I wonder with Joe Sutton gone if they can cancel the worldwide Analyst and
Associate PRC.  It take a lot of time away from our people and we are ranking
them ourselves anyway.

John
---------------------- Forwarded by John J Lavorato/Corp/Enron on 11/01/2000
07:22 AM ---------------------------

Gwendolyn Gray
11/01/2000 12:13 AM
To: Ben Jacoby/HOU/ECT@ECT
cc: Matthew Almy/NA/Enron@ENRON, Jonathan Anderson/HOU/EES@EES, Bilal
Bajwa/NA/Enron@Enron, Thomas Baldwin/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT,
Philip Berry/HOU/EES@EES, Alton Jackson/Corp/Enron@Enron, Matthew
Lenhart/HOU/ECT@ECT, Gabriel Monroy/HOU/ECT@ECT, Stephanie
Segura/HOU/ECT@ECT, Shirley Gail Sidler/Corp/Enron@ENRON, Katie
Stowers/HOU/ECT@ECT, Chris Walker/HOU/ECT@ECT, Otis Wathington/HOU/EES@EES,
Angie Zeman/Corp/Enron@ENRON, Donald
Reid/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Scott Stoness/HOU/EES@EES, Mitch
Robinson/Corp/Enron@Enron, Phillip K Allen/HOU/ECT@ECT, Jeffrey C
Gossett/HOU/ECT@ECT, Greg Piper/Corp/Enron@Enron, Mark J
Leskowitz/HOU/ECT@ECT, Lisa Bills/Corp/Enron@ENRON, Victor
Lamadrid/HOU/ECT@ECT, Zachary McCarroll/Enron Communications@Enron
Communications, Ed Smida/Enron Communications@Enron Communications, Elena
Kasaju/HOU/EES@EES, John J Lavorato/Corp/Enron@Enron

Subject: Final Associate/Analyst 2000 PRC - Jacoby

PRC Representatives
Thank you for your participation in the year-end 2000 PRC.  Listed below are
the Associates/Analysts you will be representing:

As you may know, the final PRC will be conducted on December 12th (Analysts)
and December 13th (Associates).  Your participation in these meetings is
essential.  Prior to that date, each business unit has been asked to conduct
a pre-rating meeting to determine each employee's pre-rating.  The
pre-ratings will be loaded into the PEP system.  The PEP system is open and
available for employees to select reviewers.  You have been listed as a
secondary supervisor so that you may review each of your Associates/Analysts
feedback.  You are responsible for contacting the Supervisor and/or
Associates/Analysts to discuss and obtain valuable performance information.
The Associate and Analyst Programs will also provide you with a copy of the
completed feedback for each of the people you represent once the PEP system
is closed.  The more information that you can secure regarding your
Associates/Analysts will ensure that each person is cross-calibrated
correctly at the final PRC.  If you are a new PRC Representative and are
unsure of the process, please contact either Jana Giovannini at x3-9233 or
Shelly Butler at x3-4584 with any questions.

Supervisors
You should approve/add/delete the reviewers selected by the
Associates/Analysts that work in your group.  You should then consolidate
this feedback including your over-all thoughts, which should be presented at
your business unit pre-rating meeting.  If your business unit is not
conducting a pre-rating meeting due to it's size, please make sure that the
rating you provide is loaded into the PEP system prior to the final PRC.
Please contact the PEP help desk at x3-4777 option 4 or Terry Bosien at
x3-5230 if you are unable to load this data yourself.  You should wait to
provide feedback to your Associates/Analysts until the final decisions have
been made to avoid any confusion.  All pre-ratings are subject to the final
cross-calibration and may change in the final PRC meeting.  You are
responsible for contacting the PRC Representative listed above whom will be
representing your Associates/Analysts prior to the final PRC.  Keep in mind
that the more information you can provide, either verbal or written, will
ensure that the final PRC is a success.

Associates/Analysts
You are responsible for selecting your reviewers.  You should have received
your logon ID and password from the PEP team.  If you have not received this,
please contact x3-4777 option 4 with questions.  Please go into the system
and select your reviewers.  Your direct supervisor may let you know how many
people to select and will be ultimately responsible for approving your
reviewers.  Remember that it is important to select a broad range of
reviewers that include internal/external customers at any level.  You will
also be asked to complete feedback on yourself.  Be sure to take the
opportunity to detail your accomplishments and specific ways in which you
have added value to your unit.  This is your chance to be heard.  You may
hear from your PRC Rep to discuss your roles and responsibilities.  If you do
not, we suggest that you contact them either verbally or in writing.

An Enfo-session regarding the PRC is being held at 3:30pm on November 1, 2000
at the Doubletree Hotel, La Salle Ballroom A for all Associates and
Analysts.  We encourage you to attend.  Final PRC results should be
communicated to the Supervisor by 12/31/00.  The feedback should be
communicated to the Associates/Analysts by 1/15/01.  If the
Associates/Analysts have not received feedback by the deadline, they should
contact their Career Development Manager (Jana Giovannini x3-9233 or Shelly
Butler x3-4584).  Thank you for your cooperation and we look forward to a
successful final PRC


Walt, I am not aware of any Board changes being considered but you should
call Stan and Ted to see if they have any suggestions.
I would like to see a draft today.

	Walt Zimmerman
	05/04/00 06:49 PM

		 To: Michael Burke/Houston/Eott@Eott
		 cc: Stanley Horton/Corp/Enron@Enron, Steve Duffy/Houston/Eott@Eott
		 Subject: Annual Election of EOTT Directors and Committees

Prior to the distribution of materials for the May 15 EOTT Board of Directors
meeting, the sole shareholder (Enron Liquids Holding Corp.) needs to reelect
EOTT's Board of Directors.  This will be accomplished by a written consent
that will be executed on behalf of Enron Liquids Holding Corp.

Also, at the May 15 meeting, EOTT's directors will elect the members of the
Audit Committee and the Compensation Committee for the next year.

Are you aware of any changes to the EOTT Board, the Audit Committee, or the
Compensation Committee?  In some past years, Ted Gaylord has polled the
outside directors to ensure that they intended to continue their service on
EOTT's Board and committees.  If you would like, I will ask Ted to poll the
outside directors again this year as to their intentions for continued
service.

Also, we need to start preparing an agenda for the May 15 meeting.  If you
would like, I will forward to you tomorrow a draft agenda that is based on
last year's "annual meeting" agenda.

Please let me know your thoughts on these matters.   Thanks.


Jeff,
Below are a bunch of articles with quotes from Sen. Dunn & Sen. Peace.  Hope
it helps, let me know if you need more or if you are looking for something
else.
Thanks, A.

Calif Lawmakers Seen Adjourning Without Deal For Edison
By Jason Leopold

07/23/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

OF DOW JONES NEWSWIRES

LOS ANGELES -(Dow Jones)- The California Legislature is unlikely to pass a
bill to rescue insolvent utility Southern California Edison before an Aug. 15
deadline, key lawmakers said Monday.
The state Assembly is expected to adjourn for a monthlong break later Monday
after it votes on the state's $101 billion budget, which has been fought over
in both houses for more than a month. The Senate approved the budget early
Saturday morning
Once the budget is approved, Assembly members plan to leave for summer
recess, according to Assembly Speaker Pro Tem Fred Keeley's office, and some
said they won't return until Aug. 20.
"I'm fairly sure nothing, other than behind-the-scenes talks will take place
until after the break," said Sen. Joe Dunn, D-Santa Ana, chairman of the
Senate committee investigating price gouging by generators.
Jamie Fisfis, spokesman for the Assembly Republican Minority Caucus, said GOP
members are leaving for trips and have no intention of returning before Aug.
20.
Failure to approve a rescue by Aug. 15 would put the Edison International
(EIX) utility in a difficult spot. Southern California Edison, in default on
debt obligations and power bills, is banking on a political solution and has
said its creditors could drag it into bankruptcy if lawmakers don't pass a
relief measure by the deadline.
Gov. Gray Davis, who is also counting on a political solution, may call a
special session to force action on a rescue plan if lawmakers don't pass
something before recessing.
"The governor said he will not hesitate to call a special session if he needs
to," spokesman Steve Maviglio said. Senate President Pro Tem John Burton,
D-San Francisco, has disputed the governor's authority to do so.
Brian Bennett, Edison International's vice president of external affairs,
remained optimistic that a rescue agreement can be worked out before Aug. 15.
"There's a group of naysayers out there saying this is not going to get
done," Bennett said. "The Senate is on the record saying a legislative
solution is better than bankruptcy. And for the millionth time, this company
has no intention of filing for bankruptcy."
Assembly Speaker Bob Hertzberg, D-Van Nuys, and Keeley, D-Boulder Creek, who
sponsored legislation to rescue Southern California Edison but failed to gain
the support of a majority of the Assembly, are expected to hold work sessions
this week to put together a comprehensive piece of legislation that can gain
the support of the Senate, Gov. Gray Davis and the utility.
It's unclear who will participate in the work group or whether lawmakers can
hammer out legislation and pass it before the Aug. 15 deadline set in a
memorandum of understanding Southern California Edison Ed signed with the
state in April.
The MOU calls for the state to buy the utility's transmission lines for $2.76
billion and enable it to issue debt backed by ratepayers to recoup $3.5
billion in unrecovered wholesale power costs.
Each house of the state Legislature is working on its own plan, neither of
which would implement the MOU in full.
The Senate bill, which narrowly passed that body Friday, would allow Southern
California Edison to recover $2.5 billion of its power costs by issuing bonds
and give the state a five-year option on the utility's transmission lines.
Edison executives have already said the bill doesn't provide the company with
sufficient funds to become creditworthy.
-By Jason Leopold, Dow Jones Newswires; 323-658-3874;
jason.leopold@dowjones.com

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

California; Metro Desk
Sanctions Against Enron Urged Electricity: A state Senate panel probing
suspected price gouging says the Houston generator refuses to disclose
documents.
CARL INGRAM
TIMES STAFF WRITER

07/22/2001
Los Angeles Times
Home Edition
B-1
Copyright 2001 / The Times Mirror Company

