Army base to turn
over all its utilities to a private company. Enron won the $25 million,
10-year contract in 1999.
McCain and Carnahan, members of the Senate Armed Services Committee that
reviewed White's nomination, wrote him that no matter how impartial he tried
to be on the utility issue, his ties to Enron "would raise in the public's
mind a question about whether your decisions would be totally unbiased."
They said that appearance would remain for at least a year even if White sold
his more than $25 million in Enron stock, as he is doing.
White told McCain and Carnahan he is "committed to ensuring that my conduct
avoids both actual conflicts of interest and the appearance of such
conflicts."
Spokeswoman Hannah declined to say how long White will remove himself from
involvement in specific base utility contracts.
Enron has bid to run utilities at nine Texas bases, including the Army's Fort
Bliss.
The company says it has stopped submitting new offers while waiting for
decisions from the Pentagon on several contract-related issues.

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

Western Wholesale Power Trades Fri Above FERC Price Limit

06/29/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

NEW YORK -(Dow Jones)- The price of power in the western wholesale market on
Friday topped the limits set by federally ordered price controls, traders
said.
Bulk electricity trades as high as $107 a megawatt-hour in the western spot
market were confirmed by one of the buyers. Also, Enron Corp.'s (ENE)
Internet-based trading system publicly offered to sell power in Nevada at
$105/MWh.
The maximum price allowed under a formula set June 18 by the Federal Energy
Regulatory Commission is $91.87/MWh.
Asked about the overshoot, FERC said sellers would have to justify prices
above the benchmark.
"We constantly monitor the markets out there," a FERC spokeswoman said. "If
there is anything above the proxy price, they would have to come in and
justify it."
Enron spokeswoman Karen Denne said the company posted the $105/MWh offer on
its EnronOnline system, but didn't sell any power above the FERC limit.
FERC's complicated price limits for the West set a maximum price based on the
operating cost of the most expensive generator used to meet demand for
electricity during power alerts in California.
Suppliers who claim prices above the limits must explain why to FERC, which
can order refunds if it isn't convinced.
Some market participants point to a loophole. The FERC order only applies to
"spot" market transactions, which the commission defines as deals done within
24 hours of the commencement of deliveries. But power traded Friday is for
delivery Monday, so some market participants have said that the controls
don't apply to Friday deals.
"It does appear to be a loophole," Denne said.
Gary Ackerman, executve director of the Western Power Trading Forum, an
industry association, said that traders could start doing more transactions
two days in advance to circumvent the FERC rules if market prices rise above
the cap, which can change based on prices for natural gas. Or deals could be
done at the cap with the seller adding non-monetary payments such as natural
gas or free electricity delivered later in the year.
Other market participants said they simply will buy needed power supplies at
the market price, regardless of the FERC rules.
On June 19, the first day the new rules took effect, hour-ahead deals were
done at $300/MWh. So long as two companies agree to a price and the buyer
doesn't later complain to the FERC, it seems that FERC would be hard-pressed
to enforce its rules.
If a buyer were to file a complaint after such a deal, it would quickly find
itself locked out of the market when supplies become tight, traders said.
The FERC spokeswoman said the above-limit prices would have to be justified
even without a complaint.
The price cap will be recalculated whenever the California Independent System
Operator enters its next Stage 1 supply emergency. At that time the cap will
likely be much lower, because gas prices have fallen significantly since the
current cap was set.
-By Mark Golden, Dow Jones Newswires; 201-938-4604; mark.golden@dowjones.com
(Andrew Dowell contributed to this article.)

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


Is it really necessary to coordinate everything through ENW?  I am not sure
people will do that?  I think ENW should be informed but not be in control of
the registration.  Have the ENW people requested that they be in charge of
this process?  Will they care if we change it?

	Leslie Hansen
	12/12/2000 02:14 PM

		 To: Mark E Haedicke/HOU/ECT@ECT
		 cc:
		 Subject: Enron Policy re Use of Third Party Trading Platforms

Mark:

I wanted to follow up to see if you have had an opportunity to consider the
proposed policy attached below.  Currently, the traders have no guidelines
governing their use of third party electronic trading platforms, and there
has been no centralized system for monitoring such use.

Please give me a call with any questions or comments.

