PPC RTO Car Talk – 10/24/03
* California's governor-elect Schwarzenegger says he loves a westwide RTO, SMD,
PJM and ERCOT. FERC Chairman Pat M. Wood's response to that news: "I was
Source: Restructuring Today, 10/24/03
* FERComm'r Nora Brownell announced at a conference last week that FERC has
the power to force RTO membership.
Source: Restructuring Today, 10/20/03
* A mere six months after being appointed lead director of the board of nearly
bankrupt Merry Marketeer Allegheny Energy, Jim Hoecker (former FERComm'r and
noted dereg fan) has quietly resigned.
Source: EnergyInfoSource, 10/14/03
* The criminal trial of accused sniper John Mohammed was held up for one day
owing to a blackout on Virginia Dominion's system.
* A lightening bolt hit an actor while making a movie near Rome. The actor plays
Jesus in the film.
Source: New York Post, 10/24/03 (by Jennifer Fermino)
* Remember the nifty salary, perks, club membership, golden parachutes, bonus',
options, etc. that the new big cheese of Allegheny gets? (See 10/3 and 10/10/03
RTO Car Talk.) The former top dog is no piker in that department, either. He got $4
million severance and a $65,683/month pension. He took home over $1.6 million in
salary and bonus' in '02.
[Ed. note: Nice work, it you can get it -- being the top dog of a nearly bankrupt
Source: Pittsburgh Tribune Review, 10/16/03 (by Rick Stouffer)
* Goldman Sachs will buy Merry Marketeer Cogentrix for about $2.4 billion. The
deal includes an assumption of $2.3 billion in Cogentrix' debt and an equity
contribution of $115 million. Cogentrix owns 27 power plants. Merry Marketeer
Aquila sought to buy the company in '02 for $415 million and the assumption of
$1.1 million of debt, but the sale fell through.
Source: Platts, 10/20/03; Reuters, 10/20/03
* Trans-Elect, the independent tx company run by former PacifiCorp top dog Fred
Buckman, last week sued Merry Marketeer Dynegy and its subsidiary Illinois
Power. Trans-Elect contends that when FERC rejected Trans-Elect's request for
what amounted to a 92% tx rate increase on the facilities, the parties agreed to
negotiate an "alternative rate path". (See 8/1/03 RTO Car Talk.) But Dynegy/Illinois
Power refused to deal, and now Dynegy is negotiating with Merry Marketeer Exelon
for the sale of all of Illinois Power. Trans-Elect seeks $5 million for its trouble, and
$15 million in lost profits.
Source: The Energy Daily, 10/24/03 (by Tina Davis)
* Another former PacifiCorp big cheese, Don Frisbee, remarked at a recent mtg that
IOUs "have the highest ratio of investment in plant and equipment of any industry in
the world. There's a good reason for a regulated market."
[Ed. note: This is the second time Frisbee has publicly decried dereg. His stance is
far different from that of the current PacifiCorp big cheese, Judi Johansen.]
Source: The Portland Tribune, 10/24/03 (by Kristina Brenneman)
* Merry Marketeer Aquila, trying to avoid bankruptcy, seeks states' permission to
use its regulated utility subsidiaries' assets as collateral for a $431 million loan.
Permission isn't necessary in Michigan or Nebraska. Colorado and, last week, Iowa
have approved the request. Minnesota denied the request last week. Regulatory
comm'ns in Missouri and Kansas have not yet ruled on the matter.
A big question why Aquila needs $2.2 billion in regulated utility assets to back a
$430 million loan.
Source: The Kansas City Star, 10/23/04 (by Steve Everly)
OHIO DEREG NEWS
* Ohio entered the Radiant Future of retail dereg three years ago. Today, the Ohio
PUC admits that retail "choice" doesn't exist. Merry Marketeer First Energy's rates
are frozen until '06, and the smart money is on rate shock after that -- just as in New
Jersey, when ratepayers enjoyed a 15% rate increase when full retail dereg kicked in
last August 1.
A consultant fears that people will think dereg is a failure if rates haven't come down
and there is no choice of suppliers after '06.
[Ed. note: DUH!]