SACRAMENTO -- A Senate committee investigating suspected price gouging in the
California electricity market recommended Saturday that a Texas generator be
found in contempt and fined for refusing to disclose top-secret business
records.
The special committee recommended the actions against Enron Corp. of Houston,
a major wholesaler of electricity. Swift ratification by the full Senate is
expected.
The committee, investigating whether generators have manipulated prices to
drive up profits during the state's energy crisis, urged that Enron be fined
an initial $1,000 and that the cumulative sum be doubled for each day the
company continues to defy the panel.
In its controversial probe, the committee has found eight power sellers in
contempt for failure to produce subpoenaed documents about their production
and pricing practices. Recently, six of the companies have sought to have the
contempt citations cleared by agreeing to hand over the records.
But Enron and Reliant Energy have refused. Last week, the committee voted a
second time to hold Reliant in contempt, but has so far suggested fines only
against Enron.
If Enron obeys the demand to turn over its trade secrets and other
confidential information before the full Senate acts, the contempt action
will be stopped, lawmakers said.
"We have no hope they will comply," said Sen. Joe Dunn (D-Santa Ana),
committee chairman.
Senate President Pro Tem John Burton (D-San Francisco) said upper chamber
approval of the committee's recommendations would occur quickly, but called
the progressively severe fines "pocket change" for Enron.
"Ken Lay spends more than that on his Rolex watches," Burton said of Enron
Chairman Kenneth Lay.
An Enron official, Karen Denne, said the committee's recommendations took the
company by surprise. She said Enron had been working in "good faith" with the
committee to provide the information, but now was being exclusively targeted
for punishment.
"No one else has been singled out by the committee. Why is Enron being
singled out?" she said.
Denne said Enron in the last week had agreed to provide all its California
transaction documents for last year. "That's far more than anyone else has
turned over," she said.
She conceded that the records did not detail out-of-state transactions, which
the committee also had subpoenaed.
Enron has refused to let the committee inspect its records, contending that
the Federal Energy Regulatory Commission is the only regulatory entity that
can legally investigate and control the wholesale electricity market in
California.
Enron and other generators also argued that their most closely guarded trade
secrets would be put at risk of exposure to competitors if they were given to
the committee, even under confidentiality agreements proposed by the panel.
Though it is rarely used, the Senate last exercised its contempt power in
1929 during a price-fixing investigation of the cement industry. Several
executives were found in contempt for refusing to answer questions and were
ordered to jail.
The state Supreme Court, however, voided the contempt citations on grounds
that the Senate's demands for information were too vague.
Dunn said the committee considered recommending other punishments, including
the jailing of top Enron executives and forbidding the firm from doing
business in California as long as it was in contempt.
He said the committee, which adopted the report on a unanimous bipartisan
vote, agreed that payment of fines, known as "coercive penalties," was the
best choice.
The Senate ordered the investigation last winter as Gov. Gray Davis declared
the state to be in an "energy emergency" and a series of rolling blackouts
was imposed statewide.
At the time, wholesale generators, most located out of state, were charging
what some called "rip-off" prices. Davis has asked the federal government to
order generators to refund almost $9 billion in alleged overcharges, but
indications are that only about $1 billion may be paid.
The committee was charged with examining the wholesale market and making
recommendations for legislation if abuses were found.
The committee subpoenaed Enron and seven other generators in April, insisting
that they turn over millions of records relating to bidding strategies,
prices, energy availability and documents dealing with possible antitrust
issues, including out-of-state transactions.
All the companies initially defied the subpoenas. But under the threat of
contempt, most recently have said they will provide the information under
confidentiality agreements.
Enron and Reliant of Houston held out. Enron filed 20 objections to the
subpoenas and argued that the committee's investigation was out of bounds.
Reliant has sued the committee in Sacramento Superior Court to stop the
investigation, charging that the panel violated the company's rights to due
process and refused to hear its objections to the subpoena.

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

NEWS
THE ENERGY CRUNCH / Power firms' financial records destroyed, state is told
Robert Salladay
Chronicle Sacramento Bureau

07/22/2001
The San Francisco Chronicle
FINAL
A.9
(Copyright 2001)

A state Senate committee is investigating why Morgan Stanley, a financial
adviser to several power generators, destroyed documents that could show a
well-planned effort to gouge California consumers.
After several weeks of asking for the documents, and getting a positive
response from Morgan Stanley, the Senate committee was told last week that
the documents were destroyed as a matter of routine "years ago."
"I got a call Wednesday from a Washington, D.C., counsel for Morgan Stanley,
who said, 'I regret to inform you the documents have been destroyed,' " Sen.
Joe Dunn, D-Santa Ana (Orange County), chairman of the Senate investigating
committee, said yesterday.
The revelation came as the Senate moved against another company under
scrutiny by Dunn's committee -- Enron Corp., the world's largest energy
trader. The Senate was meeting yesterday to vote on the 2001-02 state budget
but approved another step in contempt proceedings against Houston's Enron for
its refusal to hand over documents to committee investigators.
The central question is whether power companies colluded to raise prices by
purposely withholding electricity. At one point this year, the price of power
was the highest in state history -- more than $5,000 per megawatt -- as
supplies sank to unusually low levels.
The Senate inquiry into Morgan Stanley involves activity years before the
energy crisis. Investigators suspect that power companies and their financial
advisers knew well before the crisis began that prices could be raised. Any
records confirming that suspicion would be evidence of extraordinary market
power.
At the time deregulation was being implemented during the late 1990s, nearly
everyone involved was talking about how competition would push down the price
of electricity. At the same time, however, power companies like North
Carolina's Duke Energy Corp. were paying inflated prices to purchase power
plants in California.
After deregulation, the power companies paid nearly $2 billion total for
aging plants worth an estimated $1.1 billion.
"Electricity prices were stable and there was an oversupply (of energy) at
the time, and these were the oldest units they were buying," Dunn said. "Why
would they pay two or three times for these plants?"
Dunn requested that Morgan Stanley (now called Morgan Stanley Dean Witter)
provide all the supporting documentation regarding the purchase of the
plants. He said he received commitments from company attorneys that no
documents had been destroyed.
A representative with Morgan Stanley declined to comment yesterday. But a
Morgan Stanley attorney told the Orange County Register, which reported the
story yesterday, that the company did not destroy any documents after the
first May 16 request from Dunn's committee.
"At the end of the project, they decided what they were going to keep and
what they weren't going to keep, and those decisions were made years before
the energy crisis and years before this committee existed," attorney Paul
Patono told the Register.
Dunn noted it is not illegal to raise prices or exert "market power," as long
as the energy companies don't collude. But the issue is important to federal
regulators, who could impose price controls on energy if they believe the
system is not truly competitive.
Only a few power firms have refused to hand over documents that the Senate
committee has requested. Last week, Dunn's committee voted to move forward
with contempt fines against Enron and Reliant Energy. They also authorized
the committee to depose executives from the companies.
Dunn also has recommended fines that would start at $1,000 on the first day
and double each subsequent day. A $1,000 fine imposed on a Monday would rise
to $16,000 by Friday, then double to $32,000 on Saturday. A week of delay
would cost Enron $127,000.
Senate President Pro Tem John Burton, D-San Francisco, and the Rules
Committee he controls have the option to raise the fines even higher. They
plan to take up the matter this week.
"They can afford it," Burton said yesterday about the proposed fines against
Enron. "That's like pocket change. Ken Lay (chairman of Enron) spends more
than that on his Rolex watches."
Enron representatives could not be reached for comment. Their attorneys have
previously told Senate investigators that they want a confidentiality
agreement to protect their bidding practices from being made public.

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

Senate committee told Morgan Stanley destroyed power records

07/22/2001
Associated Press Newswires
Copyright 2001. The Associated Press. All Rights Reserved.

SACRAMENTO (AP) - A state Senate committee wants to know why Morgan Stanley,
a multibillion dollar financial firm and adviser to several power generators,
destroyed documents that potentially could show efforts to gouge California
consumers.
The company recently also has come under the scrutiny of an Oregon lawmaker
who is concerned the company's purchase of the rights to move power between
California and Oregon could result in artificially high prices.
For several weeks, Morgan Stanley had told the committee it would provide the
documents, but said last week they had been destroyed as a matter of routine
"years ago," said Sen. Joe Dunn, D-Santa Ana, the committee's chairman.
Members of the committee are trying to determine whether power companies
worked together to raise prices by purposefully holding back electricity to
drive up demand.
Morgan Stanley's involvement would have been several years ago, when it
advised out-of-state energy companies to buy California power plants up for
sale.
A Morgan Stanley attorney told the Orange County Register that the company
did not destroy any documents after Dunn's committee requested the documents
May 16.
"At the end of the project, they decided what they were going to keep and
what they weren't going to keep, and those decisions were made years before
the energy crisis and years before the committee existed," said Paul Patono,
a company attorney.
Dunn noted it is not illegal to raise prices as long as a company doesn't
collude to force prices upward.
Private utilities became able to sell their plants as part of the 1996 plan
to deregulate the electricity market. Although the plants were expected to
sell below their book value, they instead sold for up to three times that
price, although the state then had an oversupply of electricity and old
plants.
While the public was told deregulation would lead to lower electricity
prices, energy officials and experts testifying before the committee have
said it's unlikely investors would buy aging power plants if they believed
that to be true.
Dunn is curious if there was any kind of plan or advertising that said the
plants, if bought a certain way, would give of the buyers market power in the
wholesale electricity market.
The committee is still moving forward with contempt proceedings against
Houston-based power marketers Enron Corp. and Reliant Energy for refusing to
hand over documents to committee investigators.
New York-based Morgan Stanley, now Morgan Stanley Dean Witter & Co., got into
the energy trading in 1984 and now is one of the top 20 U.S. power marketers.
The company also has come under the scope of Rep. Peter DeFazio, D-Ore.
Morgan Stanley bought the rights to transmit just under a third of the power
flowing between California and Oregon from the Bonneville Power
Administration through February 2002.
DeFazio has written a letter to the BPA, asking that the agency make sure the
Northwest keeps its "reliable, affordable" energy source.
"The ability of a financial services company, which has no obligation to
serve electricity consumers, to lock up all available capacity for a year
raises serious concerns," DeFazio wrote.
A company spokeswoman said Morgan Stanley acquired the transmission capacity
from BPA to meet its power delivery obligations in the Northwest, and had no
intention of manipulating the market.
---
On the Net:
http://www.msdw.com

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

USA: UPDATE 1-Calif. govt panel wants Reliant cited for contempt.

