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PPC RTO Car Talk.091903

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PPC RTO Car Talk – 09/19/03

ANOTHER TRIUMPH OF DEREGULATION
Enron, the Cal PX, Mirant, NEG, NorthWestern Corp. (One-Company-Formerly-
Known-As-The-Montana-Power-Company), NRG, PG&E, Portland General
Holdings, Texas Commercial Energy, Touch America (The-Other-Company-
Formerly-Known-as-the-Montana-Power-Company).

What do these 10 companies have in common?

Thanks to FERC and dereg, they are all bankrupt.

NorthWestern Corp. -- the outfit that took over the retail territory of The Montana
Power Company and formed NorthWestern Energy to operate the distribution
service -- bit the big one on 9/14.

NorthWestern’s debt load is $2.2 billion. The company is dragging 9,418 creditors
behind it. Its non-utility businesses -- Expanets, a communications unit, and Blue
Dot, a plumbing, heating and air conditioning company -- will be sold outside of
bankruptcy.

The state regulatory comm’n intends to ask the Delaware bankruptcy court to let it
intervene in the case.

Meanwhile, before yet another Delaware bankruptcy judge, Touch America asked
permission to sell its corporate jet for $3.6 million. Earlier this month, it sought
leave to sell its season tickets for football games at a Missoula stadium for $34,242.

[Ed. note: What’s for sale next? Tahitian black pearls? Custom Lamborghinis?
Merry Marketeer and IOU executive salaries, bonus’, options and perks are pretty
amazing to those in public power land.]

Sources: Reuters, 9/15/03; Platts, 9/15/03; Associated Press, 9/17/03 (by Bernard
McGhee); file:///C|/TMP/NorthWestern Corporation - News Center - News
Display.htm; Associated Press, 9/17/03

**********
NEW ZEALAND’s NEW “INVESTMENT FACILITATION” COMM’N
Last week New Zealand named six folks to its new Electricity Comm’n. The
chairman, to serve a 3-year term, is Roy Hemmingway, most recently chairman of
the Oregon PUC, at an annual salary of $170,000. Other comm’n members (all
from NZ) are an economist; a former director of the nat’l tx grid; a consultant; an
engineer; and a lawyer.

The primary functions of the comm’n are to advise the gov’t on power matters and to
ensure sufficient electricity in drought years. The comm’n will let contracts to build
power plants that will be fired up when low rainfall causes spot market prices to
soar.

Although earlier the comm’n was expected to cost NZ$50 million annually (see
5/25/03 RTO Car Talk), reports now say that the 20-person staff will cost NZ$6
million per year, to be paid for by a levy on “industry players”.

[Ed. note: See 5/25/03 RTO Car Talk for a description of the gov’t’s plan. The
comm’n will contract to build about US$169 million worth of coal, gas, oil and
diesel plants. In the end, of course, it’s the ratepayers who will enjoy footing the
costs of the plants and the comm’n.]

A trade ass’n of big industrial users fears that the gov’t will implement a social
agenda (set low fixed charges for small users; set limits on deposits required of
consumers; and fixate on renewable power sources). A 29-member “lines company”
ass’n is pleased that true regulation is not part of the gov’t’s game plan.

Sources: Dow Jones Newswires (date unknown, but recent); The Oregonian,
9/15/03 (by Gail Kinsey Hill); Dominion Post, 9/17/03 (by Marta Steeman); New
Zealand Herald, 9/16/03 (by Liam Dann)

**********
BLACKOUT FALLOUT
* On 9/4/03, Joseph Welch, the big cheese of Int’l Tx Company (ITC) -- a MISO
member -- testified before Rep. Billy Tauzin’s (R-LA) House Energy & Commerce
Committee on events that ITC saw that led to the blackout.

In the “lessons learned” portion of his prepared testimony, he notes the following:

-- The MISO grid was used for members’ own purposes, regardless of rules,
procedures or impact on other users. Convoluted RTO configurations contrived by
members guarantee that communication is a matter of luck. The electrical
configuration between MISO and PJM leads to gaming the market.

-- After the NE’s 1965 and 1977 blackouts, reliability standards of operation and
planning were followed with very good results until recently. “Loop flows such as
those onerously imposed on Michigan allow over scheduling of the grid on fictitious
contract paths without regard to the consequences. Operational practices such as
‘parking’ and ‘hubbing’ of transactions (scheduling of transactions using
intermediary third parties rather than transacting directly between buyer and seller),
cause actual use of the grid to be cloaked. This is because the park/hub transaction,
with its fictional flow of electricity, can fall beneath the screen whereas the original
transaction would have been visible. Entities responsible for ensuring proper use of
the grid ignore threats to reliable operation in response to pressure from market
participants wishing unfettered use, regardless of actual infrastructure capability - to
substitute operational procedures for infrastructure - to ignore the rules when it is
advantageous.”

[Ed. note: His testimony should be displayed in FLASHING NEON LIGHTS. In
short, reality has now proven what skeptics, contrarians and non-Team Players have
said all along. RTOs, ISOs etc. -- a central feature of FERC’s dereg -- will lead to
gaming, obfuscation, needless complexity, unreliability, the victory of profit motive
over public service, and, at bottom, blackouts.]

Source:
http://energycommerce.house.gov/108/Hearings/09042003hearing1062/Welch168
2.htm

* Merry Marketeer Xcel (parent of bankrupt NRG) is under investigation. It seems
that, just hours before the blackout, Xcel may have limited the output of its biggest
plant in order to drive up power prices.

[Ed. note: Whotta surprise. Re-read Joe Welch’s testimony, above.]

Source: Saint Paul Pioneer Press, 9/12/03 (by David Hanners)

* In Colorado last week, FERComm’r Nora Brownell tried to convince the state
PUC and the Office of Consumer Counsel that, due to the blackout, an RTO is the
way to go. She was unsuccessful.

“Chaos in the marketplace makes it impossible to support efficient marketplaces,”
she anounced.

[Ed. note: And who is responsible for the “chaos in the marketplace”? FERComm’r
Nora Brownell, for one. There they are -- the dereg fans -- in their racing colors,
having decided to ride Clydesdales in the Kentucky Derby, all the while maintaining
that, if they just get the right kind of saddle, they’ll compete with the
Thoroughbreds.]

Source: Denver Post, 9/17/03 (by Steve Raabe)
**********
MORE TRIUMPHS OF DEREGULATION
* Merry Marketeer Reliant went big-time in its quest for profits promised by
dereg. Formerly Houston Lighting & Power Co., it shed its name for a new,
improved moniker and became the owner of 128 power plants from NY to
California.

The result? Reliant is $6 billion in debt; barely staved off bankruptcy last March; has
recently downgraded its earnings forecast; is being sued for anti-trust violations and
was investigated for criminal activities owing to its trading practices; paid FERC
$13.8 million in fines for on account of trading malfeasances; and suffered a net
income loss of $1 billion over the past 12 months.

Nevertheless, Reliant’s ever-chipper spokesman says, “We still think [dereg] is a
very good idea . . . [L]ook at Texas. [Dereg] is working here.”

[Ed. note: Yeppers, Reliant just won two rate increases, bringing its retail rates in
Texas up to 11.1 cents/kWh. WOWZER, dereg means power too cheap to meter!]

Source: Fort Worth Star-Telegram, 9/14/03 (by Dan Piller)

* Merry Marketeer Aquila announced last week that it will sell its electricity
operations in Canada in order to help pay off its debts. Last month, Aquila reported
its fifth consecutive quarterly loss. Last year, it exited the energy trading business.

Source: Associated Press, 9/15/03

* Prosecutors filed charges against three former Merrill Lynch employees for
helping pad Enron’s balance sheet through those barges moored off the coast of
Nigeria.

Daniel Bayly, retired head of Investment Banking; Robert Furst, former managing
director; and James Brown, a former investment banker, surrendered to the FBI and
were hauled off in handcuffs to federal court in Houston.

The Nigerian scheme allegedly consisted of Merrill Lynch creating an off-balance
sheet partnership to operate generators perched on an anchored barge. Enron, having
sold an interest in the barges to Merrill Lynch for $28 million, promised it would
repurchase the barges from Merrill Lynch at a profit within six months (thus making
the sale a loan). Enron then booked a $12 million profit from this phony sales
transaction.
Source: Houston Chronicle, 9/15/03 (by Mary Flood); Reuters, 9/17/03 (by C.
Bryson Hull)

* Duke Energy Trading & Marketing agreed to pay $28 million to settle charges by
the federal Commodity Futures Trading Comm’n (CFTC) for manipulating the
natural gas market between ’00 and ’02.

The CFTC order found that Duke reported false information to industry publications
in order to benefit its own trading positions.

To date, CFTC has collected $96 million from six Merry Marketeers for similar bad
behavior: Duke, $28 million on 9/17; Enersco, $3 million on 7/31; Williams, $20
million on 7/30; Encana, $20 million on 7/28; El Paso, $20 million on 3/26; and
Dynegy, $5 million on 12/19/02.

Sources: Platts, 9/17/03; Argus, 9/17/03 (by Peter Rosenthal)

**********
CONNECTING THE DOTS -- an editorial
On 2/14/02, The Oregonian published an op/ed by the former big cheese of
PacifiCorp, Don Frisbee. He wrote that the overriding responsibility of the electric
utility industry used to be the "obligation to serve". "[C]ompetition does not deliver
an abundance of electricity at attractive prices . . . [T]he regulatory process has
provided a climate in which the 'obligation to serve' has prevailed." (See 2/22/02
RTO Car Talk.)

Last Thursday, he called for a return to strict regulation (as opposed to a competitive
free-for-all). “Competition can be very dangerous in this industry. It’s not an
industry that deals well with its various demands while under competitive pressure.”
(Source: The Oregonian, 9/19/03)

It’s interesting that the current big cheese of PacifiCorp, Judi Johansen, remains a
big fan of RTOs and competition. (See 11/4/01 RTO Car Talk for a description of
her tête-à-tête with FERComm’r Brownell during a Seattle workshop). At the
Western Governors Ass’n mtg last week, she recommended the following:

* RTOs are needed. FERC is the one to monitor and enforce competitive markets.

* All tx owners should be treated equally. In particular, federal power marketing
administrations (such as BPA) should be required to operate under the same rules
that IOUs do. (Source: BPA Hot Issues, 9/19/03 (by Gail Kunz))
Johansen carefully explained to the governors that she is a former BPA
Administrator. Oddly, she didn’t make it clear when she was the Adm’r that she felt
BPA should be completely under FERC’s yoke. Nor did she make that feeling clear
when she was an atty representing public power. I guess those executive salaries,
bonus’, options and perks have their uses.

End of editorial.

**********
INTERESTING TIDBITS
* Turkey wants a loan of $375 million from the World Bank. The World Bank will
provide the loan only if the Turkish gov’t “liberalizes” its energy industry by
privatizing distribution companies and using regional tariffs. The changes will entail
“some subsidies to help create a level playing field in the market.”

[Ed. note: Don’tcha love it? Dereg fans at the World Bank and Int’l Monetary Fund
are apparently forcing dereg on hapless third world countries.]

Source: Reuters, 9/15/03 (by Asli Kandemir)

* The gov’t of British Columbia has acknowledged that the province could be forced
to pay up to $1 billion to California owing to its subsidiary’s (Powerex) trading
practices during the western energy “crisis”. Documents submitted to FERC last
July implicate Powerex -- the Merry Marketeer evidently leads the league in
"ricochet" trades.

And of course BC Hydro is pressing its claim at FERC against California for $286
million in unpaid power bills.

Fun facts: Powerex has racked up $30 million in legal fees so far to defend itself.
Using U.S. power, Powerex delivered nearly $2 billion in earnings from electricity
trades during the western energy “crisis”.

Source: Vancouver Sun, 9/13/03 (by Scott Simpson)

* Trans-Elect, the independent tx company run by former PacifiCorp big cheese
Fred Buckman, has lined up $330 million in financing to spiffy up Path 15 (the 84-
mile long tx corridor near San Francisco). The financing is through New
Transmission Development, a subsidiary of Trans-Elect, with funding through
ArcLight Capital Partners, EIF Group and a third private equity fund.

Sources: Associated Press, 9/16/03; Reuters, 9/16/03; Argus, 9/17/03 (by Lindsay
Perret)
* Last week, the Senate Energy Committee unanimously approved the nomination of
Suedeen Kelly as a FERComm’r. Sen. Jeff Bingaman (D-NM) praised Kelly’s
“more than two decades . . . of academic knowledge . . .”

Source: Dow Jones Newswires, 9/17/03 (by Rob Wells)

* Niagara Mohawk, NY State Electric & Gas Corp. and Consolidated Edison have
sued FERC to recoup $67 million in claimed overcharges by Merry Marketeers.
The alleged overcharges were incurred during a 6-week period in ’00.

FERC refused to authorize retroactive rebates. A 3-judge panel of the D.C. Circuit
Court questioned whether FERC’s decision is in line with its published regulations.

Merry Marketeer KeySpan claims that even if FERC’s decision is overturned, it’s
the NY taxpayers -- not the Merry Marketeers -- who should pay back the
overcharges.

Source: Reuters, 9/16/03

* The judge in the Mirant bankruptcy case, by continuing his injunction, denied
FERC the power to force the Merry Marketeer to honor its power sales contracts
with PEPCO.