Source: The Blade (Toledo), 10/12/03 (by Jon Chavez)
* FirstEnergy announced that it will offer two ways for ratepayers to buy power in
'06. The company would buy wholesale power at auction, then re-sell it to
customers; or customers could sign onto a "rate stabilization plan" through '08 and
take their chances on rate increases or decreases thereafter. Best of all, the
proposal allows FirstEnergy to continue collecting its stranded costs.
The plan grew out of the Ohio PUC's worry that retail dereg isn't developing.
Source: Beacon Journal, 10/22/03 (by Jim Mackinnon)
* Robert Tongren, Ohio Consumers' Counsel, recently admitted that his office
shredded a consultant's study performed in '00 (costing ratepayers $578,946) that
recommended FirstEnergy be allowed to collect no more than $4 billion in stranded
costs. The Ohio PUC allowed the company to collect the full $8.7 billion it sought -
- with Tongren's agreement.
Tongren said he never made the study public because he "feared it would only
contribute to lengthy and fruitless litigation." He claims that the study gave him
negotiating power "to ensure the growth of a competitive market."
[Ed. note: Wowzer! That strategy was certainly successful!]
After press reports of the study's shredding, Tongren had his minions, and the
consulting firm (LaCapra Associates of Boston), sift through their offices for
memos, working papers, mtg notes, etc. relating to the study.
The Consumers' Counsel governing board; the state att'y gen'l; the state inspector
gen'l; the state senate public utilities committee; and the state senate energy
chairman all intend to launch investigations. The Northeast Ohio Public Energy
Council and Citizen Action have called for Tongren's resignation.
Sources: Associated Press, 10/16/03; Plain Dealer, 10/17/03 (by Julie Carr
Smyth); Plain Dealer, 10/21/03 (by Julie Carr Smyth); Plain Dealer, 10/22/03 (by
Julie Carr Smyth); Associated Press, 10/22/03; Associated Press, 10/24/03 (by John
McCarthy); Akron Beacon Journal, 10/24/03 (by Betty Lin-Fisher)
* The city of Sterling Heights, a state retirement system, and a union fund have filed
a class action suit against FirstEnergy and its top dogs in federal court for securities
law violations. Two of plaintiffs' claims are that the company's $4.8 billion purchase
of Gen'l Public Utilities (GPU) in '02 caused its debt to balloon and stock to fall,
and that the company artificially inflated its financial results.
Source: Beacon Journal, 10/16/03
PROBLEMS IN PENNSYLVANIA -- Land o'FERComm'r Nora Brownell
FirstEnergy owns GPU, which in turns owns Metropolitan Edison and Pennsylvania
Electric Co, two retail utilities in the state.
Before being bought by FirstEnergy, GPU had agreed to defer and collect later costs
incurred from its subsidiaries' obligation to deliver power to customers who hadn't
switched suppliers under the state's Radiant Future retail dereg scheme. After the
sale, a state court voided the agreement. FirstEnergy appealed, but to no avail.
Those costs now amount to $6 million.
State PUC chairman Terrance Fitzpatrick -- the guy who '01 said, "[It's an] unrealistic
and unfortunate expectation that customer choice is only successful if it produces
prices that are lower than those established years ago under regulation" (see 3/29/01
RTO Car Talk) -- wants FirstEnergy to recover that $6 million, but he hasn't yet
figured out how. "First Energy shouldn't be required to absorb the costs but it's not
clear how to recover them from customers "easily and without raising objections."
[Ed. note: Too bad the Pennsylvania PUC comm'rs aren't elected -- maybe then the
voters would know what Fitzpatrick thinks of them.]
Source: Dow Jones Newswire, 10/17/03 (by Kristen McNamara)
THE RADIANT FUTURE IN TEXAS AIN'T SO RADIANT
Consumer advocates in Texas say that ratepayers could see their bills double in the
Dallas/Fort Worth area if ERCOT switches from a 4-zone congestion mgmt system
to a nodal system. "Seeing those bills double when you're already expecting
$250/month might take your breath away," says a city attorney.