07/18/2001
Reuters English News Service
(C) Reuters Limited 2001.

SACRAMENTO, Calif., July 18 (Reuters) - A California legislative panel voted
on Wednesday to ask the state Senate to cite Reliant Energy Inc. for contempt
for failing to comply with a subpoena seeking confidential documents.
The Senate Select Committee to Investigate Market Manipulation voted 6-0 to
move against Houston-based Reliant, which joins fellow Texas energy giant
Enron Corp. in facing what could be the first contempt citations imposed by
California's state senate since 1929.
State Sen. Joe Dunn, the Democratic chair of the panel investigating charges
of market manipulation and price gouging in California's energy crisis, would
now begin preparing a full report on Reliant's noncompliance for the full
Senate.
The committee's report on Enron could be ready for submission to the full
Senate Thursday, he said, adding that continued efforts to negotiate an
agreement had proved fruitless.
"We have been discussing this with them virtually every single day, and they
are not in compliance yet," Dunn told Reuters. "Twenty-four hours ago I was
cautiously optimistic about them, I am now back to pessimistic."
According to state law, California's senators must use the reports to decide
whether to slap sanctions on the two companies. They also have the option of
fining or imprisoning company senior officers.
Enron, for its part, has filed a lawsuit in Sacramento Superior Court
challenging the investigative committee's authority to subpoena company
documents.
Senate aides said Reliant could follow the lead of another energy company,
Atlanta-based Mirant Corp. , which has avoided the contempt threat by
cooperating with legislators' demands to sign confidentiality agreements,
open a document depository close to Sacramento, and begin placing documents
there relating to the company's recent business in California.
The vote against Reliant came despite the company's offer of some 10,000
documents in an effort to satisfy some of the compliance requirements.
Larry Drivon, special counsel with the select committee, said Reliant's offer
represented far fewer documents than some other generators have produced, and
that "virtually none" of the Reliant documents offered addressed the main
points of concern as cited in the legislative subpoena.
"What we've gotten this time is both insignificant and largely irrelevant,"
Drivon said.
The committee also voted on Wednesday to suspend for 30 days proceedings
against number of other energy firms, including Duke Energy Corp. , Dynegy
Inc. , Williams Cos. Inc. , AES Corp. and NRG Energy Inc. , pending a review
of their compliance efforts to date.
Enron has argued the committee has no legal jurisdiction over wholesale
electricity prices, which are regulated by the Federal Energy Regulatory
Committee (FERC), and that the committee's proceedings violate the company's
legal rights.
State officials have accused the energy companies of overcharging California
power agencies and utilities some $8.9 billion for wholesale electricity over
the past 14 months, which saw power prices in the state soar tenfold.
Independent energy merchants have blamed the price spike on the state's
poorly designed electricity deregulation law and a failure to build enough
power plants to meet the growing needs of its 34 million residents and its
industries.

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

Calif Senator: Enron Contempt Charge Seen Dropped Tue

07/16/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

LOS ANGELES -(Dow Jones)- A California Senate committee is likely to drop a
contempt charge against Enron Corp. (ENE) Tuesday because the company is
close to agreeing to provide information for an investigation into wholesale
electricity prices, Sen. Joe Dunn, D-Santa Ana, said late Monday.
"There has been a dramatic change, and I am optimistic that by noon (Tuesday)
there will be a resolution with Enron," said Dunn, who chairs the Senate
Select Committee to Investigate Market Manipulation.
The committee voted last week to forward a contempt charge to the full Senate
because Enron refused to provide certain financial documents and sign the
committee's version of a confidentiality agreement. If the full Senate voted
to hold Enron in contempt, it could issue punishments including hefty fines
and incarceration of executives. - - 17/07/01 00-46G

The committee also voted last week to drop its contempt charge at any time
before a full Senate vote if Enron agreed to meet the committee's requests.
"Enron has chosen to intimate to us that they will comply with our demands.
They have asked us for the ability to preserve certain objections. There's a
possibility we may be sued by other market participants, and if so, Enron
wants to preserve its opportunities to pursue objections at that time," Dunn
said.
Enron filed a lawsuit last week to stop the committee's subpoena of financial
records, and a company attorney said during hearings that Enron was likely to
contest the contempt charge as well.
In talks Monday, however, Enron mentioned the possibility of dropping the
lawsuit, Dunn said, which is not a requirement to the committee's dropping
the contempt charge.
No-one at Enron could be reached immediately for comment.
The documents sought by the price manipulation committee include information
on bidding and pricing behavior in the state's electricity markets. The
committee originally was poised to cite seven other electricity generators
for contempt, but all eventually agreed to provide the requested information.
-By Jessica Berthold, Dow Jones Newswires; 310-962-2843;
jessica.berthold@dowjones.com -0- 17/07/01 01-32G

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

News
Contempt vote targets power firm Subpoena Enron Corp. refuses to relinquish
documents to state Senate panel. Series: energy.0712
JOHN HOWARD
The Orange County Register

07/12/2001
The Orange County Register
1
PageD

SACRAMENTO A Senate committee probing California's troubled energy market
urged the full Senate to declare Enron Corp. in contempt for shunning a
legislative subpoena, a move that could put the defiant power company's top
executives at risk of arrest as early as next week.
Shortly before the bipartisan vote, the Texas-based energy merchant sued the
committee in a Sacramento Superior Court four blocks from the Capitol,
contending lawmakers' demands for documents exceeded their jurisdiction,
jeopardized confidential business information and trampled the company's
rights.
The panel -- the Select Committee to Investigate Price Manipulation of the
Wholesale Energy Market -- voted 6-0 in favor of the contempt finding. The
decision means a report will be offered to the Senate, which has final
authority to approve it. That decision could be made by early next week,
although it could be postponed or withdrawn if the company cooperates, said
Sen. Joe Dunn, D-Santa Ana.
If upheld, the Senate then will have broad authority to impose sanctions,
including daily fines until the documents are produced or even arrests of
company executives, said Clark Kelso, a law professor at the University of
the Pacific's McGeorge Law School. A simple majority vote in the 40-member
Senate is required.
Enron spokeswoman Karen Denne disputed the authority of the Senate to order
arrests. "Our key executives do not even live in the state of California. The
first issue here is jurisdiction. They (California senators) don't have
jurisdiction outside the state."
The full Senate is likely to endorse the contempt finding. There is
bipartisan sentiment for it, and lawmakers often unite when legislative
authority is challenged.
In one major case, a company official was held in contempt and briefly jailed
until he agreed to cooperate with the Legislature during a investigation of a
concrete company in 1929.
"What they do in these circumstances can include sending the sergeant at arms
out to arrest responsible officials and bring them back before the committee.
Arrest, contingency fines -- they have a wide range of options," said Kelso,
a legal trouble-shooter for the Davis administration.
Matthew G. Jacobs, an attorney, former federal prosecutor and a legal
consultant to the Legislature, agreed.
"The government code says the Senate can take whatever action they deem
appropriate," Jacobs said. The Senate could even refer the contempt finding
to a local prosecutor, who could file misdemeanor criminal charges.
Denne said the committee's investigation, and its contempt vote, was an
attempt to "find a political scapegoat."
Contact Howard at (916) 449-6687 or jhoward@ocregister.com

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

NEWS
CALIFORNIA POWER CRISIS
Senate panel, energy firm fighting tough
Bill Ainsworth
STAFF WRITER

07/12/2001
The San Diego Union-Tribune
1,2,6,7
A-3
(Copyright 2001)

SACRAMENTO -- A Senate panel moved a step toward holding Enron, an energy
trading firm, in contempt for refusing to turn over documents senators hope
can shed light on the state's soaring energy prices.
Enron fired back by filing a lawsuit yesterday asserting that only the
federal government has the authority to investigate the power market.
The panel, which had previously reached agreements with all the other major
generators and marketing companies in California, voted 6- 0 to prepare a
contempt recommendation for the Senate to consider next week.
The Senate, which last issued a contempt citation in 1929, must approve any
contempt recommendation. It then has wide-ranging powers to impose fines or
jail time.
The chairman of the Senate committee, state Sen. Joe Dunn, D- Laguna Nigel,
said that if Enron agrees to turn over documents to the committee soon, then
he will recommend that contempt proceedings be dropped.
The Senate Select Committee to Investigate Market Manipulation also decided
yesterday to drop contempt proceedings against Mirant, an Atlanta-based
marketing company, because it had agreed to turn over documents.
The dispute also touched on broader issues.
Enron, the politically connected Houston-based marketing company, has been
pushing electricity deregulation throughout the world. Company chairman
Kenneth Lay is a friend and campaign contributor to President Bush.
Last month the firm helped sponsor a congressional fund-raiser featuring the
president, where contributors in tuxedos and gowns dined and drank around a
giant gold "W" that reached to the rafters at the Washington Convention
Center ballroom.
Enron has also helped shape Bush's energy plan. It is one of several major
donors accused of meeting secretly with Vice President Dick Cheney to draft
the plan.
Several senators on the panel disputed Enron's claim that only federal
regulators, and not the state government, could investigate the electricity
market.
Further, they blasted the company for saying that California could not have
access to documents stored outside the state at the firm's Houston
headquarters.
State Sen. Steve Peace, D-El Cajon, said the company was so defiant that it
looked suspicious.
"Your client doth protest too much," he said to Enron's attorney, Michael
Kirby. "One can only wonder: What do you have to hide?"
But Kirby said the company merely wanted to protect confidential information
and get answers to its objections. That, he said, is why it filed a lawsuit
contesting the committee's power to seek documents that Enron claimed would
reveal trade secrets.
Peace, however, took issue with the lawsuit, calling it a dramatic escalation
in the dispute over an energy crisis that has cost the state billions.
"You just declared war on this state's political system," he said.