Source: Fort Worth Star-Telegram, 9/18/03 (by Dan Piller)

* The Cayman Islands will open its electricity market to competition.

Source: Associated Press, 9/18/03


FFFFFFF
PPC RTO Car Talk – 09/12/03

NEWS FROM DEREG UTOPIAS
* PENNSYLVANIA (Land o'FERComm'r Nora Brownell): Wendell Holland, a
board member of Allegheny (the financially teetering Merry Marketeer) has been
nominated to serve on the state PUC. State law requires him to resign from the
board in order to serve on the PUC.

Holland was a PUC member from '91-'93, and complained about the low pay. The
PUC salary is now $109,455 -- twice what it was back then.
[Ed. note: See 3/2/03 and 8/1/03 RTO Car Talks for the story of Allegheny -- and
how its survival depends on its juicy, long-term power sales contract with California,
entered into when Gray Davis was desperately buying power. Former FERComm'r
and dereg fan Jim Hoecker is also an Allegheny board member.]

Source: The Patriot-News (Harrisburg), 9/7/03 (by David DeKok)

* MORE PENNSYLVANIA NEWS: Competition barely exists. A couple of green
suppliers have made some inroads into consumers willing and able to pay about a 2.5
cent/kWh premium over existing rates.

The state deregulated itself in 1996. Retail rates are capped for as long as it takes
utilities to collect their stranded costs, and even consumers who switched suppliers
are required to pay the stranded costs of their original supplier. The squeeze
between high wholesale costs, the high cost of serving residential accounts, and the
stranded cost surcharge ran competitors out of the state.

A lawyer and dereg fan named John Quain, who headed the PUC when the dereg plan
was conceived, figures that competition will really arrive when the rate caps end.

[Ed. note: "Competition" often does pick up when rate caps end, because rates then
rise dramatically -- and competitors follow suit by increasing their prices, as is the
case in Texas, for example. See 8/29/03 RTO Car Talk.]

Source: Pittsburgh Post-Gazette, 9/7/03 (by Frank Reeves)

* NEW JERSEY: Jersey Central Power & Light (JCP&L) ratepayers were offered
a green energy pilot program with a budget payment plan (fixed monthly bills). The
company selected to provide the green power (9.75% of which is generated from
renewables) was a subsidiary of FirstEnergy, which itself is the parent of JCP&L.

[Ed. note: Whotta surprise.]

So few signed up that last April that the state regulatory comm'n informed tens of
thousands of customers that they were now on the pilot program. As of 8/1/03,
those customers are enjoying new, improved, much higher bills. On that date the
retail rate caps came off, and the budget payment plan was ended.

Source: Asbury Park Press, 9/10/03

* GREAT BRITAIN: A second blackout hit central England (Birmingham) on 9/5
for forty minutes. Nat'l Grid's tx system was again the cause. It seems that two
years ago, an incorrect protection relay was installed.
Sources: Reuters, 9/8/03; Platts, 9/10/03

**********
BLACKOUT FALLOUT
* India has experienced an average of one regional grid collapse every six months,
but now suffers only one every 18 months.

FERComm'r Bill Massey and others are so impressed by this improvement that they
traveled to India to find out how to fix a failed grid. Indian officials pointed out that
although the tx system is automated to some degree, actual human beings are
stationed at dispatch centers where they monitor the grid 24 hours a day. Thus when
load/resource imbalances occur, manual intervention can avert a grid collapse.

Indian officials will soon visit the U.S. to show the Dep't of Energy (DOE) and FERC
how to balance loads and resources using human intervention.

Source: http://www.indianexpress.com/full_story.php?content_id=31168, by Navika
Kumar, 9/8/03

* Meanwhile, reports abound of how old, antiquated, rundown, useless, etc. tx
facilities in the U.S. are.

[Ed. note: You'd think the subject was PUHCA!]

Hence utilities are accelerating plans to automate facilities, for example, replacing
aging monitoring systems with digital switches and other high-tech gear. But it
seems that this is creating another problem. Computer hackers and viruses can black
out substations, cities and entire states.

- A cybersecurity researcher in British Columbia says he and his team could shut
down "not the whole North American grid, but a state, [for] sure."

- Last January, the "Slammer" Internet worm took down monitoring computers at a
Midwest nuclear plant and blocked commands that operated other facilities.

- Researchers have discovered how to hack into a remote terminal unit and
command it to trip and reset a breaker, thus incapacitating a substation.

- Hackers could lower settings on circuit breakers from 500 amps to 200, while
raising others to 900 amps. With the former, lines could easily overload and trip
off; with the latter, equipment would melt.
[Ed. note: Really makes all that new, improved, computerized high-tech gear sound
attractive, doesn't it?]

Sources: Associated Press, 9/11/03; Dow Jones Newswires, 9/11/03

* FERC Chairman Pat M. Wood announced that what FERC needs, in order to save
the country from blackouts, is the power to force utilities to join RTOs, and, by
intimation, the nationwide imposition of standard market design (SMD).

[Ed. note: Whotta surprise. Moreover, Wood evidently believes that tax breaks,
higher rates of return and, of course, PUHCA repeal are the other ingredients for
dereg utopia. The fate of consumers force-fed this poisonous concoction is clear.]

The Bush Administration, via Congressional testimony of DOE Sect'y Spence
Abraham, supports voluntary RTOs.

Source: Environment & Energy Daily, date unknown but recent (by Mary
O'Driscoll); Dow Jones Newswires, 9/10/03 (by Rob Wells)

* The blackout hurt 82% of small businesses in Ontario and cost the provincial
economy between $1-$2 billion, said the Canadian Federation of Independent
Business. Production cuts, inventory loss, transportation delays and vandalism were
some of the consequences.

Source: Canadian Press, 9/11/03

* Public power utilities are unlikely to embrace proposals allowing tx owners
higher rates of return in order to finance tx improvements, says the big cheese of the
American Public Power Ass'n.

Why not? Because FERC already allows IOUs (owners of most of the U.S. tx
facilities) at least a 12% return on their tx investments.

[Ed. note: Considering what you Gentle Readers are probably earning on your own
investments, 12% ain't bad -- and ought to be plenty of incentive for IOUs to invest
in their systems.]

Of course, the big cheese of the Edison Electric Institute, the IOU nat'l trade ass'n,
believes higher returns are necessary. And, like his Texas cohort Pat M. Wood,
diehard dereg politician (Rep. Joe Barton, D-TX) believes that the free market and
PUHCA repeal will result in the necessary capital investment.

Source: Fort Worth Star-Telegram, 9/9/03
* The chair of the NW Power Planning Council notes that the NW took actions
(after the blackout of 1996) that reduce the probability of another major outage.

Future problems, she said, may relate to dereg. In the days of regulation, utilities
were forced to build generation and tx to keep up with demand. Under dereg,
utilities, Merry Marketeers and the Trans-Elects of the world are unlikely to build
when prices are low.

[Ed. note: Hallelujah! And, to finish the thought, why in the world would they build
when prices are *high*?]

Source: Missoulian, 9/12/03 (by Michael Jamison)

**********
SPEAKING OF JOE BARTON . . .
Public Citizen, a political watchdog group founded by Ralph Nader, said that Joe
Barton and Rep. Billy Tauzin (R-LA) must recuse themselves from the energy bill
conference committee. The reason? "[U]nresolved allegations of potential criminal
bribery" stemming from the controversy about Westar's plan to bribe them and
others last year.

Source: Platts, 9/12/03

**********
MIRANT NEWS
Bankrupt Mirant, the Merry Marketeer that bought PEPCO's generation units in '00,
seeks to reject its below-market price power supply contracts with PEPCO. What is
one source of power serving PEPCO under those contracts? The very plants PEPCO
sold to Mirant. If the bankruptcy court allows termination of the contracts, PEPCO
must buy power at market rates and will pass the increased costs on for its ratepayers
to enjoy.

State agencies in Maryland (that state is also served by PEPCO) filed a petition
asking FERC to stop Mirant from canceling the contracts. As in the NRG-
Connecticut Light & Power dispute, FERC -- and PEPCO -- argued in the Texas
bankruptcy court that the contracts should not be abrogated.

The bankruptcy judge has said he would probably rule next Wednesday in favor of
Mirant.
Sources: Washington Post, 9/7/03 (op/ed by Elizabeth A. Noel, D.C. Office of
People's Counsel); Fort Worth Star-Telegram, 9/11/03 (by Dan Piller); Reuters,
9/11/03; Reuters, 9/11/03 (by Chris Baltimore)

**********
DUELLING LOBBYING
State regulators from the NW and the SE were in D.C. last week lobbying against
FERC's dereg in general, and in particular for a provision in the energy bill that
would delay the imposition of SMD until 2007.

At the same time, NE, Midwest and Mid-Atlantic regulators were in D.C. lobbying in
favor of mandatory RTOs and SMD.

[Ed. note: Wake up, you NE, Midwest and Mid-Atlantic folks! From everything I've
read, your consumers are already basking in the pleasures of blackouts, bankruptcies,
lawsuit costs and high retail rates. Press on for more of the same, if you must -- but
do it in your own jurisdictions!]

Sources: Tacoma News Tribune, 9/10/03 (by Les Blumenthal); PRNewswire,
9/10/03

**********
CONNECTING THE DOTS -- an editorial
Last week I mentioned a couple of NW folks who took a stand against the '90s
stampede toward dereg. To those two souls I add Rep. Peter DeFazio (D-OR). He is
the only elected official I know to have mounted a knowledgeable campaign against
dereg when there was still a chance to forestall the harm -- years before it became
apparent what a fiasco dereg is.

End of editorial.

********
CRIMES AND BAD FINANCIAL NEWS SPONSORED BY DEREG
* Ben Glisan, Jr., 37, Enron's former treasurer, and was sentenced to five years in
Club Fed -- a low-security federal prison in Bastrop, Texas. He also faces three
years of probation following his prison term; and forfeits claims to a net of nearly
$1 million (and forfeits any claim to the $412,000 in taxes he paid on the gross
amount of $1.4 million).

Glisan, the first Enron officer to be incarcerated, pled guilty to one count of
conspiracy to commit wire and security fraud. He was indicted on 23 other charges
that were dropped. The allegations against him (as well as against Andy Fastow,
Enron's former CFO, and Dan Boyle, Enron's former finance exec) are that they
schemed to manipulate company books and records to make Enron look more
successful than it was; to boost fraudulently Enron's share prices; to circumvent
federal regulations so Enron would be unjustly enriched; and to help themselves to
those unjust riches.

Glisan has not yet ratted on his pals and former colleagues, but if he does, they will
be in a heap o'trouble. In any event, his admission to conspiracy can be used against
co-conspirators. Glisan's guilty plea will also help numerous plaintiffs who are
suing Enron officers, directors, auditors and bankers for billions of dollars in civil
suits.

Moreover, the Securities & Exchange Comm'n (SEC) charged Glisan with playing a
role in padding Enron's balance sheet through a scheme involving barges moored off
the coast of Nigeria. Without admitting or denying the charges, he accepted an SEC
judgment barring him from serving as a director or officer of a public (shareholder-
owned) company.

Sources: Houston Chronicle, 9/10/03 (by Mary Flood); Platts, 9/10/03; Washington
Post, 9/11/03 (by Carrie Johnson and Peter Behr); Business Week, 9/11/03 (by
Lorraine Woellert)

* John Forney, the former manager of Enron's trading desk in Portland, is in
preliminary plea negotiations with prosecutors. Forney is charged with creating
illegal trading strategies (e.g., Ricochet, Get Shorty and Death Star) intended to
evade California price caps during the western energy "crisis".

Source: Bloomberg, 9/12/03

* Merry Marketeer Aquila, still trying to avoid bankruptcy, has asked the Missouri
regulatory comm'n for permission to use its regulated utility subsidiaries as
collateral for loans. Consumer and industry groups, and, it is suspected, the comm'n
staff, oppose the application.

The Colorado comm'n approved a similar request. Aquila did not need comm'n
approval in Michigan and Nebraska, so Aquila is already using its utility assets in
those states as collateral. Like Missouri, state laws in Kansas, Iowa and Minnesota
require comm'n approval for the action. It's unknown what comm'n staffs in those
states will recommend.

Source: Kansas City (Mo.) Star, 9/12/03

**********
A ROSE BY ANY OTHER NAME IS STILL A MERRY MARKETEER
PG&E, the parent of bankrupt Nat'l Energy Group (NEG), plans to rename its Merry
Marketeer. The new name will be Nat'l Energy & Gas Transmission, Inc., and it will
be legally separated from PG&E.

Source: Reuters, 9/11/03

**********
MORE WOES FOR FirstEnergy
Merry Marketeer FirstEnergy, a company under the microscope for the 8/14
blackout, last week revised three of it SEC filings (two '03 quarterly reports and its
'02 annual report), 'splainin' that they contained tens of millions of dollars of errors
owing to "typographical and minor computational errors".

As soon as the revisions were filed, the SEC sent FirstEnergy an informal request
for data.

Sources: Reuters, 9/11/03 (by Carolyn Koo); Reuters, 9/12/03

**********
WHAT? SUBSIDIZED HYDRO POWER IN THE EAST?
The New York Power Authority (NYPA), a state-owned nonprofit power producer,
sells power from its 17 power plants, about half of which are hydro facilities. The
agency must sell 8.5% of the power from one of its hydro projects, *at a discount*,
to neighboring states.