Leslie
----- Forwarded by Leslie Hansen/HOU/ECT on 12/12/2000 02:13 PM -----

	Leslie Hansen
	11/14/2000 01:09 PM

		 To: Mark E Haedicke/HOU/ECT@ECT
		 cc:
		 Subject: Enron Policy re Use of Third Party Trading Platforms

Mark:

Mark Taylor and I have worked with Andy Zipper to develop a policy relating
to use of third party electronic trading platforms.  We propose that you and
Mark Frevert send the attached e-mail to all traders informing them of this
policy.  Note that I included a contact for questions at the bottom of the
policy.  I have listed myself for now.  We discussed sending this e-mail to
all Enron traders, including those in Europe and within other business units.

Mark Taylor, Andy Zipper and Sheri Thomas (the designated master user who
currently acts as Product Control Director for EnronOnline) have approved the
e-mail and the policy.

I look forward to your comments on the policy.  After you have approved the
e-mail and the policy, I will coordinate with Andy and Sheri to determine how
best to circulate the e-mail.

Leslie

**************************************************************************
Many of you have received offers to use third -party electronic trading
platforms like Dynegydirect.  Enron has a Policy Relating to Use of Third
Party Electronic Trading Platforms to serve as a guide to appropriate
registration for and use of such trading platforms.  The Policy provides that:

You must notify the Enron Net Works LLC (ENW) designee set out in the Policy
if you would like to trade on such a trading platform.
All registration and other documentation must be sent to the ENW designee,
who will coordinate the necessary legal and administrative review.
You are not authorized to use a third-party electronic trading platform until
you are authorized by ENW.
The Master User for all third-party electronic trading platform accounts will
be an ENW designee.
If you are currently using any third-party electronic trading platform,
please notify the ENW designee.

A full copy of the Policy Statement is attached for your review.


_________________________________________________________________
Get your FREE download of MSN Explorer at http://explorer.msn.com/intl.asp

 - 10-16 0800 Report.xls


Attached are the two (2) sets of assignments with attached trade descriptions.

(1)  the first set (first two docs) is an assignment of trades between ENA
and HS Resources, Inc.; after execution of the assignment, the trades will be
between ENA and HS Energy Services, Inc.  subject to the ISDA which we are
now negotiating [the second doc is an appendix consisting of 5 trades and I
have asked the desk to confirm that these are the only outstanding trades]

(2)  the second set (last two docs) is an assignment of trades between J.
Aron & Company and HS Energy Services, Inc; after execution of the
assignment, the trades will be between J.Aron & Company and ENA subject to
the 8/14/94 J.Aron/ENA ISDA [the fourth doc is an appendix of all existing
trades between J.Aron/HS Energy Services, Inc.  I have no idea where this
came from but I assume it is part of your agreement with HS.  Who is
verifying the trades and are all trade terms acceptable?  Presently, the
assignment is drafted such that a conflict between the Master and a confirm
will be governed by the Master]

----- Forwarded by Sara Shackleton/HOU/ECT on 06/20/2000 05:05 PM -----

	"Jim Piccone" <jpiccone@hsresources.com>
	06/20/2000 02:41 PM

		 To: <Sara.shackleton@enron.com>
		 cc: "Jim Kincaid" <Jkincaid@hsresources.com>, "Linda Busk"
<Lbusk@hsresources.com>, "Mark Bingham" <Mbingham@hsresources.com>, "Pam
Smith" <Pasmith@hsresources.com>
		 Subject: Latest drafts of both assignments and appendices

 - HS Resources - Enron.doc
 - Enron.xls
 - HSR-HSESEnron.doc
 - JAron-Enron.xls


-----Original Message-----
From: 	CustomerNotices, WGPHOU [mailto:WGPHOU.CustomerNotices@Williams.com]
Sent:	Friday, January 11, 2002 10:31 AM
Subject:	Production Area - Station 40 Allocation - January 11, 2002

January 11, 2002

To: Transcontinental Gas Pipe Line Corporation Customers and
    Shippers

Re: Production Area - Station 40 Allocation - January 11, 2002

Due to request's exceeding capacity at Transco's Station 40
in East Texas, Transco is currently allocating capacity
through Station 40 and continuing for each day when requests
exceed capacity.  All shippers affected by the daily capacity
allocation will be notified as soon as possible.

If you have any questions, please call John E. McGrath at
(713)215-2514 or Donna L. Cooper at (713) 215-4061.

John E. McGrath
Manager
Operations Planning