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

NEWS
Enron files suit over subpoena / Provider challenges move for documents
Lynda Gledhill
Chronicle Sacramento Bureau

07/12/2001
The San Francisco Chronicle
FINAL
A.15
(Copyright 2001)

In another escalation in the war between California and out-of- state energy
providers, Enron Corp. filed a lawsuit yesterday challenging the
Legislature's authority to subpoena company documents.
The suit came as a Senate panel investigating market manipulation voted 6 to
0 to move forward with a contempt motion against Enron. A report will be
forwarded to the full Senate early next week if the marketer continues to
refuse to comply with the subpoena.
"You just went to war with the state of California," Sen. Steve Peace, D-El
Cajon, told the lawyer representing Enron. ". . . You already initiated a war
economically; now you're in a political war."
The Senate committee investigating price manipulation found Enron and Mirant
Corp. in contempt last month for not turning over subpoenaed documents. The
finding against Mirant was vacated yesterday because it agreed to turn over
documents.
The committee, chaired by Sen. Joe Dunn, D-Santa Ana, requested documents
from power providers in early April. When the requests were ignored, the
committee issued subpoenas asking generators for documents covering business
plans, operations, risk management and investment strategies.
Peace argued that forcing a judge to decide the scope of the Legislature's
authority could provoke a constitutional crisis.
"You are treading into the territory of asking the court to make judgment on
the rules and the law governing the rights of the Legislature," Peace said.
"It is a separation of powers issue of the highest order."
But Michael Kirby, a lawyer hired by Enron, said the Houston company was
simply looking for due process.
"A subpoena is a subpoena and once you go that route you must comply with the
law," he told the committee. "We are entitled to some kind of hearing with a
neutral arbitrator. It was not our preference to file a lawsuit."
Kirby and the lawsuit cite several objections to the Senate's subpoena. These
include the confidentiality of the documents and whether a California body
can require documents from outside the state. Enron also says that only
federal regulators have the power to subpoena their records.
Kirby and members of the committee disagreed over the scope of what a
legislative subpoena covers versus one used in a criminal matter.
"I think there is a fundamental misunderstanding about our legislative
inquiry," Dunn said. "We are not drawing conclusions about guilt or
innocence. We want to see what fixes must be made in the law."
Kirby did say Enron has set up a depository in Sacramento and has 30,000
documents ready to be deposited, pending an agreement can be reached on
confidentiality issues.
But that is not good enough for committee members, who believe that Enron has
continue to evade the committee.
"We have no indication that Enron ever intends to comply with the subpoena,"
said Sen. Debra Bowen, D-Marina del Ray.

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

California Officials Press Contempt Findings against Houston-Based Power Firm
Emily Bazar

07/12/2001
KRTBN Knight-Ridder Tribune Business News: The Sacramento Bee - California
Copyright (C) 2001 KRTBN Knight Ridder Tribune Business News; Source: World
Reporter (TM)

State legislators pressed forward with contempt findings against Enron Corp.
on Wednesday after the company failed to produce subpoenaed documents and
filed a lawsuit asking the court to intervene on its behalf.
Lawmakers on a special Senate committee investigating electricity price
manipulation warned that the voluminous lawsuit, filed in Sacramento Superior
Court, could have far-reaching implications for the Legislature's ability to
conduct investigations and make findings. A few even suggested the legal
action could trigger "a constitutional crisis" that could end up in the
California or U.S. supreme court.
"You are treading into the territory of asking a court to make judgment on
the rules and the law governing the rights of the Legislature," said state
Sen. Steve Peace, D-El Cajon. "It is a separation of powers issue of the
highest order."
Representatives from Enron, a power marketer based in Houston, said they are
merely concerned that the committee has violated their due process rights.
Enron and another company, Mirant, were initially found in contempt by the
committee June 28 for refusing to turn over thousands of pages of documents
that had been subpoenaed June 11.
But the committee offered the companies a reprieve. If they complied with the
subpoenas, signed confidentiality agreements and set up a document depository
in Sacramento by Tuesday, the contempt findings would be expunged.
Committee attorney Laurence Drivon reported at the hearing that Mirant had
complied with the requirements, and had set up a document depository in the
U.S. Bank building downtown.
Mirant spokesman Patrick Dorinson said 159,000 pages of documents had been
turned over in 44 boxes as of Wednesday morning.
As a result, the panel voted to purge the contempt findings against Mirant,
but said it would review the company's compliance again in about 30 days.
Enron, however, did not turn over any documents or sign a confidentiality
agreement since the last hearing, Drivon said, and negotiations yielded
little progress. On a 6-0 vote, the panel agreed to move forward with
contempt proceedings against Enron.
As early as next week, the committee will forward a report to the Senate,
which will vote on the contempt findings and levy punishments that could
range from jail time for company officials to steep fines.
The panel said Enron could still purge the contempt findings if it complies
with the subpoena before the report is forwarded.
But company officials fired back at the committee, accusing members of
unfairly singling out Enron and treating it differently from other energy
companies.
"It is exceedingly difficult to discern whether the committee's actions are
designed to uncover the facts underlying the price spikes in California's
wholesale electric power market, or to create a convenient political
scapegoat to shoulder the blame for California's policy mistakes," one
official wrote to the committee.
All along, Enron officials have said they have several objections to the
committee's process. They believe the panel is violating the Federal Energy
Regulatory Commission's jurisdiction in its investigation; that it isn't
entitled to documents that are stored outside California; and that it doesn't
have the right to the confidential information and trade secrets in the
documents.
They also argue that their due process rights have been violated because they
received no response to their written objections to the subpoena before the
June 28 contempt vote.
The committee chairman, Sen. Joe Dunn, D-Santa Ana, overruled most of their
objections Wednesday. However, Enron officials argued it's unfair for a
committee member to rule on their objections.
"It is a foregone conclusion that the objections are going to be overruled,"
Enron lawyer Michael Kirby said at the hearing.
Officials believe an impartial third party should determine the merits of
their concerns, which was a primary reason the company filed the lawsuit,
said Enron spokeswoman Karen Denne.
In the lawsuit, Enron seeks a court injunction to end contempt proceedings
until the company's objections "have been duly considered and ruled upon by
an impartial hearing officer."
But Dunn said the Legislature's investigations are different from court
inquiries, and so are its procedures. "The same due process concerns
applicable to a court proceeding are not equally applicable to an
investigation by the Legislature," he said.
He denied the committee had singled out Enron, and said he believes Enron's
lawsuit is really asking the court to force the Legislature to end its
investigation.
The committee is scheduled to consider contempt findings against other power
companies next week.
"Enron (has) raised, potentially, a constitutional crisis with this
litigation," Dunn said.
Constitutional scholar Clark Kelso said legislators clamoring about a
constitutional crisis may be exaggerating. But Kelso, a professor at McGeorge
School of Law in Sacramento, believes the suit should be dismissed because it
is premature. He said the contempt process is still under way in the Capitol,
and has yet to be acted upon by the Senate.
Reacting to Enron's claims that an impartial third party should hear its
objections, Kelso also disagreed. "A court is not going to hold a Senate
committee to the same standard of impartiality it would hold a judge to," he
said.

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

California Senate Committee Pushes Enron Contempt Citation Forward

07/11/2001
Dow Jones Business News
(Copyright (c) 2001, Dow Jones & Company, Inc.)

Dow Jones Newswires
LOS ANGELES -- A California Senate committee voted Wednesday to forward to
the full Senate a contempt charge against Enron Corp. because the company
refuses to provide certain financial documents for an investigation into
wholesale power prices in the state.
If Enron is deemed to be in contempt by the full Senate, the legislators will
vote on punishments that could include fines against the company or
incarceration for company executives.
"When Enron decides it is so important to keep its information private, I can
only assume there is much more there to find than I can imagine," said Sen.
Steve Peace (D., El Cajon), a member of the Senate Select Committee to
Investigate Market Manipulation.
Enron (ENE) filed a lawsuit Tuesday to stop the Senate's subpoena of
financial records, saying the documents were outside of California's
jurisdiction.
The Houston company also is likely to legally contest the contempt charge, an
Enron attorney said during Wednesday's hearings.
The market manipulation committee will forward its contempt report to the
full Senate by early next week, at the earliest, said Sen. Joe Dunn (D.,
Santa Ana), chairman of the committee.
If at any point between now and then Enron decides to comply with the
committee's requests, the contempt charge will be dropped, Sen. Dunn said.
The committee also voted not to recommend a contempt charge for Mirant Corp
(MIR), which agreed to provide financial documents Wednesday morning shortly
before the hearing.
The documents sought by Mr. Dunn's committee include information on bidding
and pricing behavior in the state's electricity markets. The committee
originally was poised to cite eight electricity generators for contempt, but
all except Enron have since agreed to provide the requested information.
Write to Jessica Berthold at jessica.berthold@dowjones.com
Copyright (c) 2001 Dow Jones & Company, Inc.
All Rights Reserved

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

California; Metro Desk
Duke Energy Asked to Allow Release of Data Power: Senator says the generator
is refusing to make public some information crucial to the price-gouging
probe. Firm says it's complying.
CARL INGRAM
TIMES STAFF WRITER

07/10/2001
Los Angeles Times
Home Edition
B-8
Copyright 2001 / The Times Mirror Company