The license for that project is up for renewal. NYPA wants to reduce the amount of
the output it shares with other states, while an ass'n of 40 public power utilities in
Massachusetts wants the sharing increased to 20%.

The big cheese of the Massachusetts group says that the cheap power belongs to the
entire region, not just to New York. One of the member utilities' managers
complains, "It bothers me that there's a constant 'It's ours, it's ours' attitude on the
part of [NYPA]."

[Ed. note: Sound familiar? Dick Munson, and his merrie band of NE-MW
Coalition-ers, whine bitterly about the "subsidies" afforded the NW through BPA.
Do I smell the fetid odor of hypocrisy]

Sources: Boston Herald, 9/11/03; http://www.nypa.gov/

**********
THE MONTANA COLUMN
The New York Stock Exchange sent NorthWestern, One-Company-Formerly-
Known-As-The-Montana-Power-Company, a second formal notice that
NorthWestern is in violation of yet another criteria for being listed on the exchange
-- and that delisting is in the air.

A Delaware bankruptcy court has approved the sale of Touch America's (Another-
Company-Formerly-Known-As-The-Montana-Power-Company) private line and
dedicated Internet business for $43 million to the winning bidder, 360networks. The
company's headquarters building in Butte was not sold.

[Ed. note: Sic transit gloria Bob Gannon.]

Sources:
http://www.mtstandard.com/articles/2003/09/10/newsstate/hjjgjaijihjbha.txt ;
http://www.mtstandard.com/articles/2003/09/11/newsbutte_top/hjjgjaiiihjjgi.txt



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PPC RTO Car Talk – 09/05/03

CONNECTING THE DOTS -- an editorial
In 1996, when the Regional Review set the NW on a course some folks now want to
reverse, there was an opportunity to avert the actions, many of which are now
irreparable, proposed by the gold-rush gang. Only the Douglas PUD manager and his
annoying consultant stood against the stampede. And got stomped. Years of
successful experience in hydro-thermal coordination and creating robust, multi-
party enterprises providing long-term benefits to all participants (and their
ratepayers) were heaved into the dumpster.

Where was everyone, including the press, during this time? Kissing the boots (and
other things) of the leading lemmings, willing to serve, in the most servile manner,
the Dereg God.

The Regional Review facilitator accused the handful of hold-outs of the modern
crime of not being Team Players. Consultants produced "templates" for the Dereg
Utopia, bolstering the effort by terming the current situation as the "regulated
monopoly model", and trumpeting the imminent victory of untrammeled
competition, clear down to 110 volts. A BPA lawyer announced that the agency
would not take legal action to enforce its 1981 contracts with full requirements
customers. Industries demanded what amounts to the right to buy the cheaper of
cost-based or market-priced power. Public power utilities formed ill-fated
"strategic alliances" with IOUs, and studied whether they themselves should morph
into IOUs. IOUs changed their names to meaningless combinations of letters, and
hired new CEOs who hailed from Texas. IOUs and BPA split themselves in half,
vastly increasing their costs and lessening their efficiency. Enron bought off
consumer and environmental groups in order to buy PGE without opposition.
Montana passed a full-blown retail dereg law that led to the near economic
destruction of the state. Oregon passed a retail dereg law that, fortunately, is pretty
much a nothing-burger. And all NW ratepayers were creamed by the western energy
"crisis".

We have FERC, of course -- but in the end, ourselves -- to blame.

End of editorial.

**********
BLACKOUT FALLOUT
Millions of words have been written about what did, or may have, happened on
August 14 in the Northeast. One problem, it appears, can be laid at the feet of Merry
Marketeer Allegheny. A Midwest ISO (MISO -- the Midwest RTO) operator told an
Allegheny guy to back off production at its power plant in western Indiana due to
overloading on high voltage lines. Transcripts show that Allegheny dithered and
quarreled, and even wanted to bring yet another of its plants on line.

[Ed. note: More evidence in my mind that Merry Marketeers, the spawn of dereg,
care nothing about service and reliability, but everything about profits.]

Source: Washington Post, 9/5/03 (by Peter Behr and Steven Gray)

**********
BAD NEWS, FINES, HIGHER COSTS & FAILURES, SPONSORED BY DEREG
* TEXAS (Land o'FERC Chairman Pat M. Wood): ERCOT (Electric Reliability
Council of Texas -- the state's RTO) has outgrown its 85,000 sq. ft., $32.5 million
control center. The building was completed last November. Overflow employees --
150 of them -- are now housed in temporary quarters (trailers and various strip mall
offices). These overflow employees are, for the most part, computer and
administrative folks.

Construction of a new, 50,000 sq. ft. building, adjacent to the control center and
expected to cost in the $12 million range, will begin in the next few months.

ERCOT has 370 employees. About 315 of them work in or near the control center
in Taylor, while the remainder are in Austin where ERCOT owns a 45,000 sq. ft.
building that serves as corporate headquarters and as the backup control center.
The city of Taylor has provided ERCOT with a 100% abatement of real and personal
property taxes for the first five years, and 50% for the next five years. The city
manager pointed out that Taylor wants to do what it can to help, because "ERCOT
brings high-paying jobs, and this is a major expansion in Taylor."

[Ed. note: ERCOT outgrew its quarters in fewer than 10 months. ERCOT has 315
employees. Add this -- and the local tax breaks -- to your cost-benefit analysis,
dereg fans!)

Source: Austin Business Journal, 8/29/03 (by Mary Alice Kaspar)

* NEVADA: Merry Marketeer Sierra Pacific Resources, owner of Nevada Power
and Sierra Pacific Powe r, said it will be "difficult" for its two utilities not to go
bankrupt if they have to pay a $287 million judgment to bankrupt Merry Marketeer
Enron.

Enron terminated its wholesale power sales contracts with the two after they failed
to provide financial assurances per the contracts, and then sued for profits it would
have made if the contracts had continued. The judge said that FERC, not the
bankruptcy court, has the authority to overturn the contracts -- thus the award.

[Ed. note: Sounds like the reverse of the NRG-Connecticut Light & Power food
fight.]

Sources: Dow Jones Newswires, 8/30/03 (by Robert L. Grant); Las Vegas Review-
Journal, 8/30/03 (by John G. Edwards)

* "PROFITEERING" SETTLEMENTS: In June, FERC ordered 43 companies to
show cause why they didn't manipulate the market during the western energy "crisis"
of '00 and '01. The following Merry Marketeers recently agreed to settle with
FERC, in the following amounts, in order to resolve those allegations:

Aquila Merchant Services, $75,975
Reliant Resources, $836,000
Morgan Stanley, $857,089
American Electric Power (AEP), $45,240 (reported in 8/29/03 RTO Car Talk)
PacifiCorp, $67,745
Williams Cos., $45,230
Puget Sound Energy, $17, 092
Portland Gen'l Electric (PGE), $12,730
Mirant, undisclosed amount
[Ed. note: California officials want Merry Marketeers to refund about $9 billion in
alleged overcharges. If my math is right, the settlements add up to about $2 million.
Calling the settlements a "drop in the bucket", one California official said, "FERC
keeps talking tough, but is weak in response."]

FERC staff has moved to dismiss the charges against PNM Resources (an affiliate of
Public Service Co. of New Mexico); Sierra Pacific Power Co.; PGE Energy
Services; Public Service of Colorado; TransAlta; Tucson Electric Co.; FP&L Energy;
Cargill-Alliant; BPA; Los Angeles Dep't of Water & Power; Western Area Power
Adm'n; Salt River Project; and the cities of Anaheim, Azusa, Pasadena and Riverside.
FERC earlier dropped claims against Duke Energy.

The administrative law judge (ALJ) handling the matter says the responses from the
43 companies will be kept secret for the time being.

[Ed. note: Another blow to "transparency".]

Sources: Platts, 8/29/03; Associated Press, 8/31/03; Dow Jones Newswires, 9/2/03
(by Jessica Berthold); Reuters, 9/2/03; New York Times, 9/3/03 (by Jonathan
Peterson); Reuters, 9/2/03; Reuters, 8/29/03; Dow Jones Newswires, 9/2/02 (by
Chris Baltimore)

* MONTANA: The state's Consumer Counsel has been trying, for the past year, to
have FERC revoke Merry Marketeer PPL Montana's market-based rate authority.
PPL Montana is the unit of Pennsylvania-based PPL Corp. that bought the former
Montana Power Co.'s generation. PPL Montana is the major power supplier to
retailer NorthWestern (One-Company-Formerly-Known-As-The-Montana-Power-
Company).

Consumer Counsel's office argues that PPL owns and operates more than 90% of
the power sold in the deregulated retail market, and that the spiraling cost is an
example of abuse of the monopoly.

Source: Associated Press, 9/2/03

* COLORADO: The state PUC is informally inquiring into Xcel's power outages
and service quality. The inquiry is based on a series of outages over the past 15
months and by an audit showing that Xcel falsified information about the number and
duration of outages in its Minnesota service territory (see 3/14/03 RTO Car Talk).

[Ed. note: Xcel is a Minneapolis-based Merry Marketeer that is the parent of
bankrupt NRG; is one of the 19 Merry Marketeers that the CFCT is investigating for
market manipulation during the western energy "crisis"; and is the parent of e prime,
the unit that dumped four traders and two other employees for false reporting of
natural gas prices to industry publications.]

Likewise, the Pennsylvania PUC, investigated Allegheny, Pennsylvania Power &
Light, FirstEnergy (Penn Power) and PECO Energy, then required them to meet
tighter reliability standards and durations of outages. The New Jersey regulatory
comm'n has had to set rules for Jersey Central's number of repair crews that must
respond to outages and number of staffers its outage-related division. The Kentucky
regulatory comm'n found that AEP has made inadequate investment in retail service
quality and reliability.

 [Ed. note: Yeppers, dereg has sure caused power suppliers to emphasize reliability -
- i.e., the lack thereof.]

Source: The Denver Post, 9/3/03 (by Steve Raabe)

* OHIO: The state PUC extended Dayton Power & Light Co.'s (DP&L) retail rate
freeze for two years, and put a limit on increases after that.

Ohio's 2001 dereg law cut DP&L's residential rates by 5% and then froze them until
12/31/03. The extension will continue the 5% reduction and freeze the rates
through '05, and caps at 11% future increases on the energy portion of residential
power bills. Tx and distribution portions of the bills will be frozen until '08.

No competition has developed since retail dereg began in '01. Had a rate freeze
extension not been approved, residential customers would have been hit with high
market rates next January.

[Ed. note: Evidently the comm'n will allow DP&L to collect its remaining $350
million in stranded costs, but the money will be used as "residential shopping
credits" to lure ratepayers to switch to new suppliers. There are, however, *no*
other suppliers. I can't tell whether the "residential shopping credits" are a fiction,
thus allowing DP&L to continue pocketing its stranded costs (which must be
nonexistent inasmuch as there is no competition). See 5/16/03 RTO Car Talk.]

Source: Dayton Daily News, 9/3/03 (by Jim Bohman)

**********
MIRANT BANKRUPTCY DOINGS
* The bankruptcy court granted bankrupt Merry Marketeer Mirant's request for a
temporary restraining order against PEPCO (a utility serving Maryland and
Washington, D.C., and owned by Pepco Holdings) and FERC (see 8/29/03 RTO Car
Talk). The order bars PEPCO and FERC from requiring Mirant to continue buying
from or selling power to PEPCO, among other things. Separately, Mirant asked the
bankruptcy court to terminate power purchase and sales contracts between it and
PEPCO.

PEPCO and FERC have now asked a federal district court in Texas to remove
jurisdiction over the matter from the bankruptcy court, claiming that FERC has
jurisdiction.

PEPCO's big cheese warns that PEPCO's ratepayers could enjoy higher rates before
all is said and done.

[Ed. note: PEPCO sold its generating plants to Mirant three years ago (see 3/7/03
RTO Car Talk). PEPCO buys power from Mirant, and the contract price is lower
than market price (see 7/19/03 RTO Car Talk). This spat between FERC and a
bankruptcy court is a further episode in the NRG-Connecticut Light & Power food
fight.]

* A subsidiary of Merry Marketeer Cleco, Perryville Energy Partners, may sue
Mirant if the bankruptcy court allows Mirant to end a power sales contract for the
output of a 725 MW plant in Louisiana owned by Perryville.

* El Paso Corp., the huge pipeline company, filed papers to stop Mirant from
drawing on a $109.8 million letter of credit until a dispute over a terminated power
sales contract is resolved. The contract was nullified when Mirant filed for
bankruptcy, and the parties differ over how much El Paso owes Mirant to settle the
contract. El Paso says it owes Mirant $36.9 million, while Mirant says $106.6
million is the amount owed it.

[Ed. note: Lawsuits hatched by dereg are a lawyer's dream!]

Sources: PR Newswire, 9/5/03; Reuters, 8/29/03; Bloomberg, 9/4/03

**********
ENRON'S ENDLESS SHADY DEALS & INTERESTING LEGAL ARGUMENTS
* A Connecticut garbage company (a quasi-public agency) evidently paid Enron
$220 million in exchange for an agmt whereby Enron would pay the company $28.5
million/yr through 2012 for power generated at a Hartford garbage burner owned by
the company.