The state PUC has a 3-year process underway to transform the system. The PUC
chairman believes that a nodal system would result in grid upgrades in the right
places. (See http://www.puc.state.tx.us/rules/rulemake/26376/26376.cfm , Staff
Recommendation Order As Approved August 7, 2003 Open Meeting (8/1/03),
Download 26376adt.doc [140 pages].) Free enterprise (and the profit motive) will
guide the efficient development of the power system. "Ultimately, it's simple," says
[Ed. note: Both the PUC and FERC have deigned to ignore the New Zealand study
showing that nodal pricing does not result in tx grid upgrades. Assessment of
Outcomes Achieved by Full Nodal Pricing in the NZEM, November 2002 (New
Zealand Energy Market Rules Committee)]
Merry Marketeer TXU estimates that the cost of new computers, software and
personnel needed to run the new nodal system would be $500 million statewide. The
company believes that "the nodal system will not provide enough benefits to
overcome the significant investment required."
[Ed. note: Whotta surprise.]
In other Texas news, the big cheese of Merry Marketeer Xcel doubts that retail
dereg will ever arrive in the panhandle. Why not? The area has the lowest rates in
the state, primarily because Southwestern Public Service (now an Xcel subsidiary)
designed its efficient, low-cost generation in-house.
[Ed. note: Whotta surprise.]
ERCOT 's proposed budget contains a 33% increase in its fee (from 33 cents/MWh
to 44 cents/MWhr). For one thing, ERCOT wants to hire 130 more people.
[Ed. note: Whotta surprise.]
In an unrelated development, ERCOT's big cheese -- Tom Noel -- will retire next
Sources: Fort Worth Star-Telegram, 10/19/03 (by R.A. Dyer); Restructuring Today,
10/22/03; Restructuring Today, 10/20/03; Texas Electric Market Reporter, 9/30/03;
Fort Worth Star-Telegram, 10/21/03
BACK AT THE RANCH IN MONTANA's DEREG UTOPIA
Two parents of school children have sued PPL Montana, Avista and PacifiCorp,
private owners of dams in the state, saying they owe decades' worth of lease
payments to Montana.
The complaint alleges that while the dams are on state-owned riverbeds, the owners
have never paid compensation to the state's public school trust fund.
PPL, which owns 11 dams it bought from The Montana Power Company, last year
protested the property taxes it owes on the dams. This protest tied up millions of
dollars that would go to local and state gov't. See 6/13/03 RTO Car Talk.
[Ed. note: In '02, Montana citizens voted on (and defeated) an initiative to examine
whether the state should condemn and buy PPL's dams in order to reduce retail
power costs. PPL fought the initiative, claiming that the state couldn't afford the
dams because they were worth much more than the value set by state appraisers.
Amusingly, shortly after the election, PPL filed its property tax protest, arguing that
the state overvalued the dams.]
Source: Great Falls Tribune, 10/21/03 (by Mike Dennison)
CONNECT *THESE* DOTS, SPORTS FANS!
Top Virginia officials are asking state legislators to postpone retail dereg for three
more years, and to keep rates capped until '10. The fear is that power suppliers in
Virginia will charge as much as they want in '07 -- the year the caps are scheduled to
come off --because there is no competition.
Two companies, WPS Resources and American Transmission System Operator, are
threatening to leave MISO due to fears about MISO's cost and reliability.
The Mississippi regulatory comm'n, Southern Co., and Entergy filed comments with
FERC challenging FERC's authority to open the tx grid to small (under 20 MW)
New England utilities oppose ISO New England morphing into an RTO.
FERC Chairman Pat M. Wood, at a conference in Phoenix late last month, declared
that it's about time for the west to quit talking and implement new rules governing
the region's tx grid.
[Ed. note: Ya think some folks believe dereg, RTOs, SMD, etc. are a crock? And yet
Pat M. Wood keeps playing his dreary, hollow tune . . .]
Source: Utilities Monthly Report, October 2003 (10/15/03; 10/13/03; 10/8/03;
CRIMES, BANKRUPTCIES, FINES & OTHER OUTRAGES SPONSORED BY
* Daniel Gordon, the former head of Merrill Lynch's energy trading unit, is under
investigation for embezzling $43 million from the firm in '00. He will be criminally
charged with money laundering.