SACRAMENTO -- The chairman of a Senate committee probing suspected price
gouging during the California energy crisis charged Monday that Duke Energy
is refusing to allow him to make public information key to his investigation.
Sen. Joe Dunn (D-Santa Ana) said Duke has made the price bidding information
from its Chula Vista plant available to committee members and staffers. But
under a federal confidentiality rule, the data cannot be made public without
Duke's consent.
The documents concern the Chula Vista plant, which former employees have
alleged was ramped up and down to drive up power prices during three days in
January. However, state records show that the agency overseeing the
electricity grid ordered those gyrations to keep the power flowing throughout
the state.
Dunn said Duke's refusal thwarts the committee's investigation and efforts to
enact possible remedial legislation because the confidential information
cannot be shared with others in the Legislature or the public.
Dunn said Duke cited a rule of the Federal Energy Regulatory Commission that
gives the company the authority to decide which records it makes public and
which stay secret.
"The only one who can release the data is Duke. We agreed to be bound by what
is provided in the FERC tariff, nothing more or less," he said.
Former Employees Tell of Maneuvers
Dunn noted that the committee is considering trying to obtain the information
elsewhere and "release it over Duke's objections."
Three former workers at the Duke plant near Chula Vista testified last month
under oath that the plant, among other things, was ramped up and down in what
seemed to be an effort to maximize revenue during the Jan. 16-18 emergency.
But Duke countered immediately that it had merely obeyed orders of the
California Independent System Operator, which keeps the state's electricity
grid in balance. Duke later provided Cal-ISO documents backing up its
explanation.
Duke executives insisted that the former employees failed to provide a full
picture of the plant's operation during the three days.
But Dunn, chairman of the select Senate committee on alleged price gouging,
said Monday that by refusing to authorize release of all the subpoenaed data,
Duke was guilty of the same tactics.
"Duke is trying to draw the impression that it has [provided] the full
picture. But they are fully aware that we cannot draw any final conclusions
until all that data has been released. That hasn't occurred," Dunn said.
To make a determination whether the Chula Vista power was withheld to drive
up prices, Dunn said, the committee must publicly examine "the bids Duke
submitted from which the ISO issued orders to the plant." They include the
expensive hour-ahead and day-ahead markets, he said.
Duke, a North Carolina-based wholesaler that operates several plants in
California, noted that it considers the information proprietary and
off-limits to legislators not on the committee.
Duke spokesman Tom Williams insisted that the generator is attempting to
comply with the committee's demands. But he was unable to say whether Duke
would agree to make the bidding documents public along with other records the
committee plans to turn over.
"We are complying now," Williams said. "There is some suggestion that we are
leaving stuff out when we have not had a chance to testify. . . . I don't
know what we are ultimately going to do."
The committee had threatened to cite eight wholesale generators unless they
provide pricing and bidding documents by Wednesday. Six, including Duke, have
said they would comply to avoid a contempt citation. Two, Enron and Mirant,
were cited.
Dunn said the committee on Wednesday likely will give companies that are
trying to comply an extra week to do so, but others probably will be formally
charged with contempt in a report to the full Senate. The upper house is the
final arbiter of such issues.
Although there is scant precedent for levying penalties against those cited
for contempt, Dunn said he favors imposing severe fines. In 1929, the most
recent case, a cement company executive was sent to jail.

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

Calif Pwr Plant Outages Dn In Jun, Still Top 2000 -Report

07/09/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

LOS ANGELES -(Dow Jones)- The average amount of electricity generating
capacity unavailable to California due to breakdowns or planned maintenance
at power plants fell by half in June from the three previous months, the
California Energy Commission said Monday.
But the 6,758 megawatts of generation that was off line on average last month
was still more than twice the 2,683 MW off line in June 2000.
Generators, including Duke Energy (DUK), Reliant Energy Inc. (REI) and Dynegy
Inc. (DYN), said that's because the half-century-old power plants ran at
maximum capacity during the past year to help cover the state's massive
electricity shortfall.
Generators said there's nothing suspicious about the increased amount of
capacity that went off line this year. In fact, they schedule maintenance a
year in advance.
"We ran the heck out of our plants," said Duke spokesman Tom Williams. "These
plants are about 50 years old. They broke down because we ran them so hard."
In addition, about 5,000 MW of generation operated by small power producers
known as qualifying facilities shut down their units this spring, because
they were owed for power supplied to Edison International (EIX) unit Southern
Californa Edison and PG&E Corp. (PCG) unit Pacific Gas & Electric. Those
plants began operating again late last month after striking deals to settle
their claims.
State officials, however, believe the generators have purposely kept their
power plants off line to drive-up wholesale electricity prices. State Sen.
Joe Dunn, D-Santa Ana, said it appears generators have the ability to
influence wholesale power prices and have done so by forcing some of their
units off line.
"Whether they did it in a concerted fashion is the question we're trying to
answer," Dunn said. "But it's clear that some of these plants may have shut
down for unnecessary maintenance."
The amount of generation off line between March and May averaged 14,026 MW,
according to the commission's report. Since January, average outages each
month have run about twice as high as the same month the year before.
The numbers are based on calculations made by the state's Independent System
Operator, manager of the electricity grid, which keeps track of the outages.
-By Jason Leopold, Dow Jones Newswires; 323-658-3874;
jason.leopold@dowjones.com

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

More Employees To Testify Vs Calif Generators -Senator
By Jason Leopold
Of DOW JONES NEWSWIRES

07/05/2001
Dow Jones Energy Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)

LOS ANGELES -(Dow Jones)- Current and former power plant employees are
expected to testify soon against California's major power suppliers, alleging
the companies manipulated the state's wholesale electricity market in an
effort to boost power prices, the head of the state Senate committee
investigating the claims told Dow Jones Newswires.
The whistleblowers are non-management employees who work for or were once
employed by Reliant Energy Inc. (REI), Dynegy Inc. (DYN), Mirant Corp. (MIR),
Williams Cos. (WMB) and Duke Energy (DUK), said state Sen. Joe Dunn, D-Santa
Ana, chairman of the Senate Select Committee to Investigate Price
Manipulation.
"We have been dealing with a whole number of whistleblowers to provide their
view, whether good or bad," Dunn said. "These are whistleblowers from
virtually all five generators who are either current or former employees."
California is seeking $9 billion in refunds from suppliers, which it accuses
of price gouging. The state also hopes to pursue criminal charges against
power company executives.
So far, Dunn's committee has only heard testimony from former employees of
Duke. The testimony against the other generators could come as early as July
10, Dunn said. Some of the whistleblowers are concerned about losing their
jobs or being blacklisted once they testify, he said.
Two former employees of Duke's South Bay power plant are slated to testify
Thursday before the Senate committee that Duke reduced output at the
706-megawatt power plant to drive up wholesale power prices.
Last month, three former Duke power plant employees testified that Duke
tossed out spare parts and "ramped down" two turbines during power
emergencies. The men produced control room logs to back up their testimony.
"The testimony by the new whistleblowers is headed in the same direction as
the other three (Duke) employees," Dunn said, adding that evidence may
include some control room logs that show power plants being ramped up and
down.
The California Independent System Operator, manager of the state's power
grid, admitted last week that Duke was acting on its orders when the company
reduced output at the plant, but said it issued those orders because Duke's
power prices were too high.
Generators Deny Manipulation

Energy companies will have an opportunity to give their side of the story to
the committee by the end of the month, Dunn said.
The companies deny allegations they manipulated the market.
"We have not withheld," said Mirant spokesman Pat Dorinson. "We have not
manipulated the market. We follow dispatch instructions given to us by the
ISO."
Dynegy spokesman Steve Stengel said the company hasn't been told by Dunn's
office that anyone would be making specific allegations about its operations.
Repeating an argument used by Duke, Stengel said plant employees weren't
aware of the big picture.
"No one at our power plants is in a position to know why the plants ramp up
and down," Stengel said. "Communication is between the ISO and the Dynegy
marketing staff. We take dispatch orders from the ISO."
Dunn said additional employees have come forward since the Duke employees
first testified and that his staff interviews potential whistleblowers.
"We see if they have something to add to the investigation," Dunn said.
Despite the emergence of new witnesses, Dunn wouldn't claim to have found a
"smoking gun."
"I tend to shy away from that term," Dunn said. "To be honest, if a (smoking
gun) exists, I doubt we will ever get our hands on it."
Dunn's committee started its hearings three months ago. The senator said he
has concluded that generators have the ability to set the price of wholesale
electricity and should be stripped of their ability to charge market rates.
"We still have to hear from the generators," Dunn said. "But it seems very
clear that the Big Five generators have market power. The question is how do
they exercise market power and what is the impact on the price? If market
power has been exercised in a concerted fashion, that's a potential antitrust
charge. That's illegal."
The committee will continue its investigation through the summer break, which
begins July 15, and expects to complete its probe by September, Dunn said.
-By Jason Leopold, Dow Jones Newswires; 323-658-3874;
jason.leopold@dowjones.com

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

News
Power producers in contempt Energy Companies withhold documents in probe of
possible price fixing. Series: energy.0628
KIMBERLY KINDY
The Orange County Register

06/29/2001
The Orange County Register
1
PageH

Sacramento Two power producers were found in contempt Thursday by a Senate
committee investigating possible price manipulation after company officials
refused to turn over thousands of subpoenaed documents. Such an action hadn't
been taken since 1929, when the Legislature was investigating the cement
industry.
Enron Corp. and Mirant Energy both failed to reach an agreement by Thursday's
deadline to turn over internal memos, business strategies, contracts for
electricity sales, and volumes of other documents that will reveal how
they've run their businesses under deregulation.
Mirant spokesman Patrick Dorinson said his company hopes to reach an
agreement with the committee within two weeks and said company officials
would continue to negotiate in good faith.
But Enron was defiant. No company official attended the hearing. Instead, San
Diego attorney Michael Kirby faxed a four-page letter, announcing for the
first time that the company has no intention of handing over documents. Enron
challenged the committee's legal authority to investigate the industry and
said that most of the documents were stored outside California, so the
committee had no legal right to ask for them.
Enron officials refused further comment. The response outraged Sen. Steve
Peace, D-Chula Vista, who said Enron should face harsher punishment than the
rest and warned other power producers to not follow Enron's lead.
"These guys make the tobacco guys look like paupers," Peace said. "(The
tobacco industry was) nowhere near as slick as these guys."
Sen. Joe Dunn, D-Santa Ana, chairman of the Senate Select Committee to
Investigate Market Manipulation, said that if the two companies don't comply
by July 10, the full Senate will likely be asked to hold them in contempt.
The Senate could order the immediate delivery of the documents in addition to
fines and other penalties.
The other five companies that faced a possible contempt citation Thursday
were given an extension to July 10 because they were starting to turn over
documents or had agreed to a method of turning them over.
Those companies include Dynegy Inc., which handed over 18,000 pages Thursday,
and Reliant Energy, which turned over 1,800, Dunn said.
Duke Energy and Williams Cos. agreed to turn over the requested documents to
a central location in Sacramento, provided a confidentiality agreement can be
reached. AES Corp. was not found in contempt because Williams' compliance
likely covers the company; Williams pays AES to run the plants and sells the
energy the plants produce.
Contact Kindy at (916) 449-6685 or kkindy@ocregister.com

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

California News
TWO COMPANIES FOUND IN CONTEMPT OF LEGISLATURE; ENRON, MIRANT HAVE 12 DAYS TO
WORK OUT DEAL TO PROVIDE DOCUMENTS
BY DION NISSENBAUM, Mercury News Sacramento Bureau

06/29/2001
San Jose Mercury News
Morning Final
27A
(c) Copyright 2001, San Jose Mercury News. All Rights Reserved.