The $220 million went down the drain when Enron filed for bankruptcy. A grand jury
has subpoenaed a garbage company lobbyist to investigate, among other things,
whether she acted properly in billing $27,000 to the garbage company for travel and
meal expenses of the governor's staffers during the time the deal was being
negotiated.

* In July, a FERC ALJ ordered Enron to refund $32.5 million owing to its market
manipulation during the western energy "crisis". The ALJ found that Enron had
virtually taken over El Paso Electric's trading desk in order to gain access to
sensitive market information. (El Paso was fined $15.5 million and forfeited power
trading privileges for two years.)

Enron is challenging the ALJ's decision, claiming that FERC has no authority to
order retroactive refunds; that the bankruptcy court must approve any fine; and that a
$135 million bond, posted with the now-defunct Cal PX some years ago as a
condition of trading power in California, cannot be used for ratepayer refunds.

Sources: Associated Press, 9/3/03; Reuters, 9/4/03

**********
VIRGINIA IS WIDE AWAKE
Last spring, the state passed a law prohibiting utilities operating there from joining
an RTO until '04 (see 2/21/03 RTO Car Talk). Now, the state regulatory comm'n
recommends suspending portions of the 1999 retail dereg law because "[r]etail
electric deregulation doesn't seem to be working anywhere".

Source: Dow Jones Newswires, 9/3/03

**********
ABOUT THE PUBLIC UTILITY HOLDING COMPANY ACT (PUHCA)
Passed in 1935 as a political response to the excesses of electric power holding
companies, this last bastion of consumer protection may be on its way out under the
energy bills pending in Congress. The venerable law limits actions of IOUs that want
to expand outside their home bases; bars non-utility companies and individuals from
holding major stakes in the utility business; and stops the use of regulated utility
assets, paid for by ratepayers, to underwrite get-rich-quick schemes, as David Wittig
of Westar tried to do.

Interestingly, in a recent Fitch Ratings' analysis of PUHCA, the credit rating agency
found that "PUHCA-registered entities are less likely to enter speculative grade . . .
ratings. Companies operating outside PUHCA have had greater flexibility to
diversify their operations in a higher risk manner (e.g., NorthWestern Corp. [the
nearly bankrupt Merry Marketeer serving Montana]) or engage in disproportionate
merchant energy and trading operations (e.g., Aquila, Inc. [another nearly bankrupt
Merry Marketeer]).
PUHCA repeal, says Fitch, would likely result in "[i]ncreased event risk from merger
and acquisition activity . . ."

Fitch also notes, "In the utility industry, experience has shown that balancing the
interests of creditors, shareholders, utility customers and the general public interest
is a smart way to do business and enhances the long-run value of the company for
all. Those that maintain this balance are likely to retain higher ratings regardless of
whether or not PUHCA remains in force."

[Ed. note: Unfortunately, many corporate cultures in the energy industry lack that
balance. PUHCA repeal would end most of the legal requirements there are to
maintain that balance.]

Source: Fitch Ratings, Corporate Finance, 9/2/03

**********
NEWS FROM FOREIGN DEREG UTOPIAS
* GREAT BRITAIN: Nat'l Grid Transco is the only tx provider in England and
Wales. The company owns about 5,000 miles of high voltage tx lines. It says that
the 8/28, 40-minute blackout during London's rush hour was caused when a year-old
transformer failed, and a backup system in London collapsed seconds later.

Analysts say the blackout couldn't come at a worse time. Nat'l Grid, which owns
14,000 miles of tx lines in the Northeast including the Niagara Mohawk grid in New
York, wants FERC to link tx rates of return to improvements tx owners make in their
systems, as is the case in Britain.

In the past 12 months, Nat'l Grid has invested US$574 million in its British system,
but only about US$80 million in its U.S. system. The rate of return is the same in
both countries.

Competition (dereg) in Britain has driven several companies into bankruptcy.
Wholesale prices have fallen by 40%. [Ed. note: Retail prices have remained the
same or increased.] U.S. Merry Marketeers such as AES and TXU have bailed after
recording huge losses.

Some say that this winter, "deregulated Britain . . . faces a 20% chance of blackouts."
Moreover, increased price volatility and service disruption during August may be "a
harbinger of things to come . . . [under what] will be[come] progressively normal
circumstances".

An op/ed in a British newspaper says that London's blackout "has focused people on
the viability of the [deregulated] system." ". . . Britain, under Margaret Thatcher, was
the first country to [deregulate] electricity. Perhaps after leading the way in this
field, we are starting to pay the price now."

Sources: New York Times, 9/2/03 (by Heather Timmons); Platts, 9/5/03; The
Independent (London), 8/29/03

* POLAND: The gov't wants to terminate long-term (10-20 year) power sales
contracts signed in the 1990s.

Why? European Union (EU) rules require Poland to deregulate its energy market
after it joins the EU in '04.

The cost of terminating the contracts? About US$3.5 billion.

How will termination be financed? By bonds sold on the int'l market, to be paid off
by a surcharge on ratepayers' bills.

Any other costs? Yup -- termination of the contracts will trigger defaults on loan
agmts taken out by power plant investors to modernize plants, and producers and
banks will seek compensation.

[Ed. note: Has anyone done a cost-benefit analysis on whether dereg will be good
for Poland? No? Whotta surprise.]

Source: Reuters, 9/5/03

* ITALY: Having some of the highest electricity prices in Europe, this country
deregulated itself about four years ago. A recent analysis of large industrial
companies shows that while over 50% of them have switched suppliers, many are
now dissatisfied with the quality of service.

Says a senior analyst: "Currently, competition in [Italy] is primarily about offering
price savings . . . Due to competition, prices offered by different suppliers will
gradually converge, as they have done in other [deregulated] markets."

[Ed. note: I'll bet that prices "converging" means that prices increase. Whotta
surprise.]

The Italian power exchange, the main feature of which will be a day-ahead electronic
market, was supposed to launch in January '01. It is still not up and running, because
two gov't ministries cannot agree on whom to hire to run the thing.
[Ed. note: I suggest George Sladoje, the former top dog of the defunct Cal PX -- for
the same modest $1.87 million annual salary that he was paid by the PX.]

Sources: Reuters, 9/5/03; Datamonitor, date unknown but recent

* RUSSIA: The prime minister signed a resolution to establish wholesale
generating companies, four to be formed around hydro plants, and six around thermal
plants. But hydro plants will remain owned by the state for "national security"
reasons.

Five days from now, the gov't will roll out its proposed rules for transitioning into a
"free market" for wholesale power. Beginning next month, up to 15% of all power
will be sold on the "free market".

Sources: RIA Novosti, 9/3/03; BBC Monitoring Former Soviet Union, 8/29/03

**********
INTERESTING TIDBIT
St. Louis-based Ameren Corp.'s utility subsidiary, AmerenUE, wants the Missouri
regulatory comm'n to allow it to transfer all of its Illinois electric utility service
area assets to AmerenCIPS (which utility subsidiary serves 323,000 electric
consumers in Illinois).

AmerenCIPS was formerly Central Illinois Public Service Co., which sold its
generation in '00 to unregulated Merry Marketeer AmerenEnergy Generating Co.
AmerenUE used to be Union Electric Co. It operates nine power plants and serves
1.2 million electric customers in Missouri.

[Ed. note: I sense something strange here, but can't put my finger on it. Stay tuned.]

Sources: St. Louis Business Journal, 9/5/03;
http://www.ameren.com/AboutUs/adc_au_Operating_Cos.asp



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PPC RTO Car Talk – 08/29/03

BLACKOUTS IN DEREG UTOPIAS, WANNABEs & 3RD WORLD COUNTRIES
* FINLAND: On 8/23, a cable failed when, after routine maintenance, a power plant
was reconnected to the grid. For some reason the local blackout spread to the entire
capital city of Helsinki and surrounding areas, lasting about 30 minutes.
Source: Reuters, 8/23/03

* ENGLAND: A 30-minute blackout left London and surrounding areas powerless
during rush hour on 8/28. Nat'l Grid Transco, the grid operator, said the cause was a
fault on one of its 275kV circuits.

Nat'l Grid owns Niagara Mohawk, the service territory of which was blacked-out on
8/14 in the Northeast U.S.

Ofgem, the U.K.'s Office of Gas and Electricity Markets, says that investment in the
U.K.'s power grid is higher than that in the U.S. tx system.

Sources: Reuters, 8/28/03 (by Paul Majendie); Dow Jones Newswires, 8/28/03 (by
Nicole Lee and Ian Talley); Platts, 8/29/03

* FORMER SOVIET UNION: The power supply to four cities (all the schools, but
not hospitals and residences) was cut off because the regional power company hasn't
been paid.

At the other end of the continent, in the Kiev area, a distribution company is shutting
off power to military bases for failure to pay bills. The company is owned by
American Merry Marketeer AES, which operates in Russia, the Ukraine, Georgia and
Kazakhstan.

Georgia's entire power system croaked on 8/25 at the beginning of rush hour. The
blackout was variously attributed to intentional damage to a tx line and to the
breakdown of a hydro plant. An investigation is underway.

Meanwhile, Russia's energy comm'n has imposed price caps this year -- prices for
industrial customers cannot rise more than 13%, and those for residential customers
no more than 16%.

Sources: 8/23/03, 8/28/03, and 8/26/03BBC Monitoring Former Soviet Union;
8/25/03, Xinhua News Agency-CEIS

* ITALY: The nation's grid operator told distribution companies to prepare for
rolling blackouts beginning last Friday morning. Evidently blackouts were avoided
owing to the passage of an emergency decree that allows a gov't official to let plant
operators bypass environmental rules (e.g., water temperatures and emission limits).

Sources: Dow Jones Newswires, 8/28/03 and 8/29/03 (both by Vittorio Al essio)

**********
AND IN FRANCE --
The recent heat wave, and fear of a strike in September, have led to much volatility in
the market for peak power. Day-ahead peaks, now trading between Eur40-50/MWh,
could quickly leap to Eur80-150/MWh (where it was during much of July and
August). The supply and demand balance is extremely delicate.

Source: Platts, 8/28/03

**********
ENRON NEWS
Bankrupt Enron is joining former Enron employees in trying to recover $53 million
paid to 114 favored employees a month before the Merry Marketeer filed for
bankruptcy.

Under a proposed settlement, those still working for Enron would cough up 40% of
the money they received; those laid off in the last 20 months, between 40-85%; and
those who left voluntarily or were fired for performance reasons 90%.

Source: Associated Press, 8/23/03

**********
WHAT'S TRANS-ELECT UP TO?
The independent tx owner, run by former PacifiCorp big cheese Fred Buckman, owns
about 14,000 miles of tx lines in the U.S. and western Canada. Backed by GE Capital
and ABB, it plans to spend at least $10 billion buying and upgrading more lines.

Among those said to have tx systems for sale are Exelon's ComEd; American
Electric Power; Dynegy's Illinois Power; Allegheny; and FirstEnergy.

Source: USA Today, 8/22/03

**********
TEXAS: DEREG UTOPIA (Land o'FERC Chairman Pat M. Wood)
Last month, TXU announced that it was filing for a second rate increase this year
(see 7/25/03 RTO Car Talk). At the same time, the company noted that its research
shows that many customers did not receive savings promised by TXU's competitors -
- many who switched are paying more than if they had stayed with TXU.

"To date, the track record of our competition has been very poor at delivering"
savings, said a TXU senior veep.

[Ed. note: Whotta surprise. A Merry Marketeer raises its rates, and the other Merry
Marketeers raise their rates. Competition = higher rates.]
Source: The Dallas Morning News, 8/22/03 (by Sudeep Reddy)

**********
BLACKOUT FALLOUT
* Here's a big surprise: Industry officials are worried that the Bush adm'n, in giving
the Dep't of Energy (DOE) the task of leading the investigation of the blackout,
seeks to advance its dereg agenda. In the past, industry professionals have been the
ones to investigate major power failures.

Some say that DOE's political views on dereg could obstruct its ability to conduct a
dispassionate engineering analysis. Jack Casazza, a 57-year industry veteran who
was on point on the '65 New York blackout and the '78 grid collapse in France, says
he believes that DOE doesn't have "the expertise or competence to do the job right,"
and thus he fears that the analysis "won't be worth anything." Casazza believes that
those with "hands-on experience with power systems" -- those "who know what
actually goes on in the control rooms and in the field" -- ought to be named to the
task force.

[Ed. note: So far, 16 folks have been named to the U.S.-Canadian task force. Among
them are professors, homeland security advisers, PUC chairmen and RTO big
cheeses. The best, though, is a "chief coroner". I certainly agree with appointing at
least one coroner to serve on the task force. Source: Associated Press, 8/26/03]

Source: Wall Street Journal, 8/21/03 (by Rebecca Smith)

* A 12-page assessment of the blackout, by Portland energy whiz Robert
McCullough, can be found at www.mresearch.com

* An Electric Power Research Institute -- EPRI -- paper concludes that ratepayers
would have to shell out $100 billion to upgrade the tx grid in order to preve nt a
repeat of the 8/14 blackout.