[Ed. note: Dereg brings out the best in everyone.]
Source: Bloomberg, 10/14/03
* Two more folks were indicted for conspiracy to commit fraud, falsifying books
and records, and making false statements to the FBI in connection with the Nigerian
barge deal that helped Enron inflate its '99 earnings. The two are Sheila Kahanek, an
ex-Enron accountant, and William Fuhs, a former Merrill Lynch veep. Five people,
including Andy Fastow, have already been indicted for their roles in the scheme.
Source: Houston Chronicle, 10/15/03 (by Mary Flood)
* Fifty law firms, accountants, consultants and other professionals have billed Enron
$515 million to date -- more than double the cost of any other bankruptcy case. One
reason is the complexity of the case. Another, according to press reports, is the
location of the bankruptcy court.
It was the obscure Enron Metals & Commodity Corp., with 55 employees, that made
the first filing, because it was headquartered in the NY Southern District Bankruptcy
Court's jurisdiction. What's so great about this court? It is considered a calm harbor
against mobs of angry employees, creditors, regulators and politicians. And it has a
reputation for being willing to let a bankrupt company hire vast armies of attys.
Source: Houston Chronicle, 10/17/03 (by Eric Berger)
* The Enron/Sierra Pacific Resources battle continues. An Enron dude says that
Sierra refuses to negotiate a settlement of the $336 million judgment for early
termination of a power sales contract, while Sierra's top dog Walt Higgens says
Enron's offer of 90 cents on the dollar is "completely unreasonable".
Source: Las Vegas Sun, 10/22/03 (by Kevin Rademacher)
* The bankruptcy judge in Fort Worth issued a temporary stay of 98 pending
lawsuits against officers and directors of bankrupt Merry Marketeer Mirant. Mirant
wants the stay to be made permanent, arguing that dealing with that number of actions
will cost time, effort and money. The lawsuits cover anti-trust claims arising from
the western energy "crisis", pension losses, etc.
Source: Platts, 10/24/03
* The utility industry is still in the dumpster according to Standard & Poor's
RatingsDirect. The reasons? "[D]eteriorating financial profiles, weak competitive
positioning, refinancing risk, regulatory uncertainty, execution risk regarding
industry corporate restructuring initiatives, and volatility in the wholesale power
[Ed. note: In other words, dereg fans have trashed what used to be a solid industry.]
Source: "Downgrades Continue to Dominate U.S. Utility Rating Actions in Third
Quarter", 10/16/03 (by Barbara A. Eiseman and John P. Alli)
* FERC staff settled with Idaho Power Co. allegations that the company manipulated
the wholesale power market during the '00-'01 western energy "crisis". The
settlement amount is $83,373.00, the amount FERC claims Idaho Power received
for scheduling a counterflow in order to get congestion relief payments.
Source: Platts, 10/16/03
FUN FACTS ABOUT WESTERN INTERCONNECT's PRINCIPALS
Camden Collins: Att'y and engineer. Board member of the Cal ISO oversight board;
assistant to Dan Fessler, the California PUC president who started California down
the road to ruin; consultant with BearingPoint.
Robert Wilmouth: Former banking big cheese; top dog of the Chicago Board of
David Jermain: Former PacifiCorp exec; consultant with Putnam, Hayes & Bartlett,
Arthur Anderson and BearingPoint.
Sam Gupta: MBA candidate; computer/electrical engineer in Silicon Valley.
Shauna G. Barker: CPA; former auditor with Ernst & Young.
Source: NGE's Power Market Today, 10/8/03
FOREIGN DEREG UTOPIA NEWS
None of it is good. Investigations continue into the September blackout; a British
steel maker believes it is being ripped off by Merry Marketeers; a German Merry
Marketeer cancelled its power sales contracts with 300 communities because the
prices are now too cheap (German prices have risen by 25% this year, leading a
European Merry Marketeer big cheese to say, "Let us reject for once and for all the
myth that [dereg] necessarily means price decrease . . ."); Norway is running low on
power and prices are double what they were in '00; Buenos Aires enjoyed a blackout
on 10/16; the state of Western Australia enjoyed blackouts during September and
October; Dempsey KO'd Firpo; the Moguls invaded Russia; and Generalissimo
Francisco Franco is dead.