SACRAMENTO -- California lawmakers found two companies in contempt on
Thursday for refusing to turn over thousands of pages of documents as part of
an investigation into possible electricity price gouging, the first time
since the Great Depression that a committee has resorted to such a drastic
measure.
After weeks of fruitless negotiations, a special state Senate committee
unanimously found Enron and Mirant -- two of the state's largest private
power providers -- in contempt of the Legislature.
''These companies have shown contempt for the people of California, and it
adds to the strong suspicion that they have a lot to hide,'' said Sen. Wes
Chesbro, D-Santa Rosa.
Five other energy companies avoided a similar fate with a series of 11th-hour
faxes, phone calls and deliveries to the Capitol meant to signal their
willingness to cooperate.
But lawmakers offered sharp criticism of Enron and Mirant. ''Am I prepared to
throw someone in jail for non-compliance? Hell, yes,'' said Sen. Bill Morrow,
the top Republican on the committee.
The companies have 12 days to work out an agreement with the committee or
face punishment. Because the action is taken so rarely, there is little
guidance for lawmakers on how to proceed.
Any punishment must be approved by the full Senate, which has wide latitude
to order the arrest of company officials, impose financial penalties or take
some other action.
An attorney for Mirant sought to avert the vote with a last-minute agreement,
rejected by the committee, to turn over some documents. Enron's response was
a four-page letter in which it questioned the committee's right to examine
its business practices.
The last time the state Senate took such an action came in 1929 when
lawmakers ordered the arrest and brief imprisonment of a cement company
executive who refused to speak to them about alleged price fixing.
More recently, a state Assembly committee investigating former Insurance
Commissioner Charles Quackenbush ordered the arrest last summer of a witness
who failed to appear at a hearing. The witness came to the Capitol several
hours later.
The Senate committee has been trying for months to gain access to
internaldocuments.
All seven companies fought the requests and asked the committee to adopt
broad restrictions on what material it would make public. But the committee
refused.
In light of the stalemate, the committee vowed to hold the companies in
contempt.
Five companies -- Duke Energy, Dynegy, Reliant, Williams and AES -- managed
to ward off a contempt vote by turning over, or agreeing to turn over,
documents under the less-stringent secrecy protections offered by the
committee in May.
As the hearing got under way, Reliant turned over 1,800 pages of what it
called non-confidential documents. A few hours later, Dynegy delivered seven
boxes filled with more than 18,000 documents.
Sen. Joe Dunn, D-Garden Grove, called the last-minute flurry of activity
''unfortunate and disturbing'' and said his committee will spend the next two
weeks looking over the documents to see if they satisfy the panel's demands.
Should the companies balk on their last-minute agreements, Dunn said, the
committee will take a second look at finding them in contempt. {CHART} CHART:
MERCURY NEWS
[Chart not taken in database]

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

California News
FIRMS FACE CONTEMPT RULING FOR WITHHOLDING DOCUMENTS
BY DION NISSENBAUM, Mercury News Sacramento Bureau

06/28/2001
San Jose Mercury News
Morning Final
19A
(c) Copyright 2001, San Jose Mercury News. All Rights Reserved.

SACRAMENTO -- A special legislative committee looking into alleged
electricity price gouging is poised to take the almost unprecedented step of
declaring power companies in contempt for failing to turn over thousands of
pages of documents.
State Sen. Joe Dunn is expected to grill the major power companies at a
hearing today for refusing to turn over records the Garden Grove Democrat and
his committee want to examine.
''We have reached the end of our patience,'' Dunn said Wednesday.
If the committee declares the companies in contempt, Senate aides said, it
would be the first time in 72 years that the Legislature has taken such a
step.
Just what might happen to the companies remains unclear. State law gives
lawmakers broad, but vague, power to impose financial penalties on the
companies, arrest witnesses or take stronger action.
The full Democrat-controlled state Senate would have to decide what
punishment, if any, to impose.
Dunn and his committee have taken a lead in the Capitol in exploring
allegations that power companies, including Duke Energy, Reliant, Mirant,
Williams and Dynegy, used unethical or illegal tactics to drive up the price
of power and rake in billions in profits.
For nearly three months, the committee has been working with company lawyers
to gain access to thousands of pages of documents. After weeks of stalemate,
the committee issued a 15-page subpoena earlier this month to the companies.
But the companies have balked.
Tom Williams, a Duke spokesman, said his company was unwilling to turn over
information until the committee agreed to some restrictions.
''We have not gotten adequate confidentiality agreements from Sen. Dunn's
committee and that's a big stumbling block,'' he said.
Dunn said he is willing to protect company trade secrets but will not agree
to broad confidentiality rules.
According to Senate aides, the last time the Senate found someone in contempt
was in 1929, when lawmakers ordered the arrest of a witness in a price fixing
investigation. The state Assembly made similar threats last year during an
investigation of former Insurance Commissioner Charles Quackenbush. Exactly
one year ago, the Assembly committee ordered the arrest of a witness who
failed to appear. The witness appeared several hours later.

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

NEWS
Two power firms held in contempt by state Senate panel / Enron, Mirant cited
over subpoenaed documents
Lynda Gledhill
Chronicle Sacramento Bureau

06/29/2001
The San Francisco Chronicle
FINAL
A.6
(Copyright 2001)

A state Senate committee held Enron and Mirant corporations in contempt
yesterday for not turning over subpoenaed documents as six other energy
companies made frantic, last-minute deals to comply with the lawmakers'
orders.
The contempt finding is the first of its kind since 1929 when a Senate panel
investigating price fixing in cement prices briefly jailed a Portland
businessman for refusing to comply with a subpoena.
"Jailing is an option and we preserve all options at this point," said state
Sen. Joe Dunn, D-Santa Ana, the chairman of the committee investigating
charges of price manipulation in the wholesale electricity market.
Although Dunn's committee voted 5 to 0 to find the companies in contempt, the
panel will decide July 10 whether to ask the full Senate to issue sanctions
against Enron and Mirant.
Dunn's committee requested documents from power providers in early April.
When the requests were ignored, the committee issued subpoenas on June 11
asking generators for documents covering business plans, operations, risk
management, and investment strategies.
Based on their pledges yesterday to cooperate with the committee, six energy
providers escaped contempt citations and were given until July 10 to comply
with the orders. All of the companies cited concerns about confidentiality of
the documents.
As committee members met, generators' lawyers stepped into hallways and made
hurried calls from cell phones to their corporate headquarters, and one
company delivered a truckload of documents to the Capitol.
"While we have received certain documents today, we have no idea what has
been given to us," Dunn said. "That it has taken until today to get these
responses is unfortunate and disturbing."
Enron drew most of the wrath from the committee after sending only a letter
questioning the committee's jurisdiction. The company also criticized an
investigation by Attorney General Bill Lockyer, which company officials
called "fatally and irreparably compromised" by what it said was blatant
bias.
Lockyer has said in published articles that the heads of some of the power
generating companies, like Enron, should go to jail.
Lawmakers took Enron to task for not bothering to send a representative to
the hearing.
"There is clearly a stark contrast in the conduct in the marketplace between
Enron and other companies," said Sen. Steve Peace, D-El Cajon. "The irony of
the Enron letter is that they were the architect of the whole (deregulation)
concept."
An Enron spokeswoman reached after the hearing declined to comment.
An attorney for Duke told lawmakers his company would agree to place all
requested documents in a Sacramento depository for the committee to review.
He also agreed that except for a few minor changes the company would agree to
a proposed confidentiality agreement.
Under the plan, information such as trade secrets and other proprietary
information would be kept confidential and companies would receive a 10-day
notice if the committee planned to make public any confidential materials.
The company would then have that time to ask for a court order preventing any
release.
A lawyer for Williams Energy agreed to the same conditions as Duke, and an
attorney for Mirant pursued a similar strategy but stopped short of pledging
that all documents would be made available.
A Mirant spokesman said later that the company has compiled thousands of
pages of documents and will continue to work with the committee.
"We want some assurance from committee that the documents will not end up in
some public forum where they could be misused," said Patrick Dorinson.
If Mirant or Enron comply with the subpoena before the July 10 hearing, the
contempt citation will be rescinded, Dunn said.
As the committee met, it received boxes from Dynegy containing 18,000 pages,
plus 1,800 documents from Reliant. Two other companies, AES and NRG Energy
Inc., were given an extension because the requests for their documents were
made later.
The committee will review the documents before July 10 to see if those
companies have complied, Dunn said.
The last time the Legislature found someone in contempt was 72 years ago when
H.T. Battelle of the Pacific Portland Cement Co. was thrown in jail for
ignoring a Senate subpoena.
Dunn said it is not clear what the Senate would do in this case.
The Democratic lawmaker's committee made national headlines last week when
three former employees of a Duke power plant testified that they were told to
ramp power production up and down in an apparent attempt to manipulate
electricity prices. Duke countered that it was merely following the orders of
the state's power grid operators.

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

USA: Calif. Senate panel cites generators for contempt.

06/28/2001
Reuters English News Service
(C) Reuters Limited 2001.

SACRAMENTO, Calif., June 28 (Reuters) - A California state Senate committee
voted to cite Mirant Corp . and Enron Corp for contempt on Thursday after the
energy generators failed to supply confidential documents as required by
subpoena.
The committee, which is seeking evidence of power price manipulation in
California's chaotic energy market, voted unanimously for the contempt
citations after Mirant and Enron did not produce the required papers.
"The step we took today is historic," said state Sen. Joe Dunn, Democratic
chair of the Senate Select Committee to Investigate Market Manipulation. "We
haven't done this in 72 years."
Dunn said his committee would draw up a contempt report which would be
forwarded to the Senate by July 10.
The full Senate, in turn, will be charged with determining what sanctions to
impose - which could range from renewed orders for documents to fines to jail
time for individuals determined to have obstructed compliance with the
subpoenas.
The committee postponed action on possible contempt citations for other
energy companies, including Reliant , Dynegy , Williams Cos , Duke Energy ,
AES Corp and NRG Energy , giving them until July 10 to follow through on
promises to provide the required documentation.
Dunn said the citations against Mirant and Enron - which would be the first
imposed by California's state Senate since 1929 - would be vacated if the
companies comply with the subpoenas by the July 10 deadline.
The companies have objected to providing the confidential materials, which
they argue includes proprietary information on bidding and pricing for
California energy purchases that, if disclosed, could damage their
competitive ability.
Enron, in particular, has rejected the committee's authority, saying it keeps
its documentation in Texas and is therefore outside California jurisdiction.