[Ed. note: Imagine that! Voters can enjoy paying a $100 billion bill for the pleasure
of allowing Merry Marketeers to peddle power from one end of the continent to the
other. Moreover, estimates reported in the press put the cost of the blackout
anywhere from $6-$10 billion. Either one -- the cost of the upgrades, or the
financial loss from the blackout -- completely wipes out the alleged "savings" that
DOE's study found would be enjoyed if FERC's Standard Market Design were
implemented ($1 billion/yr near-term, and $700 million/yr long-term),
http://www.energy.gov/HQDocs/DOES0138SMDfinal.pdf Add $110 billion to your
cost-benefit studies, dereg fans!]
Source: Reuters, 8/25/03

* FERComm'r Bill Massey and two other FERCers traveled to India to learn how
India restores power promptly. There, grid collapses are a regular event -- the
country has experienced three regional tx system failures over the past four years.

Source: Anil Sasi in New Delhi, 8/29/03

* The New York ISO says it found no evidence of market manipulation during the
blackout. Posted real-time spot prices in New York City reached $1,053/MWh on
8/15, but that price "will not be valid under the proposed settlement."

Source: Bloomberg, 8/25/03 (by Richard Schwartz)

* Merry Marketeer DTE Energy announced last week that it will seek approval to
raise rates to recover the $35-$40 million it lost during the blackout. Eight days
earlier, DTE's big cheese had said that its ratepayers would *not* enjoy losses the
company incurred from the blackout.

Source: Detroit Free Press, 8/28/03

**********
CONNECTING THE DOTS -- an editorial
It's an indictment of those who are or once were in (regulatory) positions of
authority -- who brag that market-based rates and open access (actually,
irresponsible access by Merry Marketeers) would stimulate capital investment -- and
who now say the problem was a decade of no investment. They lied, or were conned
by theoretical economists.

Nevertheless, there is no excuse for misoperating the tx system. Even if juicy
transactions must be foregone, the system shouldn't be overloaded when it contains a
known bottleneck. The braggarts (mentioned above) can be blamed for the dearth of
tx investment, but not for operational failures. Other dereg fans (or operators who
are forced to march to the drum of their dereg fan employers) are responsible for
that.

Dereg fans deserve abuse for having promised that dereg would tap the cornucopia of
copious capital, and then in salting the wound by denying that they themselves caused
the capital to dry up.

End of editorial.

**********
OREGON DEREG
Oregon's dereg law allowed big industries access to the open market on 10/1/01.
But by that time the industries had discovered, owing to the western energy "crisis",
that dereg wasn't all it was cracked up to be.

Thus a pulp mill operator has spent $75 million developing its own co-gen facility;
another company cut its annual energy costs by $1 million by shifting production
start times, installing new equipment, etc.; and a third simply idled its steel-making
facility.

[Ed. note: These industries have been among the most vociferous proponents of
wholesale and retail dereg, only to discover that things didn't work out as advertised.]

Source: The Business Journal of Portland, 8/27/03 (by Shelly Strom)

**********
THE MONTANA COLUMN
[Ed. note: It's not only FERComm'r Nora Brownell who thinks that Montana took "a
good first step". In '99, the Edison Electric Institute (EEI, the trade ass'n of investor-
owned utilities) awarded The Montana Power Company its top award for financial
performance for selling its generation assets (to PPL Corp.). Moreover, said EEI,
the success of Touch America (One-Company-Formerly-Known-As-The-Montana-
Power-Company) "helped propel the company forward." See 3/7/03 RTO Car Talk.]

The annual shareholders mtg of NorthWestern Corp. (The-Other-Company-
Formerly-Known-As-The-Montana-Power-Company) in Sioux Falls, S.D., turned
into a rodeo. The mtg was abruptly adjourned when it became clear that there weren't
enough votes to authorize the issue of 200 million more shares of stock.

Angry shareholders questioned the bonus' and pay hikes of top brass and the $3.5
million golden parachute given the big cheese who resigned last January.

NorthWestern is $2.2 billion in debt; has discontinued its dividend; and its stock has
plunged from $16.48 to 51 cents in the past 12 months. It hasn't fully paid its
Montana property taxes, and has reneged on a contract to supply power to Montana
cities and schools. Bankruptcy is not out of the question.

Sources: The Montana Standard (Butte), 8/27/03 (by Charles S. Johnson); Billings
Gazette, 8/27/03 (by Charles S. Johnson)

* Northwestern Corp. owns NorthWestern Energy, which serves the ratepayers that
The Montana Power Company used to serve. PPL Corp., a Pennsylvania Merry
Marketeer, bought The Montana Power Company's generation facilities (11 dams
and two coal-fired plants) for $767 million in '99. NorthWestern Energy buys about
half of the power that PPL generates in Montana.

PPL is not worried about NorthWestern's possible bankruptcy. Even if
NorthWestern abrogates the contract, PPL says it could easily find new retail
distributors to sell the power to.

Source: The Morning Call (Allentown, PA), 8/29/03

**********
FERC DOINGS
In July, FERC ruled that a "through and out" rate -- a fee charged by MISO (the
Midwest RTO) and PJM (the mid-Atlantic RTO) for moving power across their
regions -- is unjust and unreasonable (and a barrier to competition) and must be
eliminated by 11/1/03. The fee generates about $250 million annually. See 7/25/03
RTO Car Talk.

The Pennsylvania PUC and a dozen Midwest ISO tx owners seek a rehearing of that
decision. The PUC alleges that FERC unfairly ordered a "seams elimination cost
adjustment", which it says would provide tx owners with revenues without a rate
case. The tx owners complain that elimination of the "through and out" rate would
mean free service over the owners' tx facilities, and that they would lose $50 million
annually.

Source: Reuters, 8/25/03 (FERC Docket EL02-111)

* The Gen'l Accounting Office (GAO), at the behest of Sen. Joe Lieberman (D-CN),
issued another report on FERC's efficacy. (An 8-page GAO report was released in
early June on FERC's role in protecting electricity customers. That report did not
evaluate FERC's success in protecting consumers. See 7/25/03 RTO Car Talk.)

The latest GAO report concludes that FERC (primarily, the Office of Market
Oversight and Investigations -- OMOI -- the group of 100 or so attys, auditors,
economists, engineers, finance dudes, policy wonks and communicators that costs
$8 million to support) has no working definition of market abuse; that OMOI doesn't
have access to real-time data about energy prices and grid operation in order to
determine whether markets are being manipulated; that OMOI lacks "market
expertise"; etc. etc.

Lieberman opined, "Another year has gone by and FERC is still not capable of
effectively protecting consumers." FERC Chairman Pat M. Wood responded that it's
"inherently very difficult" to define just and reasonable rates more clearly.
[Ed. note: In my opinion, FERC has no interest in protecting consumers. "Just and
reasonable rates" in a deregulated market are market rates -- which are whatever the
market will bear, according to a FERC administrative law judge in Docket No. EL02-
80-002 et al. (See 3/7/03 RTO Car Talk.) What could be clearer than that?]

Sources: Senate Gov't Affairs Committee, 8/27/03; CBSMarketWatch.com,
8/27/03 (by William L. Watts); Dow Jones Newswires, 8/27/03 (by Campion
Walsh)

**********
GOOD-BY, TRANSPARENCY
Last March, BPA stopped publishing its daily offer on its website. Later, the Army
Corps of Engineers ceased publishing power output data for the 31 federal dams in
the Pacific Northwest. See 6/20/03 RTO Car Talk.

Most recently, Merry Marketeer Entergy asked FERC to remove a couple of
documents from FERC's website because they contained confidential information --
eight power purchase contracts between Entergy and its affiliates.

Source: Reuters, 8/25/03

**********
DEREG BANKRUPTCIES, MANIPULATION, ETC.
* Ohio-based Merry Marketeer American Electric Power (AEP) and FERC have
settled allegations concerning AEP's actions during the western energy "crisis". AEP
will pay California $45,240, the approximate amount the Cal ISO said AEP earned
from Enron-like trading schemes such as Death Star.

Source: Platts, 8/27/03

* Bankrupt Merry Marketeer Mirant seeks, in bankruptcy court, to reject a money-
losing, long-term (through 2021) contract under which it buys power from PEPCO
(Potomac Electric Power Co.). Mirant is also trying to renegotiate two short-term
deals (through 6/04 and 1/05) whereunder it sells power to PEPCO to supply
PEPCO's standard offer needs. PEPCO serves Maryland and Washington, D.C.,
which have deregulated their retail markets.

Mirant says it has in hand an injunction from the bankruptcy court preventing PEPCO
or FERC from starting any "conflicting proceedings".

If Mirant is successful in terminating the contracts, PEPCO says its ratepayers will
enjoy any losses it suffers as a result.
[Ed. note: Shades of NRG and Connecticut Light & Power.]

Sources: Platts, 8/28/03; Dow Jones Newswires, 8/28/03 (by Susan Willetts)


FFFFFFF
PPC RTO Car Talk – 08/22/03

RTO WEST'S REGIONAL REPRESENTATIVES GROUP (RRG) MEETING
At last week's RRG mtg, progress of a sort was made. RRG members, discussants
and other hangers-on reached agmt on some high level concepts regarding the need
for unified tx system planning, and agreed to examine alternatives to the RTO West
stage 2 proposal. No means for evaluating the costs and benefits of different
proposals was considered. A schedule was set for discussing remaining issues, again
at a high level, and for development of conceptual alternatives.

There appeared to be general agmt that the region needs (a) regional tx system
planning; (b) the ability to identify beneficiaries and parties potentially responsible
for implementation of the plan; (c) a planning entity with some level of
independence, objectivity and inclusiveness; and (d) transparency of information. (A
key test is, "Can the plan be implemented?")

**********
BLACKOUT FALLOUT
* Lots of investigations are underway to learn the cause of the Northeast's blackout.
A U.S-Canada Task Force (led by Dep't of Energy Sec'ty Abraham and the Canadian
Minister of Energy), and Rep. Billy Tauzin's (R-LA) House Committee on Energy
and Commerce, are but two. The most amusing one has to be that ordered by
Russian oligarch Anatoly Chubais, head of Russia's UES (United Energy System).

Chubais trumpeted that Russia has a far better accident-proof system than does the
U.S., and that major power outages cannot happen in Russia. He announced that UES
"will thoroughly analyse what has happened", predicting that it could take up to 70
days for his investigation to determine the cause of the Northeast's blackout.

Back at the ranch, Chubais proclaimed that UES' entrance into the Georgian energy
market is not connected with recent power supply problems in Georgia. Apparently
it was a coincidence that this month, when UES acquired 75% of the shares in that
nation's distribution company, the rates went up and the power went out.

[Ed. note: I guess Bill Richardson, the former DOE Sec'ty who believes that the U.S.
has a third-world power grid, has never visited the former Soviet Union.]
Sources: Associated Press, 8/18/03; BBC Monitoring Former Soviet Union,
8/19/03

* DOE Sec'ty Abraham intimated that owing to the blackout, the Bush administration
wants to take a go-slow approach to implementing dereg. "We believe that to get the
mandatory reliability standards and the [tx] incentives in place is important enough to
allow for a slower process [on dereg/SMD/RTOs]", he said last week.

Meanwhile, FERComm'r Bill Massey opined that the blackout shouldn't derail
dereg. He believes that the blackout offers no "initial justification for FERC to back
away from its rules -- "I do not hear the White House saying we ought to reverse
course on forming RTOs."

Sources: Reuters, 8/17/03; Reuters, 8/19/03 (by Chris Baltimore)

* Some blame the lack of tx investment as the root cause of the blackout. Who, for
example, you ask?

Betsy Moler, former FERC chairman, former DOE deputy sec'ty, current lobbyist
for Merry Marketeer Exelon: "It is very well known where there are weak links in
the [tx] grid. There are maps of them. The fact that these weak links persist is
ridiculous."

Mike Naeve, former FERC comm'r, now a member of DOE's Electricity Advisory
Board: "Over the past two decades investment in the transmission grid has stalled . . .
"

Dave Cook, FERC's former deputy general counsel, now veep and general counsel
for the North American Electric Reliability Council: "The question is not whether,
but when, the next major failure of the grid will occur."

Nora Brownell, former Pennsylvania PUC comm'r, current FERC comm'r: "It's very
clear this [the blackout] is not about deregulation. It's about investing in the [tx]
system."

Bill Richardson, former DOE sec'ty, current governor of New Mexico: The U.S. is
"a superpower with a Third World grid."

[Ed. note: These folks are some of the Main Mugwumps who presided over the
imposition of dereg on the wholesale power market. Dereg, the scheme that they
promised would result in investment in the tx system, among other utopian things.
Who presided over the deregulation of some of the fabulous state retail markets?
George W. Bush, governor of Texas in '99, now President; Pat M. Wood, chairman
of the Texas PUC in '99, now FERC chairman; Tom Ridge, governor of Pennsylvania
in '98, now Sec'ty of the Dep't of Homeland Security; Nora Brownell, member of the
Pennsylvania PUC in '98, now a FERC comm'r; Marc Racicot, governor of Montana
in '97, now chairman of the Bush re-election committee.]

We owe these folks a lot for giving us dereg -- with its bankruptcies, blackouts, civil
disorder, corruption, criminal indictments, fines, fraud, guilty pleas, high retail rates,
lawsuits, lies, suicide and general destruction of the utility industry and the nation's
economy.]