Sources: Dow Jones Newswire, 10/16/03 (by Andrea Chipman); Independent.co.uk,
10/19/03 (by Clayton Hirst); Platts, 10/20/03; Blooomberg, 10/24/03; Dow Jones
Newswire, 10/17/03 (by Laurence Norman); Green Left Weekly, 10/22/03 (by
PPC RTO Car Talk – 10/10/03
REGIONAL REPRESENTATIVES (RRG) MEETING
A morning was spent reviewing the three options. The first half of the afternoon was
spent arguing whether the RRG is 1) going in circles, 2) making any progress, 3)
able to make decisions. Another argument ensued over whether the RRG should 1)
work on the areas where there is agreement, or 2) work on the areas where there
The group agrees on a basic approach to the following subjects: market monitoring,
planning, expansion -- open season for new projects (there is disagreement over
whether a backstop is needed), security coordinator, and OASIS consolidation.
The group has conflicting ideas on how to approach congestion management,
pricing/pancaking, backstop for expansion, liability, system operation (i.e., should an
RTO have operational authority), and governance.
[Ed. note: I think everybody has a different definition of "pancaking".]
The next RRG is scheduled for 10/29. In the meantime, one small group will meet
to draft a "paper designed to capture the areas of convergence", another will work on
the governance issue, while a third will work on congestion management issues.
Other option-specific meetings may also be held.
[Ed. note: These mtgs are such an unbelievable waste of time and money. FERC
ought to be drawn and quartered for forcing the country to engage in this utter
DEREG UTOPIAs, FOREIGN STYLE
* ALBERTA: "The benefits to the Alberta government's flawed deregulation plans
for . . . electricity are getting harder and harder to find." The latest problem is a
request by Enmax (a Calgary-owned utility) for an 11% rate increase.
This request follows Epcor's (an Edmonton utility) cessation of offering consumers
long-term power contracts. Epcor was losing money on those contracts.
"Albertans, it seems, are paying for the privilege of competition." The province is
enjoying a 20% generation surplus, but ratepayers are enjoying increased prices. In
'02, the average MWh cost $43.93; this year it's $65.62. "For some reason, the most
expensive power generator sets the price."
"Alberta households, which consume only 17% of the power generated but represent
100% of the voters, have yet to reap the rewards of the restructured environment."
[Ed. note: Whotta surprise.]
Source: Globe & Mail, 10/6/03 (by Deborah Yedlin)
* THE NETHERLANDS: The number of major competitors in the Dutch power
market is: four (Electrabel, Essent, Nuon and Reliant). Nuon wants to buy Texas
Merry Marketeer Reliant's European business. This would reduce the number of
competitors to: three. The Dutch "competition authority", NMa, is pondering
whether to approve the marriage.
Source: Platts, 10/7/03
* EUROPEAN UNION (EU): The 15-nation EU intends to open fully the
electricity market to commercial customers in '04, and to residential customers in
'07. Monopolies, such as Electricite de France, will vanish. The EU took another
step in dereg's direction by approving a value-added tax to energy sales -- an effort to
remove nat'l barriers in that the tax will be at the place of consumption rather than
that of supply. This move will eliminate "distortions of competition between
Source: Bloomberg, 10/7/03
* CZECH REPUBLIC: A 30-minute blackout struck the western part of the country
on 10/6. Cause unknown.
Source: ABC News Online, 10/8/03,
* ITALY: The UCTE (Union for the Coordination of Electricity Transmission) is an
ass'n of operators of interconnected, continental European tx grids. Members are
operators in Belgium; Bulgaria, Germany, Spain, France, Greece, Italy, Slovenia,
Croatia, the Federal Republic of Yugoslavia, Bosnia-Herzegovina, the FYROM,
Luxembourg, The Netherlands, Austria, Portugal, Romania, Switzerland, Poland, the
Slovak Republic, the Czech Republic, Denmark (associate member) and Hungary.