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

News
Senate may turn up heat on power producers Legislature Subpoenas may be used
to obtain internal documents from big electricity companies. Series:
energy.0628
KIMBERLY KINDY
The Orange County Register

06/28/2001
The Orange County Register
1
Cal

SACRAMENTO The Senate might exercise its contempt powers for the first time
in more than 70 years if electricity producers fail today to obey a subpoena
ordering them to turn over documents that would provide an inside look at
their business practices, lawmakers said Wednesday.
The power producers are flying in representatives to appear before a Senate
committee today, but they are not expected to turn over any of the documents,
which were first requested in April.
They are seeking a protective order that would ban the committee from
disclosing the information to the public or to other government agencies,
said Gary Ackerman, executive director of the Western Power Trading Forum,
which represents many of the major power producers.
"They want to have some control over these confidential documents, and they
have this right," Ackerman said. "The Senate has subpoena powers, but they
also have obligations."
State Sen. Joe Dunn, D-Santa Ana -- who chairs the Senate committee that
issued the subpoenas -- said he hopes the power producers will comply, but if
they don't he'll be forced to take more aggressive actions.
There are two possibilities, including the reissuance of subpoenas, this time
naming company officials instead of a faceless corporation. The full Senate
would have the power then to throw the named person in jail, as it did in
1929 when the Legislature was investigating the cement industry for possible
collusion and price- fixing. In that case, the state Supreme Court stood
behind the Senate's authority.
The focus of Dunn's committee is similar to the 1929 investigation. He is
looking into accusations of collusion and price fixing, this time among some
of the nation's largest electricity producers.
Dunn said the other possible action is to ask the full Senate to hold the
companies in contempt, and order that they turn over the documents or face
possible court action. Failure to comply with a legislative subpoena is a
misdemeanor. The Senate also could probably ask the court to intervene in the
dispute, said Matthew Jacobs, an attorney who's studied the Legislature's
powers in this area.
"It is my sincere hope that we can avoid the ultimate penalty for
noncompliance, which is to jail the individual to comply," Dunn said. "There
is no legal basis for refusing to comply with the legislative subpoena based
on an assertion of confidentiality."
Senate Leader John Burton, D-San Francisco, said the Senate will likely
support whatever action the committee asks it to take.
"The Senate would probably support what they would want to do," Burton said.
"If they make the case, then we will probably take the action that they
believe is appropriate."
Jacobs, who served as special counsel to the Assembly during the hearings
that led to the resignation of former Insurance Commissioner Chuck
Quakenbush, said the Legislature's subpoena power is the greatest when a
specific person is named.
"The (Senate) sergeant-at- arms goes out and places the person under arrest
and takes him down to the county jail," said Jacobs. "If they comply with the
subpoena, they can get out of jail. You can't throw a corporation in jail."
In the 1929 case, the sergeant-at-arms arrested H.T. Battelle, secretary of
the Pacific Portland Cement Co. The company protested, saying the Senate
didn't have such authority, but the Supreme Court sided with the Senate.
Battelle was forced to comply, according to a copy of the published decision.
Dunn said since Battelle's case is the only trailblazing that's been done on
the Senate's contempt and subpoena power, it will rely on the advice of the
Legislative Counsel's Office as to its options should the generators fail to
turn over documents.
Power producers are angry with Dunn and his committee's aggressive approach
to unearthing information. During a committee hearing last week -- which
showcased three former power-plant workers who have accused the producers of
wrongdoing -- the power merchants' group labeled the committee's work a
"witch hunt."
Contact Kindy at (916) 449-6685 or kkindy@ocregister.com.

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

News
Testimonies point to power manipulation Electricity Davis calls account of
ex-Duke Energy workers a potential `smoking gun.' Series: energy.0623
KIMBERLY KINDY
The Orange County Register

06/23/2001
The Orange County Register
1
Cover

SACRAMENTO Three former workers at a Duke Energy plant moved from obscurity
into the national spotlight Friday as they became the first eyewitnesses to
provide sworn testimony accusing a generator of unethical -- and perhaps
illegal -- conduct in California's energy crisis.
Gov. Gray Davis called the men "heroes," and before the first witness even
completed his testimony, he invited them and their families to have breakfast
with him Monday.
"If these allegations are true, it might be the smoking gun we thought
existed all along."
With 10 television crews and twice as many radio and print reporters
recording one of the most dramatic Capitol hearings in recent history, the
men spent six hours before a special Senate committee that is investigating
whether price-fixing and collusion among generators either fueled or created
the crisis.
The accounts of mechanics Ed Edwards and Glenn Johnson and control- room
operator Jimmy Olkjer included accusations of equipment tampering at a Chula
Vista plant in order to withhold production and drive up electricity prices.
The testimony drew an immediate response. A consortium of power generators
labeled the hearing a "witch hunt" in a letter that reached committee
chairman Sen. Joe Dunn, D-Santa Ana, even before the last witness had
finished testifying. Dunn diverted briefly from the questioning to read the
letter aloud and then dismissed the charge as "nonsense."
Duke spokesman Tom Wil liams said the former employees' testimony should be
questioned because when Duke assembled its own team this spring, they were
not hired. "It's absolutely absurd," Williams said of the allegations.
But Lt. Gov. Cruz Bustamente said he believes the accounts of the three men
are solid. He believes that Duke perhaps didn't hire them because they were
at the top of their pay scale, each of them working more than two decades in
the business.
"I think they provide clear evidence of tampering at the facility," said
Bustamente. "They have distinguished careers and service records and they are
coming forward as good Californians."
The testimony of the three men recounted much of the same information they
provided to The Orange County Register and CBS News on Thursday, but expanded
it and added a few revelations.
Dunn believes the most important testimony focused on a series of
control-room logs for three days in mid-January that show how frequently Duke
ordered the "ramping up" and "ramping down" of their generators.
Johnson called it "yo-yoing" and said the charts on the generators that track
production levels started looking like "cardiac monitors" after Duke took
over the plant.
The significance of the constant ramping up and down is two-fold: It could be
used as partial evidence to prove allegations that Duke manipulated its
production levels to drive up prices. And it backs up testimony from the
former employees that this behavior led to the erosion of good equipment,
causing further breakdowns and outages that would affect supply.
Duke officials said most of this ramping up and down was on orders of the
California Independent Systems Operator, which operates the state's power
grid, but they could not quantify what percentage of the decisions were their
own.
"This amount of ramping up and down is unusual," said Dunn. "There were
decisions made in three-, four-, five- minute intervals. I don't think that
kind of micromanagement comes from ISO."
The three men -- whom Duke had inherited from former plant operator San Diego
Gas & Electric -- said they were shut out of decision- making that led to the
powering down of generators. But after a while, they said, they were able to
pick up on the longtime Duke employees' jargon and began to make their own
interpretations for the company's motives behind powering down.
"They would say they were `down for economics.' That was thrown around a
lot," said Johnson, who added that he came to believe it was done
deliberately to "reduce load to boast prices."
Again, Duke officials deny these allegations, saying they never powered down
generators to "game" the market.
Sen. Steve Peace, D-El Cajon, said the testimony convinced him that Duke
Energy is in violation of its lease with the San Diego Unified Port
Authority, which owns the plant.
The lease, which Peace read from during the hearing, requires that Duke use
"prudent utility practices" in its management of the plant - - something that
both Edwards and Johnson said was violated as routine maintenance was
abandoned and generators fell into disrepair.
If found in violation of the lease -- which the port authority is
investigating -- Duke presumably could lose control of the plant.
Williams said Duke has improved, rather than downgraded, the service record
of the plant.
On Thursday, the employees said in interviews with the Register that they
were ordered to fill Dumpsters with valuable new parts that were sold as
scrap metal. The parts were later needed to perform repairs, and since they
were not on hand, generators were not able to operate at full capacity.
Olkjer, the control-room operator, said he also noticed a correlation between
Duke's decision to ramp down its generators and a precipitous rise in energy
prices. He believes that the Duke was able to influence prices by withholding
power.
"None of these allegations are true," said Williams. "Many of the parts were
obsolete, so we did clear them out ... we did nothing unethical."
Dunn said the next committee hearing, in mid-July, will provide power
generators with an opportunity to respond to allegations that they have
price-gouged Californians. He said that so far, three months after asking for
and then serving subpoenas for documents, the committee has received nothing
from the generators.
"They have also refused to agree to a non-destruct order for documents. We
want them to promise to not destroy documents, which could provide critical
evidence, and they will not do it," Dunn said adding that the contempt
charges are a possibility.
Dunn said if the committee finds evidence of criminal wrongdoing, it will
hand it over to Attorney General Bill Lockyer. If it finds evidence of
misconduct that shows the market is being wrongly manipulated, it will use
that information to push for system reforms and refunds for overcharges.
After the hearing, the men said they were amazed and frightened by the media
circus and by attention they received.
"I'm shocked," said Johnson, who Friday was also awarded a Medal of Valor by
the California National Guard after a three-year delay because of
administrative glitches. "I feel like my life is never going to be the same."
Contact Kindy at kkindy@ocregister.com or 916-449-6685

Caption: Ex-power plant worker Ed Edwards, right, testifies before a state
Senate panel Friday
Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.