Sources: Washington Post, 8/17/03; Washington Post, 8/22/01;
http://www.washingtonpost.com/wp-dyn/articles/A34499-2003Aug22.html ;
see 8/15/03 RTO Car Talk

* Earlier this summer, FERC detailed two FERCers to the Midwest ISO (MISO) to
hover and keep an eye on things. See 3/14/03 RTO Car Talk. Those staffers were in
MISO's control room after the blackout began. It remains to be seen whether the
salaries, moving expenses, per diem, retention bonus', merit increases, or other
costs incurred will have been worthwhile.

Source: Associated Press, 8/21/03; Associated Press, 8/22/03

* A number of Merry Marketeers were pleased with the blackout, for power prices
on Friday, 8/15, the day after the blackout began, jumped to more than $1,000/MWh
for a time in parts of the Northeast.

Goldman Sachs, for example, through its energy-trading arm, J. Aron, evidently
skimmed some cream on Friday when selling power from its New Jersey plant into
the market. "This could be a big windfall for Goldman," observed one energy analyst.

"[Uncertainty in the wake of the blackout] could be good for energy trading . . . [b]ut
hopefully, that won't involve more oversight or regulation, because that could be a
negative and stifle capital investments," mused Entergy-Koch's director of power
trading.

[Ed. note: Read that quote carefully, then reach for the barf bucket.]

Source: New York Times, 8/19/03 (by David Barboza and Landon Thomas, Jr.)
* Already a New York law firm has filed a class action against FirstEnergy for
damages suffered during the blackout. The Long Island Power Authority says it lost
$20 million, and has hired a law firm to explore its options.

Source: New York Times, 8/20/03 (by Patrick Healy)

* Dennis Kucinich, Ohio Congressman and presidential hopeful, asked that his state
revoke FirstEnergy's operating license owing to the company's role in the blackout.

Source: Reuters, 8/20/03

* Last week, the Nat'l Black Caucus of State Legislators held an energy conference.
The conclusion: dereg has so far failed to deliver consumer choice and savings on
power bills. The blackout means that reliability is now a problem. One attendee,
from the Office of the People's Council in Washington, D.C., noted, "Competition,
[dereg] and restructuring really have failed to bring tangible benefits to residential
customers."

[Ed. note: Washington, D.C., is the home of Angel Cartagena, former chairman of
the District's regulatory comm'n. He believes that dereg has been good for America
"and we need to bring it to energy markets." See 7/26/02 RTO Car Talk.]

Source: Associated Press, 8/21/03 (by Linda Ashton)

* Trans-Elect, the independent tx company run by former PacifiCorp big cheese
Fred Buckman, argues that the blackout was made possible by inadequate returns on
investment, which led to underinvestment in the tx system.

[Ed. note: FERC allowed Trans-Elect a 13.5% return on its investment in the
upgrading of Path 15 in California. What return are you Gentle Readers getting on
*your* investments these days?]

Source: Financial Times, 8/19/03 (by Richard Waters)

* The president of the Int'l Brotherhood of Electrical Workers (IBEW) says that
dereg has led to the reduction or suspension of training for workers, while the work
force has been reduced by one-third over the past ten years. "[D]eferred
maintenance has become the hallmark of deregulation . . . If we continue down this
road [dereg], . . . [p]ower outages will become a way of life . . . [Dereg] has turned the
once reliable, self-sustaining utility business into a marketplace where profit-taking
trumps reliability."

[Ed. note: The IBEW says it all.]
Source: U.S. Newswire, 8/19/03

**********
TOO BAD THAT MEETING WASN'T IN CLEVELAND!
PJMers and MISOers met near Chicago on the day of the blackout to discuss --
guess what -- reliability planning. Attached is the 1-page registration form for the
meeting.

**********
THE NRG COLUMN
In a final 2-1 decision, FERC ordered bankrupt Merry Marketeer NRG to continue
supplying power to Connecticut Light & Power (CL&P) because NRG didn't show
that it will be forced to liquidate if it must uphold its contract. Brownell dissented.

[Ed. note: The issue of whether the bankruptcy court (which gave NRG permission
to negate the contract) or FERC has final say over the matter now seems to be
joined.]

Source: Dow Jones Newswires, 8/18/03 (by Kristen McNamara)

**********
THE MONTANA COLUMN
The Montana regulatory comm'n voted last week to require NorthWestern Corp., the
parent of NorthWestern Energy (One-Company-Formerly-Known-As-The-Montana-
Power-Company) to disclose how it spreads costs and revenues among its affiliates.

The comm'n wants to ensure that NorthWestern Energy is not subsidizing other
enterprises. It is also worried that the company is so financially shaky that it won't
be able to buy enough natural gas to meet demand, or to enter into long-term
contracts for electric power.

The company asserts that the comm'n "may be overreaching their [sic] statutory
responsibilities."

The comm'n chairman observed that one lesson of dereg is that dereg "requires a
very active and vigilant regulator."

[Ed. note: In other words, dereg means ya need lots of busy regulators to regulate
deregulation. Whotta surprise.]

NorthWestern Corp.'s CFO resigned last week. The company's shares closed at 61
cents earlier this week.
Sources: New York Times, 8/21/03 (by Jonathan D. Glater); Reuters, 8/20/03

**********
LIFE & TIMES IN DEREG UTOPIAs
* NEW ENGLAND: The Maine and Rhode Island PUCs are fighting to keep their
ratepayers from having to pay for tx upgrades that would benefit primarily the
ratepayers in Connecticut. A Maine comm'r says that the "socialization of costs" is
outdated and unfair in a deregulated market.

Sources: Providence (R.I.) Journal, 8.20/03 (by Timothy C. Barmann); Bangor Daily
News, 8/22/03

* TEXAS (Land o'FERC Chairman Pat M. Wood): The state PUC granted Merry
Marketeer TXU approval to increase its rates by 3.7% for the enjoyment of
ratepayers. This follows the 12% rate increase TXU got last March.

The PUC, TXU, Reliant and Entergy entered into "protocols" that will advance dereg
into southeast Texas. Entergy is the sole energy supplier in the area now, and its
interconnections are with Louisiana, Arkansas and Mississippi (not with Texas).

The "protocols" determine most market procedures; some prices for tx fees; and
other ancillary charges. They also call for a 6-month pilot program to test the
market procedures. FERC is expected to rule on the "protocols" in six to nine
months.

Entergy hopes competition will arrive by the end of '04, although a pilot program
aimed at inviting competition has been in place since July of '01, with no takers.

Sources: Reuters, 4/21/03; The Beaumont Enterprise, 8/21/03

**********
ANOTHER INTERESTING ENRON TIDBIT
The court-appointed examiner in Enron's bankruptcy wants to subpoena four
secretaries who worked for Ken Lay and Jeff Skilling. He hopes that the four will be
able to dish up some dirt.

Source: Houston Chronicle, 8/21/03

**********
AND NOW, FOR SOMETHING *COMPLETELY* DIFFERENT
[Ed. note: Just after last week's blackout began, before anyone had the vaguest idea
about the cause, FERComm'r Nora Brownell said dereg wasn't responsible.]
OWED TO DEREG
(Chorus, to the tune of Home Grown Tomatoes)

Deregulation, deregulation,
Gotta have more of that deregulation.

Massive blackout sweeping the nation?
Why, that can't be from deregulation.
It didn't take deregulation
Much of a period of gestation
To create a discomforting situation
With a real life demonstration
Of what can happen when legislation
Is sold off to greed insatiation
In a rush of anti-consumerization
That gives the fat cats great elation,
But is apt to create price inflation,
Service interruption magnification,
And all manner of aggravation
For all the rest of civilization.
(Chorus)

Despite the claims, deregulation
Has brought very little new generation
Or apparent forms of innovation
In the design of a power station,
But by giving truth a permutation
Officials claim there's no relation
Between the system's degradation
And the government's prostration
At the feet of every organization
Or big industrial association
That has the goal of exploitation
Of the little people of our nation.
(Chorus)

Call it lies or miscommunication,
Whatever your choice of explanation,
What we've got here is a demonstration
Of inevitable complication
From the devious coordination
Of politics and industrialization,
Leading to manipulation
Of the real explication
For the dubious creation
Of unneeded deregulation.
When will there be a realization
Of this awful abomination?
(Chorus)

How can we achieve emancipation
From this horrendous emanation
Of anti-citizen legalization,
Of grasping companies' aggrandization?
(Other than, in our imagination,
Engaging in mass defenestration
Of the heads of every corporation
That bought this financial gratification?)
Perhaps the answer's in cooperation
To show the public's condemnation
And promise politicians career termination
Unless they engage in re-regulation.
Re-regulation, re-regulation,
Can't stand any more of that de-regulation.
Massive blackout sweeping the nation?
Sure shows the need for re-regulation.

Source: Dayton (Ohio) Daily News, 8/21/03


pjm-miso.doc



FFFFFFF
PPC RTO Car Talk – 08/15/03

"THE MARKET WILL PROVIDE RELIABILITY & CONGESTION RELIEF"
So far, we've been told that an Ohio power plant owned by FirstEnergy tripped off
line. Then First Energy's and American Electric Power's tx lines tripped out of
service. In the end, it apparently took nine seconds for a blackout to strike the MISO
and PJM states of Ohio, Michigan, Pennsylvania, New Jersey, New York,
Connecticut and Vermont -- as well as the province of Ontario.
Fun facts: eleven U.S. nukes; 11 Canadian nukes; and 80 fossil plants tripped off.
PJM lost 4000 MW of load; MISO, 18,500 MW; New York ISO, 24,400 MW; ISO
New England, 2500 MW; Hydro Quebec, 100 MW; and Ontario IMO (Independent
Market Operator), 21,000 MW -- for a total of about 61,800 MW of load loss. The
outage covered about 9,300 miles of tx line.

Notice all the RTOs and ISOs involved. Whotta surprise!

Sources:
http://www.firstenergycorp.com:80/engine;jsessionid=TKN0MCVWL4C0RBXVIS
EQJMY?s=com.firstenergycorp.www.Home&o=32403001&q=1&p=%2FFirstEner
gy+in+the+News%2FIndex%2F08%2F16%2F2003+FirstEnergy+Provides+Initial+
Assessment+Of+Status+Of+Its+System; Press Release, North American Electric
Reliability Council (NERC), 8/15/03; APPA RTO Message #246a - Inquiring Minds
Want to Know "Why the Lights Go Out", 8/15/03

**********
WOOD (and others) ON COMMAND AND CONTROL & WHAT WENT WRONG
FERC Chairman Pat M. Wood believes he got his Reichstag Fire. He's now broadly
hinting that FERC needs jurisdiction over "reliability".

[Ed. note: Rallying all the True Believers responsible for getting the nation into this
mess, he will doubtless seek to impose his scurvy will upon all tx providers, blithely
ignoring the fact that the Northeast, despite its plethora of RTOs and ISOs and the
implementation of Standard Market Design, has not entered the Radiant Future.]

Bill Richardson, former Sec'ty of the Dep't of Energy and current governor of New
Mexico, observed that the U.S. is "a superpower with a Third World grid."

[Ed. note: He'll probably have a major role in fixing things, what with his wealth of
in-depth experience in the electric utility industry. It's been 26 years since the last
major blackout in the east. How close to perfect can you get? Apparently
Richardson has never spent time in India, China, or any other Third World, non-
superpower country.

["Experts" no one's heard of are leaping up from everywhere and being quoted about
how antiquated, inadequate, ill-suited, etc., the tx system is. Show me a facility that
can't be misoperated. Freeways, under the right circumstances -- say, a Madonna
concert -- can be congested. So can telephone facilities, cellular or land-line -- for
example, did you try calling anywhere on 9/11/01, or did you try calling NERC
during and after the blackout?
[If a tx path is constrained, the schedulers don't need to overload it. A facility should
not be allowed to become the infamous "single contingency", even if it means the
dispatch has to be less than optimum. And could it be that the high voltage tx lines
were built to serve load, and not to pander to a bunch of Merry Marketeers wanting
to hawk their snake oil from one end of the country to the other?]

Source: FERC Press Release, 8/15/03; Washington Post, 8/15/03 (by Peter Behr);
New York Times, 8/14/03 (by Kirk Semple)

**********
BROWNELL ON RTOs
Nora Brownell, the FERComm'r who believes Montana took a "good first step" into
Dereg Utopia, says that the blackout isn't the fault of competition. She asserts, "It's
very clear this is not about deregulation. It's about investing in the [tx] system."

What attributes of dereg -- specifically, RTOs -- has Brownell touted all these
years? Attracting *investment* in the tx system, for one! On 9/20/01, she testified
before Rep. Billy Tauzin's Energy subcommittee that "[l]arge, independent RTOs can
improve grid reliability by . . . attract[ing] investment in infrastructure . . . "

Brownell has touted another attribute -- the efficiency of an RTO. She told Tauzin's
subcommittee that "[w]ith large RTOs there . . . are no surprises. Emergency
situations are better addressed from this efficiency of response. An RTO has the
ability to ascertain and communicate system status and response plans more quickly
than 20 or so control area operators."

[Ed. note: A stopped clock is correct twice a day. I have yet to see even one
Brownell pronunciamento that is correct.]

Sources: Associated Press, 8/15/03 (by H. Josef Hebert);
http://energycommerce.house.gov/107new/hearings/09202001Hearing372/Mead-
Brownell610print.htm

**********
CONNECTING THE DOTS -- an editorial
FERC has had plenty of chances to learn that "the market" doesn't work to lure
investment in tx facilities.