UCTE will investigate the Italian blackout. Part of the investigation will assess
"changes in operational patterns due to [dereg]", inasmuch as each action in part of an
interconnected system immediately affects all parts of the system.
Source: UCTE press release, 10/2/03
THOSE ZANY CALIFORNIANS NEVER LEARN
The buff movie star Arnold Schwarzenegger replaced Gray Davis as governor in the
recent recall election. What is Schwarzenegger's energy background?
* He met with Enron chieftain Ken Lay and a small bunch of bigwigs on 5/17/01
(following two days of rolling blackouts during the western energy "crisis" -- the
"crisis" sponsored by Enron and other greedheads), reportedly to discuss Enron's
"comprehensive solution" to the energy "crisis" -- i.e., more rate increases, and an
end to state and federal investigations. A paper circulated at the meeting said that
ratepayers should eat the billions in debt incurred by the state's utilities and that the
investigations were only muddying the waters.
Others attending that meeting were Mike Milken, the former head of Drexel
Burnham Lambert, who pled guilty to fraud charges in 1990; Bruce Karatz, a housing
construction king; Ray Irani, top dog of Occidental Petroleum; Kevin Sharer, big
cheese of biotech giant Amgen; and Richard Riordan, then mayor of Los Angeles.
* Schwarzenegger "doesn't remember" that meeting.
What are some of his plans for fixing the California market mess?
* Implementing FERC's standard market design (SMD);
* In order to halt market manipulation and price spikes, creating a "critical buffer" of
electricity reserves funded through distribution charges;
[Ed. note: This is the New Zealand scheme.]
* Possibly buying-out the $42 billion worth of long-term power supply contracts
that the state entered into following the western energy "crisis";
[Ed. note: His problem will be finding the money to do so.]
* Maybe or maybe not pursuing refund claims before FERC against Merry
Marketeers accused of manipulating the power market during the "crisis"; and
* Allowing big users direct access to suppliers and letting retail prices for big users
fluctuate with wholesale prices.
[Ed. note: Merry Marketeer ass'ns -- dereg fan clubs -- are thrilled with the direct
access proposal (direct access was suspended in California in September '01). D'ya
remember what happened in San Diego? Before the '00-'01 western energy "crisis",
San Diego Gas & Electric had collected all its authorized stranded costs, and thus
could eliminate its rate caps and let its consumers choose suppliers. During the
"crisis", its remaining consumers enjoyed a deregulated retail market whereby retail
rates rose with wholesale prices. After two months of enjoying their rates triple and
quintuple, voters marched on Sacramento and burned their bills on the steps of the
state capitol. New rate caps -- set at twice the pre-dereg rates -- were almost
immediately imposed by the legislature. See 9/13/02 RTO Car Talk.
[I'd say that The Arnold, who is evidently surrounding himself with dereg fans and
high priest academics, is aiming California straight down the road to perdition.]
Sources: U.S. Newswire, 10/8/03; Reuters, 10/7/03 (by Leonard Anderson); Dow
Jones Newswires, 10/8/03 (by Jessica Berthold); The Wall Street Journal, 10/10/03
(by Rebecca Smith); San Mateo County Times, 10/10/03 (by Alan Zibel); San
Francisco Chronicle, 5/26/01 [No, that's *not* a typo -- see
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/05/26/MN209410.DTL ] (by
Christian Berthelsen and Scott Winokur; Utne Magazine, August 2003 (by Jason
Leopold -- http://www.utne.com/web_special/web_specials_2003-
* Last week FERC approved Merry Marketeer Xcel's plan to transfer its bankrupt
Merry Marketeer subsidiary, NRG, to creditors.
Source: Reuters, 10/8/03
* Curt Hebert, Jr., former Mississippi regulatory comm'r, former FERC chair
(resigned in '01) and dereg fan, is the veep of external affairs at Entergy (the outfit
serving Louisiana, Arkansas, west Mississippi and east Texas). Hebert is reportedly
being considered to replace Entergy's current big cheese when the big cheese retires
"in the coming decade".