Metro Desk
THE ENERGY CRISIS Power Debate Heats Up as Davis Reveals Contracts
RICH CONNELL NANCY RIVERA BROOKS; DAN MORAIN
TIMES STAFF WRITERS

06/16/2001
Los Angeles Times
Home Edition
A-1
Copyright 2001 / The Times Mirror Company

SACRAMENTO -- After months of resisting disclosure, Gov. Gray Davis on Friday
released 38 long-term power contracts that aides said show the administration
is deftly managing the energy crisis, but that critics warn contain clauses
and costs that may burden consumers with unpredictably high prices for years.
Provisions in some of the contracts protect generators from new state taxes,
shield them from potential action by federal regulators and give them a break
on environmental costs. At the same time, the documents are so heavily
censored in crucial areas that it is impossible to fully assess their impact
on the state and its residents.
State officials insist that the complex agreements, extending as much as 20
years and costing an estimated $43 billion, already have slowed the
hemorrhaging of state spending on power and sheltered consumers from wild
electricity price swings in the future.
"These provide a major building block for lifting this energy crisis," Davis'
top energy advisor, S. David Freeman, said as a 600-page stack of agreements
was made public in response to a court order. "That was our longer-term
strategy. We implemented it, and it's worked."
The governor, questioned after a public appearance at Mather Air Force Base,
echoed his advisor's optimism, but added: "I'm under no illusions. I think
the summer is going to be hot and the peak prices will spike up."
For months, Davis has publicly vilified the generators with whom his
administration has now become contractually bound. Asked whether his nemeses
negotiated in good faith, the governor said: "I do not think the generators
have our best interests at heart. . . . They're laughing all the way to the
bank. My job is to fight back."
Davis has a heavy political investment in the pacts, which the state began
negotiating in January as blackouts hit, power prices soared and the state's
large utilities slipped toward insolvency.
Crediting the contracts, Davis aides noted the state was paying an average of
$332 a megawatt hour for power in January, but only $179 this month. The
contracts call for an average price of about $85 per megawatt hour over the
next five years and about $69 over the next 10 years.
Critics have noted that the state's current average costs under the contracts
exceed those now available on the daily market. But Davis contends the
current reduced prices are largely a result of his contracting strategy.
Partly because of the secrecy Davis imposed on the deals, they have become a
focal point of suspicion over his handling of the crisis. News
organizations--including The Times--and Republican officeholders sued to get
them. Consumer groups, meanwhile, complained about being hit with historic
utility rate increases for deals no one could examine.
The controversy seemed to intensify Friday, despite efforts by the governor's
team to portray the agreements as a major tactical victory against
out-of-state power marketers who exploited the state's flawed deregulation
scheme.
GOP Leader Attacks 'Sweetheart Deals'
Assembly Republican Leader Dave Cox of Fair Oaks, whose staff pored over the
documents, attacked the governor for brokering "sweetheart deals for the
generators."
Even a key Democrat, state Sen. Joe Dunn (D-Garden Grove), expressed serious
concerns about a number of provisions in the deals that seem to offer special
relief to generators.
Some lawmakers and consumer groups pointed to provisions that would allow
generators to shift the cost of new taxes to the state and possibly exempt
the firms from a windfall profits tax.
"It ups the ante as far as the ultimate burden that the contracts will place
on the shoulders of California ratepayers and taxpayers," said Dunn, who is
heading a special committee investigating alleged manipulation of the state's
energy market.
The senator said he also is concerned about provisions such as one negotiated
with GWF Energy, which prevents the state from pressing any future claims
with federal regulators regarding the company's profits.
"It is very disconcerting that we would willingly give up the right to
challenge any of these [prices]," Dunn said.
Consumer advocate Harvey Rosenfield called some of the contract terms
outrageous. Rosenfield, who heads the Foundation for Taxpayer and Consumer
Rights in Santa Monica, said it was "bad enough" that the long-term contracts
resulted in "high rates for Californians for a decade." He said Friday's
disclosures pointed to other "giveaway" perks.
Freeman, who formerly headed Los Angeles' Department of Water and Power,
insisted that generators won no special windfall profit protections. The only
tax increases generators can pass along to the state, he said, are those
directly tied to production of the power in the contracts, such as new taxes
on natural gas.
"I'm not going to say some lawyer won't argue" that the generators will not
claim they are exempt from a windfall profits tax. "But the contract is very
clear and the law is very clear."
Some of the pacts lock in specific prices, such as $58 a megawatt hour for
around-the-clock power from Baltimore-based Constellation Energy Group. The
Davis administration said those guard against price spikes in future years.
Other contracts, officials said, balance the portfolio. They include deals
such as those with Dynegy Inc., which tie prices to the cost of fuel in
future years.
A number of energy insiders found reason to praise the contracts.
"The point of signing long-term contracts is not to get a great deal, it's to
reduce risk" from the volatility of spot markets, said Severin Borenstein,
director of the Energy Institute at UC Berkeley.
Edison Cites Hedge Against Price Spike
The long-term power contracts will be an important factor in limiting the
state's exposure to future price spikes, said Bob Foster, senior vice
president of public affairs for Rosemead-based Edison International, the
corporate parent of Southern California Edison.
"This was California's problem to begin with," Foster said. "You don't want
to be buying a lot of power traded on the spot market. What we really need is
a portfolio of contracts that range from one to seven years and that take out
the volatility from a large percentage of the market."
Davis advisors stressed that most of the contracted power also is linked to
development of new California generating plants, a key part of the governor's
drive to free the state from reliance on out-of-state power trading
companies.
About 60% to 70% of all the power that will be purchased in future years
under the contracts will be from new plants. The agreements, Freeman said,
helped developers obtain bank financing for their proposed plants.
By nurturing new plants, the state is signaling energy companies that "this
gravy train of high [prices] is not going to last forever," said Vikram
Budhraja, California's lead consultant in the bargaining.
But as analysts pored over the details, some challenged the governor's basic
premise that the long-term deals were largely responsible for recent falling
prices. They attribute the softening market to a host of other factors,
including cooler weather, falling natural gas prices and more plants
completing spring maintenance.
In fact, some scholars say that the current prices simply prove that the
state committed to paying the power companies too much for too long.
"The governor's spin doctors claim that not entering into the contracts would
have been gambling," said UC Irvine economist Peter Navarro. He said that in
the years ahead, odds are are heavily against the contracts being a bargain.
"That makes those contracts a long shot," he said, "which is gambling in the
worst sense of the word."
Analyst Sees Too Much Uncertainty in Contracts
Reviewing contracts Friday, energy economist Robert Michaels of Cal State
Fullerton said he was also troubled by the financial risks the state appears
to be assuming in some contracts for power plant pollution control expenses.
In some cases, he said, the state could be charged for costly emission
control upgrades.
"There's such uncertainty about what future state policy is going to be in
terms of cost of permits, retrofit requirements and new technology," said
Michaels, who reviewed the contracts at The Times' request. "I am not
familiar with any power contracts where I've seen that. It strikes me as
unusual."
Assemblyman Tony Strickland (R-Thousand Oaks), who independently sued Davis
to reveal the power contracts, said the public would not have been able to
weigh such trade-offs if the governor had continued the secrecy.
Davis relented Tuesday, a day before a San Diego Superior Court judge was to
hear the public records challenge.
Some complained the administration is still withholding key information.
Attorneys for the news organizations who sued the administration will return
to court later this month to argue for release of the redacted material.
The released contracts blacked out the indexes used to set natural gas
prices, the amount of natural gas needed to fire specific generators and
which pipelines are being used to ship the gas. That's important because gas
shipped into Southern California is more costly than gas shipped into
Northern California.
Additionally, the state is withholding information on whether the state or
the generators should pay when there are breakdowns or congestion on the
transmission system, resulting in a failure to deliver power.
Documents' Release Doesn't Stop Dispute
Experts said transmission-related provisions can be crucial to such contracts
final costs.
In arguing for continuing confidentiality, Davis maintained that the
disclosure of detailed contract information would undercut the state's
negotiators by tipping off competing generators. On Friday, however, some
critics attributed to the move to politics.
"If they were great contracts, they would have been released months ago,"
said Navarro of UC Irvine.
But Davis' defenders, including Assemblyman Roderick Wright (D-Los Angeles),
chairman of the Utilities and Commerce Committee, said the contracts
accomplished exactly what they were intended to do: stabilize the price and
supply of electricity.
"If all of a sudden you dump all these contracts, and all this power went
back into the spot market, guess what? We'd be in the same damn position we
were in last year."
*
Times staff writers Robert J. Lopez, Miguel Bustillo, Julie Tamaki, Virginia
Ellis in Sacramento and Jerry Hirsch and Doug Smith in Los Angeles
contributed to this story.

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


---------------------- Forwarded by Kori Loibl/HOU/ECT on 10/10/2000 10:43 AM
---------------------------

Sherry Dawson@ENRON
10/10/2000 10:35 AM
To: Kori Loibl/HOU/ECT@ECT
cc:
Subject: FW: Smarts

---------------------- Forwarded by Sherry Dawson/NA/Enron on 10/10/2000
10:33 AM ---------------------------

"JOLLYJAC" <jjolly@STARLUMBER.COM> on 10/09/2000 06:03:18 PM
To: "Mike Meile" <mmeile@aol.com>, "Mike Donarumo"
<mikedon@beaulieu-usa.com>, "NFA" <TheNFA@aol.com>, "Sharon Livingston"
<Sharon@galstar.com>, "Debbie Morrow" <morrowdm2@earthlink.net>, "Sherry
Dawson" <Sherry.Dawson@enron.com>, <jcoyne@starlumber.com>
cc:

Subject: FW: Smarts

Ain't it the truth?  Jacque

-----Original Message-----
From: Wal6552822@aol.com [mailto:Wal6552822@aol.com]
Sent: Monday, October 09, 2000 5:22 PM
To: jjolly@starlumber.com; woodfamily@terraworld.net; Zehr0255@aol.com
Subject: Smarts

> > One afternoon at Cheers (the bar), Cliff was

> explaining the "Buffalo

> > Theory" to his buddy Norm.  Here's how it went:

> >

> > "Well, ya see Norm, it's like this....A herd of

> buffalo can only move as

> > fast as the slowest buffalo.  Now when the herd is

> > hunted, the slowest and weakest ones at the back are

> killed first.  This

> > natural selection is good for the herd as a whole,

> because the general

> > speed and health of the whole group keeps improving

> by the regular killing

> > of the weakest members.

> >

> > In much the same way, the human brain can only

> operate as fast as the

> > slowest brain cells.  Intake of alcohol, as we all

> know, kills brain

> > cells, but naturally, it attacks the slowest and

> weakest brain cells

> > first.  In this way, regular consumption of beer

> eliminates the weaker

> > brain cells, making the brain a faster and more

> efficient machine.

> >

> > That's why you always feel smarter after a few

> beers."


Attached is our mark-up of Northwestern's Guarantee.  Please note that our
client has not had an opportunity to review this draft and it remains
subject to its comments as well.

Regards

John L. Keffer
King & Spalding
713 751 3255
713 751 3280 (fax)
jkeffer@kslaw.com
 <<Red Northwestern Corporation Guarantee.DOC>>

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