Last spring, National Grid USA told FERC that locational marginal pricing (LMP) --
a feature of FERC's Standard Market Design -- doesn't result in getting tx grid
improvements built. New York and PJM have used LMP since 1999, but congestion
has not been alleviated. New York is paying $1 billion a year in congestion costs,
but the price signal is not resulting in tx improvements.
National Grid's assertions comport with New Zealand's discovery that the economic
theory of LMP doesn't work in the real world. New Zealand has used a version of
LMP, called "full nodal pricing" (FNP), since late 1996. The New Zealand Energy
Market Rules Committee issued a report in November '02 that reviews the efficacy
of FNP. Despite a pronounced increase in inter-nodal price volatility, tx constraints
have not been relieved by new construction (in other words, one can't rely on the
market for tx investment), says the report.

The generator that has market power within a congested node has little incentive to
do anything but extract high spot market prices. And because it is neither practical
nor economically efficient to build a constraint-free tx grid, the problem of markets
with few participants will likely persist, the report concludes. (See 2/28/03 and
3/7/03 RTO Car Talk for sources.)

FERC evidently believes it is both practical as well as economically efficient to
build a constraint-free tx grid.

How did we invite investment in tx facilities in the past? Through good regulation.
If upgrades or new facilities were needed, utilities built them and good regulators
allowed the utilities to earn a reasonable return on their investment. Whotta
concept.

End of editorial.

**********
OTHER STUFF
There is, of course, the usual Bad News emanating from Dereg-ville, where
bankruptcies, blackouts, civil disorder, corruption, criminal indictments, fines, fraud,
guilty pleas, high retail rates, lawsuits, lies and suicide are the order of the day.

* In Massachusetts, three utilities asked that their "standard offer" rates be increased
by up to 4.7% (after hefty hikes last May).

* In Connecticut, Connecticut Power & Light has asked for an 11.1% rate increase
to be effective 1/1/04.

* In Pennsylvania, Duquesne Light Co. will seek a rate increase (amount undivulged)
once existing rate caps expire in 2004.

* Two former Dynegy employees pleaded guilty to conspiracy to commit securities
fraud (a third former employee still pleads not guilty).
* FirstEnergy will restate its earning for the past two years, primarily owing to
"accounting changes related to Ohio's [retail dereg] program". The company also
announced that it lost nearly $60 million in the second quarter of this year.

* AES will walk away from Great Britain's largest power plant that it bought in '99
for about $3 billion.

* Exelon, home of dereg fan Betsy Moler, will eliminate 1,900 jobs (10% of its
employees) by '06 in order to boost cash flow. [Ed. note: D'ya think Betsy Moler's
job will be among those slashed?]

* Reliant will cut 650 jobs, this after jolting investors with a worse-than-expected
second-quarter earnings report.

* A bid of $42 million was submitted for the assets of the bankrupt Touch America,
One-Company-Formerly-Known-As-The-Montana-Power-Company.

* The stock of NorthWestern, The-Other-Company-Formerly-Known-As-The-
Montana-Power-Company, fell to 74 cents/share as its credit rating was downgraded
again. Meanwhile, the big cheese of NorthWestern's parent company enjoys
$450,000 worth of personal flights per year in the company jet, an annual salary of
$565,000, and a signing bonus of $600,000.

* Marc Racicot, chairman of the Bush re-election committee, was Montana's
governor when the state's 1997 retail dereg bill was enacted. His comments: Dereg
"was the right decision for Montana." "There is no established causal relation to
deregulation and electricity costs." The sale of the assets of The Montana Power
Company "was an insightful decision." [Ed. note: I guess Racicot can get away with
saying these things, because he's now an Important Politician who needn't be
bothered by the devastation his state wallows in.] Source: Billings Gazette, 8/7/03
(by Jim Gransbery)

* The bankruptcy court judge allowed bankrupt Merry Marketeer NRG to reject a
money-losing power sales contract that eventually, through three middlemen, gets
power to Central Maine Power.

* An independent audit concluded that Merry Marketeer Xcel Energy submitted
falsified outage reports to make its service appear better to the Minnesota regulatory
comm'n.

* Enron has sued Louisiana-Pacific (LP), a maker of building products, for over $63
million, claiming it wrongfully terminated a power sales contract. LP says that
Enron had manipulated the power prices that prompted LP to enter into the contract
in '01.

* The Canadian Electricity Ass'n (CEA), a trade group of nearly all of Canada's
utilities plus Merry Marketeers, consultants, electrical manufacturers and hundreds
of others, has written FERC. CEA wants FERC to make it clear that FERC's June 26
proposed rules on withholding and unit operation don't apply outside of the U.S.

Sorry for the lack of citations/sources in this section. A vacation intervened.


FFFFFFF
PPC RTO Car Talk – 08/01/03

The date of the first RTO Car Talk was August 4, 2000. That was many moons ago,
in the salad days of dereg, when Enron and its ilk were bilking billions during the
western energy "crisis".

**********
REGIONAL REPRESENTATIVES GROUP (RRG) MTG
The RRG is a committee of 25 or so folks representing various interest groups that
have been at the drawing board for a few years trying to figure out how to create RTO
West (or at least trying to give input to the FUs, who also have RRG reps).

In last week's mtg, RRG participants snailed through the list of tx problems
generated at a previous meeting. Public power attempted to steer the discussion
toward the magnitude of the problems (i.e., how big the problem is; if resolved, what
the consumer savings are; how frequently the problem occurs, etc.). The group did
not answer these or similarly detailed questions.

The majority rejected the idea of doing an analysis (even a back-of-the-envelope
calculation) of how much a problem is costing consumers now, or the cost of fixing
a problem, or the benefit of fixing a problem. Many FUs and others argued that
"going down the cost-benefit rabbit hole" leads to "analysis paralysis". Hence the
group focused on coming to "consensus" on the problem list -- could the group agree
that the problems were in fact problems, and do the problems warrant further
discussion and possible action? There was no agreement as to how big the problems
are, what solutions are appropriate, who should pay for them, etc.

The RRG will meet again on 8/6, and will set up a calendar of intensive, 2-day
meetings every other week.
[Ed. note: Here, from an official RTO West document, is an issue the RRG
apparently discussed: "From what perspective are we evaluating problems?
Consumer interests?"

[Inasmuch as many IOUs have names such as "Public Service Co. of New Mexico"
"Maine Public Service Co.", etc., and inasmuch as public utilities are (or were,
anyway) subject to regulation for the public good, evaluating problems from the
perspective of consumer interests seems like a no-brainer.]

**********
INTERESTING TIDBIT
A $239 million agreement to sell Illinois Power Co.'s (a subsidiary of Merry
Marketeer Dynegy) tx assets to Trans-Elect expired in July, and negotiations are off
for the time being.

The original deal was derailed by FERC late last winter when FERC said "no" to
Trans-Elect's request for a 13% rate of return -- which equated to a 92% increase in
tx rates. See 6/13/03 RTO Car Talk.

[Ed. note: Trans-Elect's big cheese is Fred Buckman, former big cheese of
PacifiCorp, whose claim to fame is that he oversaw the sale of PacifiCorp to
Scottish Power.]

Source: Dow Jones Newswires, 7/28/03

**********
RATE INCREASES SPONSORED BY DEREG
* NEW JERSEY: Customers of Jersey Central Power & Light enjoyed a 3.5% rate
increase on 8/1/03. Jersey Central is the last of the four incumbent utilities awarded
increases, just before Dereg Utopia arrived, from the state regulatory comm'n (see
7/11/03 RTO Car Talk).

The Radiant Future of full retail dereg began last Friday, August 1. Residential
consumers will enjoy September bills increased by 3.5%-15.1% because the four
utilities will collect high wholesale and other costs that have been deferred during
the transitional four years of legislatively-imposed rate reductions and caps.

And the 1,750 or so large commercial and industrial users [Ed. note: Among the
most vocal advocates of dereg] will pay on an hourly basis for power. They can now
choose which supplier will charge them rates that may be up to 30% higher than what
they've been paying. But if they don't switch suppliers, they will enjoy a one-half
cent/kWh surcharge labeled a "retail adder".
[Ed. note: Politicians and other dereg fans are blaming the Usual Suspects for the
increased rates: a flawed retail dereg law, a bad economy, the high cost of
generation, the fall of Enron -- in other words, everything but the true culprits, they
themselves and dereg itself.]

Sources: The Record (Hackensack), 7/26/03 (by Kevin G. DeMarrais); Star-Ledger,
7/27/03 (by Tom Johnson)

* ARIZONA: This state hasn't deregulated its retail market, but consumers may
enjoy a rate increase anyway, thanks to wholesale dereg.

Arizona Public Service Co. (APS) has a Merry Marketeer subsidiary named Pinnacle
West. Pinnacle West was financing a bunch of new power plants. Pinnacle ran out
of financing. APS loaned $500 million to Pinnacle so that the plants can be
completed. APS wants to put the plants in its rate base, meaning that ratepayers
could enjoy a 10% rate increase.

APS argues that the plants were built to serve APS customers, so they should pay for
them. Opponents assert that the plants were built to sell power on the deregulated
wholesale market, so shareholders should pay.

Source: The Arizona Republic, 7/27/03 (by Max Jarman)

* TEXAS (Land o'FERC Chairman Pat M. Wood): The Texas PUC gave Reliant
Energy a 9% rate increase for the enjoyment of Houston-area residential ratepayers.
This is on top of an 8.2% increase last March.

Oncor is the regulated distribution subsidiary of TXU. Oncor is now "securitizing" it
stranded costs -- past investments in distribution facilities -- by issuing $1.3 billion
in bonds to be paid for by retail rates.

[Ed. note: Texas appears to define "stranded costs" as the shortfall between their
book value and their market value after dereg. Judging by past purchase prices of
utility assets, it seems to me that there is no shortfall. Au contraire, consumers
ought to be getting refunds.]

And TXU itself seeks to raise its rate from 9.7 cents/kWh to 10.1 cents/kWh. This
follows the company's 12% increase last March. The rate increases for both TXU
and Reliant are due to high natural gas prices [another FERC-deregulated -- formerly
regulated commodity].
Texas ratepayers are enjoying a free energy market, but oddly enough, competitors
seem to raise their rates when incumbent utilities raise theirs. "[T]he days of cheap
electricity are over," says an analyst.

[Ed. note: Surprise, Chairman Wood, that dog don't hunt! Here's what he said back
in '01 when he was Texas PUC chairman: "[C]ompetition works its magic on that
75% of my bill that is power generation and power sales. That's why we across the
country have really pushed for a new paradigm [i.e., dereg] here, because regulators
don't capture much good savings on those two parts of the equation." Whotta crock.
Source:
http://www.pbs.org/wgbh/pages/frontline/shows/blackout/interviews/wood.html]

Sources: Reuters, 7/29/03; Houston Chronicle, 7/26/03 (by Bill Hensel, Jr.); Fort
Worth Star-Telegram, 7/25/03 (by Dan Piller)

* FERC approved a plan to allow ISO New England (the RTO in New England) to
charge $1,000/MWh under a "scarcity pricing" rule. Last summer, the ISO's prices
hit that number for three hours.

FERC's theory is that the price will encourage generators to offer additional supplies
and encourage buyers to reduce their purchases, "both of which will help to alleviate
the shortage."

[Ed. note: Why not carry this theory to its logical end, and require all power to be
sold at a gazillion dollars/MWh? Then there would be no shortages anywhere,
anytime.]

Source: Bloomberg, 7/29/03

**********
LAWSUITS, FINES & BAD FINANCIAL NEWS SPONSORED BY DEREG
* Enersco Energy, a subsidiary of Black Hills Corp., settled with the Commodity
Future Trading Comm'n (CFTC) for $3 million that it engaged in manipulation and
false reporting of natural gas trade information.

Source: Dow Jones Newswires, 7/31/03 (by Jeff Bater)

* WD Energy Services, formerly EnCana Energy Services, will pay $20 million to
CFTC to settle attempted manipulation and false natural gas price reporting charges.

Source: Platts, 7/28/03
* Williams Cos. will pay $20 million to CFTC to settle charges that it attempted to
manipulate natural gas prices by reporting false data to industry publications.

Source: Reuters, 7/29/03

FERC intends to revoke the licenses of 40 Merry Marketeers to sell power at
market-based rates if they don't file their quarterly reports by 8/27/03.

The companies are Alliance Strategies; American Premier Energy; Ashton Energy;
Audit Pro; Black Brook Energy; Business Discount Plan; Clean Air Capital Markets;
Clinton Energy Mgmt Services; Commodore Electric; Current Energy; Delta Energy
Group; Direct Access Mgmt; Dorman Materials; Electech; Energy Marketing
Services; Energy & Steam Co.; EnergyTek; Engineered Energy Systems; Enpower;
Entrust Energy; Family Fiber Connection; Friendly Power Co.; Full Power Corp.;
Growth Unlimited Investments; K&K Resources; Keystone Energy Services; Micah
Tech Industries; Northern Lights Power Co.; People's Utility Corp.; PowerCom
Energy & Communications Access; PowerGasSmart.com; PowerSource
Corporation; River City Energy; Sigma Energy; Starghill Alternative Energy Corp.;
TC Power Solutions; The New Power Company; The FURSTS Group; TransCurrent;
and US Energy.

[Ed. note: Presumably, they will still be able to sell power at cost-based rates. Do
companies with names such as "Friendly Power Co." and "Growth Unlimited
Investments" strike you as fly-by-nighters, lured into the business by Enron's/dereg's
hefty profits?]

Source: FERC Energy Alert, 7/31/03

* In '01, Michigan began retail dereg by lowering rates 5% and freezing them
through '03. As a result, says Detroit Edison, it lost $13 million, which it wants to
recover from ratepayers. The state regulatory comm'n has denied the request. The
utility plans to seek a rehearing.

As allowed by the dereg law, Detroit Edison collects "transition charges" from voters
who seek other suppliers. Voters also enjoy paying a "securitization surcharge"
[whatever that is].

[Ed. note: Same tired old story of retail dereg -- bad for utilities and bad for
ratepayers.]

Source: Dow Jones Newswires, 7/31/03 (by Jon Kamp)
* Bankrupt Merry Marketeer Mirant posted $30 million with the parent of
Washington Gas Energy that serves Maryland and Washington, D.C. Washington
Gas gets its entire electric power supply from Mirant. The bond is for the purpose
of paying damages if Mirant terminates the power sales contract.

Mirant also supplies PEPCO with wholesale energy. PEPCO told its Maryland and
Washington, D.C., regulators that its ratepayers will enjoy higher rates if Mirant
stops supplying PEPCO and PEPCO must buy elsewhere. Said a company
spokesman, "We have no worries the lights will go out on Capitol Hill."

[Ed. note: Damn!]

Source: Dow Jones Newswires, 7/31/03 (by Kristen McNamara)

* Nearly bankrupt Merry Marketeer Allegheny, whose lead director is Jim Hoecker,
former FERC chairman and dereg fan, can survive only by extracting exorbitant
prices from California ratepayers, and thus allow the Pennsylvania PUC to cover up
the failure of its dereg scheme. See 2/28/03 RTO Car Talk.

The company has found another route to possible survival. It will sell, for $405
million, its power supply contract with the California Dep't of Water Resources
(CDWR) to Goldman Sachs. Allegheny had been looking for a buyer since last
March (see 4/13/03 RTO Car Talk). And Allegheny announced it will pay Williams
Cos. $128 million to get out of a long-term, 1000 MW power sale through which
Allegheny was supplying CDWR.

In March of '01, when California was obligating itself to over $40 billion of long-
term power supply contracts in order to escape the western energy "crisis",
Allegheny sold CDWR $4.4 billion worth of power (@ $61/MWh) that Allegheny
didn't have. The company lost $500 million on the front end of a contract that it
expected eventually to make $1 billion on.

To top it all off, Allegheny has power plants sitting idle in the Midwest. And It
bought Merrill Lynch's trading operation for $450 million, in essence paying for the
traders' talents. Then it fired most of the traders, sued Merrill Lynch, and basically
left the trading market in July of '02 (see 3/14/03 RTO Car Talk).

Sources: AFX News Limited, 7/28/03; Dow Jones Newswires, 8/1/03 (by Mark
Golden); Dow Jones Newswires, 8/1/03 (by Kristen McNamara)

* Citigroup and J.P. Morgan Chase, a couple of Enron's main financiers, agreed to
pay $305 million to the Securities & Exchange Comm'n (SEC) as penalties. The
banks helped disguise loans and otherwise hide Enron's debts from the public.
Many think it likely that the settlement could result in a raft of new lawsuits by
Enron creditors and shareholders, claiming that the banks were inextricably
intertwined in Enron's malfeasance.

Other financial institutions under SEC investigation for abetting Enron officers in
breaching their fiduciary duties are Barclays; Canadian Imperial Bank of Commerce;
Deutsche Bank; and Merrill Lynch.

Sources: Daily News (New York), 7/29/03 (by Daniel Dunaief); Reuters, 7/20/03
(by Deepa Babington); Reuters, 7/29/03 (by Dane Hamilton)

* Nevada Power Co. and Sierra Pacific Power Co. have asked FERC to backdate its
recent revocation of Enron's authority to sell wholesale power at market-based rates.

The two utilities say the June 25 revocation is useless because Enron has croaked.
The revocation should be effective, they argue, on the date in '00 when Enron began
bilking wholesale customers. The June 25 revocation "does absolutely nothing to
fulfill [FERC's] obligation to protect . . . electricity customers," they said.

[Ed. note: How long has it been since FERC stopped protecting customers? At least
ten years, I'd say.]

Source: Las Vegas Review-Journal, 7/30/03

**********
MONTANA -- NORA BROWNELL's "GOOD FIRST STEP" STATE
Touch America, A-Company-Formerly-Known-As-The-Montana-Power-Company,
has been named as a defendant in 14 court cases or administrative proceedings. In
addition to the various shareholder derivative lawsuits, it's named in these interesting
cases:

* Brazos Electric Co-op alleges that Touch America conspired and interfered with a
contract in the sale of a power plant in Texas;

* British Telecom alleges that Touch America infringed on a patent; and

* A Montana bank and a city parking comm'n want reimbursement from Touch
America for the costs of responding to alleged environmental contamination.

The 300,000 ratepayers of NorthWestern, Another-Company-Formerly-Known-As-
The-Montana-Power-Company, will enjoy a 14% rate increase just approved by the
state regulatory comm'n.
Standard & Poor's cut NorthWestern's credit rating from a "B" to a "CCC" --
vulnerable to default, highly speculative. The company's stock is selling in the $1.00
range.

The governor has set up an 11-member committee to find ways to protect
ratepayers. Led by a Montana member of the NW Power Planning Council, the
group consists of a consumer advocate, two energy lawyers, two electric co-op trade
ass'n heads, an economics professor, the state budget director, a current and a past
state legislator, and a state regulatory comm'r (who is also a board member of an
ass'n devoted to the advancement of dereg).

Sources: The Montana Standard (Butte), 7/25/03 (by Leslie McCartney);
Missoulian, 7/31/03; The Montana Standard, 7/30/03 (by Leslie McCartney); Great
Falls Tribune, 7/31/03 (by Mike Dennison)

**********
THE NRG COLUMN
FERC announced that it will reconsider its June 25 decision ordering Xcel's
bankrupt Merry Marketeer unit, NRG, to fulfill a money-losing contract with
Connecticut Light & Power (CL&P). FERC plans to issue its new, improved
decision on 10/6/03.

Meanwhile, NRG asked a federal appeals court in New York to rule, by 8/18, that the
company can end its contract. NRG earlier sought an injunction from this court to
halt FERC's June 25 decision, but the court has not yet ruled.

The Connecticut regulatory comm'n assuaged fears that blackouts would occur if
NRG does end the contract. CL&P will be able to buy power from someone, a
spokesperson said, and the higher costs will simply be enjoyed by voters in the form
of rate increases.

Sources: Reuters, 7/31/03; Dow Jones Newswires, 7/31/03 (by Kristen
McNamara); Reuters, 8/1/03

**********
ENRON's ENDLESS CRIMES
In 1999, the IRS referred a criminal case to the U.S. Justice Dep't (run, at the time,
by Janet Reno). The matter involved allegations that Enron bribed Guatemalan
officials to the tune of about $17 million in order to win a juicy power supply sales
contract. The Justice Dep't declined to investigate, for reasons unknown. And now,
the Justice Dep't (run by John Ashcroft) says it's too late to investigate -- the 5-year
statute of limitations (under the Foreign Corrupt Practices Act) has run.
Evidently an Enron employee blew the whistle back in '95 on transactions that
occurred in '93. The IRS did nothing for three years, then finally turned the matter
over to Reno's bunch in '99.

[Ed. note: And FERC wants utilities' power engineers to become stool pigeons? Oh,
come ON! See 7/18/03 RTO Car Talk.]

Sources: The Washington Post, 7/29/03; Dow Jones Newswires, 7/30/03

**********
CONNECTING THE DOTS -- an editorial
It could be curtains soon for the venerable Public Utility Holding Company Act
(PUHCA), passed in 1935 as a political response to the excesses of electric power
holding companies, and their eventual collapse during the Depression.

IOUs and Republicans, calling PUHCA "the fossilized remains of a bygone era", want
it repealed. Yup, it's a useless relic of the past, like the Constitution or the Magna
Charta.

PUHCA limits actions of utilities that want to expand outside their home bases, and
bars non-utility companies from holding major stakes in the utility business. It stops
the use of regulated utility assets, paid for by consumers, to underwrite get-rich-
quick schemes, as David Wittig of Westar tried to do.

If PUHCA is repealed, and dereg marches on, we'll have unregulated monopolies,
just as we did in the early part of the twentieth century. But of course there's no
chance that this decrepit bugaboo could come back and hurt anyone.

End of editorial.

**********
FOREIGN DEREG NEWS
* IRELAND: Britain (Northern Ireland) and the Republic of Ireland are figuring out
how to establish an all-Ireland power market. Northern Ireland wants to review the
implications of "new trading arrangements" to be implemented in the Republic in
2005, with an eye to ensuring that economic and supply benefits are not prejudiced.

Source: The Belfast News Letter, 7/26/03

* GREAT BRITAIN: Creditor banks have been forced to take over more than a fifth
of the country's power plants owing to bankruptcies and otherwise collapsed Merry
Marketeers. The banks are now seeking to find energy firms to run the plants.
About one-third of the nation's plants are closed, mothballed or operating at low
levels due to the 40% drop in wholesale prices over the past two years.

Source: The Guardian, 7/25/03

* ITALY: In January '04, the country hopes to launch a power exchange that will be
"transparent and flexible". Its best feature, say officials, will be a day-ahead
electronic market.

Source: Reuters, 8/1/03

* KAZAKHSTAN: The prime minister has decreed that rules shall be drafted for
the functioning of a retail electricity market by 1/1/04. He said that regional
distribution companies' costs accounted for 50% of the cost of power for end-users
because there is no "retail electricity market" in the country.

[Ed. note: I've heard that the New Jersey regulatory comm'n "adopted" Kazakhstan as
a project. The first problem the comm'rs had, I'm told, was figuring out where
Kazakhstan is. My guess, that the comm'rs yadda-yadda'd about dereg, SMD, LMP,
etc., was confirmed. Evidently developing countries want to learn how to build a
substation before they want to hear about dereg, SMD, LMP, etc.]

Source: BBC Monitoring Central Asia, 7/29/03

* CHINA: The country will set up six regional power markets in the next three
years in order to establish "an open, competitive and unified system of electric
power markets."

Source: Associated Press, 7/31/03

* ARGENTINA: The Int'l Monetary Fund (IMF), and the gov'ts of foreign countries
that have invested in the nation's utility sector, want Argentina to increase power
rates -- which have been capped since early 2002. The courts blocked rate increases
last November. A bill to allow temporary rate increases has been stuck in parliament
for months.

The IMF is pressuring Argentina to raise rates if it wants a 3-year financial
assistance package.

Source: Dow Jones Newswires, 8/1/03 (by Laurence Norman)
* NEW ZEALAND: Ratepayers will fund a new, gov't-owned, diesel-fueled, $150
million power plant aimed at averting another winter power crisis (see 5/23/03 RTO
Car Talk for the gov't plan that called for this solution). The operating cost will be
between NZ15 and 20 cents/kWh (wholesale prices averaged NZ7 cents/kWh last
week). The output of the new plant will equal about 3% of consumption.

The plant, to be operated by Contact Energy, will be built on the "same site as one
that ran for less than a day in the four years before Contact Energy dismantled and
sold it, in 2001." One critic likens it to yet another plant, built in 1979, which has
never been run.

Source: Dominion Post, 7/30/03

**********
HARDLY-WORTH-A-MENTION DEPARTMENT
The Mid-Atlantic Conference of Regulatory Utilities Comm'rs (Delaware,
Washington, D.C., Maryland, New Jersey, New York, Pennsylvania, Virgin Island,
Virginia and West Virginia), in its never-ending attempt to foist its bad judgment on
everyone else, issued a resolution that salivates all over FERC's Standard Market
Design.

Virginia refused to support the resolution.

Source: News Release, 7/29/03
* On 6/30/03, the Dep't of Energy released a report declaring that the three secret
phone conferences between FERC Chairman Pat M. Wood and comm'r Nora
Brownell and the Wall Street gang violated no rules. It seems that the comm'rs were
simply conveying their understanding, trying to dispel misperceptions, signaling how
they would approach a matter, etc. etc.

[Ed. note: In other words, there was an appearance of impropriety, but that doesn't
count in FERCville. Or in DOEville.]

Source: Houston Chronicle, 7/1/03 (by David Ivanovich)

**********
ESCAPE FROM THE CALIFORNIA ISO
The tx contract between PG&E and WAPA (Western Area Power Adm'n) is about to
expire. According to a consultant's report, WAPA could save Big Bucks (up to $24
million in 2005 and up to $32 million in 2010) by leaving the Cal ISO and its tx
access charge and reliability systems cost.

Source: California Energy Markets, 6/30/03 (by Elizabeth McCarthy)
**********
CONNECTING THE DOTS -- an editorial
The goal of dereg is to socialize the costs while privatizing the benefits. Through
dereg, FERC has arranged for the transfer of wealth from many small wallets into a
few large wallets.

Editor: Jerry Leone, PPC Manager

								
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