Source: The Sun Herald (Biloxi, Mississippi), 10/4/03 (by Karen Nelson)
* Last week's RTO Car Talk described the salaries, cash payments, bonus', stock
options and golden parachutes enjoyed by the recently hired top dogs of Merry
Marketeer Allegheny Energy.
The top dog himself will also receive a few perks. His base annual salary
($900,000) will increase each year by at least the annual increase in the Consumer
Price Index; he will get a company car, a country club membership and a dining club
membership; he will be reimbursed for the cost and income taxes incurred for
temporary living costs and expenses for himself and his family; he will be
reimbursed for travel to his home on weekends; and he may terminate his
employment if he is required to relocate to a principal office if Allegheny moves a
principal office more than 50 miles from Hagerstown, Maryland, or Monroeville,
Pennsylvania. (And of course as noted last week, if he leaves Allegheny for that -- or
any other -- reason, he will collect $66,667 for each month of service.)
[Ed. note: Allegheny Energy is on the brink of financial ruin. The company must
have high hopes for this dude.]
Source: The Herald Mail (Hagerstown, Maryland), 10/7/03 (by Julie E. Greene)
QUOTE OF THE WEEK
" . . . [O]ur customers benefit from a very low cost generation base. So not only
would the PUD have to go to market to replace our low cost generation, it would be
more expensive, I promise you. Even if they [sic] end up buying their power from
Bonneville Power, which they [sic] can, it will be at a rate that's higher than the
average cost of our generation. So PacifiCorp customers are immediate losers
under the PUD formation."
So says Judi Johansen, big cheese of PacifiCorp.
[Ed. note: What she doesn't note is that the six NW IOUs, such as PacifiCorp, are
enjoying receiving cash, paid by NW consumer-owned utilities through BPA rates,
to the tune of about $380 million annually. That's one reason why BPA's rates are so
high. And that's the reason some IOU ratepayers in the Puget Sound area, for
example, enjoy retail rates that are lower that those of some consumer-owned utility
ratepayers in the same area.]
Source: Brainstorm NW, October 2003 (by Jim Pasero --
ENRON's ENDLESS EFFLUVIUM
* Sierra Pacific Resources, parent of Sierra Pacific Power Co. and Nevada Power
Co., signed expensive wholesale power sales contracts with Enron during the
western energy "crisis". The expense could not be passed on to ratepayers. Sierra
bled, and its credit rating dropped to point that Enron required Sierra to post over
$300 million in collateral. Sierra refused. Enron thus claimed Sierra terminated the
Last August, the bankruptcy judge upheld Enron's invocation of the contract's early
termination clause, and hence Enron's demand for payment of the full value of the
contract to date (over $330 million), even though Enron hasn't delivered any power
to Sierra since mid-'02. Last week, Sierra filed a complaint with FERC seeking to
invalidate the payment. Sierra faces bankruptcy if it must cough up the cash.
Sources: New York Times, 10/6/03 (by Kurt Eichenwald); Dow Jones Newswires,
10/6/03 (by Jessica Berthold)
* The Securities & Exchange Comm'n (SEC) charged an Enron subsidiary's former
senior accounting officer, Wesley H. Colwell, with fraudulently inflating Enron's
earnings. Colwell agreed to pay a fine of $200,000 in penalties and $300,000 in
Colwell is reportedly cooperating with the U.S. Dep't of Justice in its criminal
investigations of other Enron top dogs such as Ken Lay and Jeff Skilling.
Sources: Reuters, 10/9/03; The Wall Street Journal, 10/10/03 (by John R.
Emshwiller); Washington Post, 10/10/03 (by Peter Behr and Carrie Johnson)
* An Enron subsidiary won an airport maintenance contract from the city of
Philadelphia. It seems that the company "teamed up" with a couple of city
politicians. The FBI has launched a corruption probe.
Source: Action News, WPVI.com, 10/9/03
* A bankrupt Enron subsidiary filed suit in bankruptcy court seeking $45 million
from Goldman Sachs for terminating a deal on trading over-the-counter derivatives, a
deal Goldman Sachs allegedly guaranteed.
Source: Dow Jones/AP, 10/10/03
MORE PROBLEMS SPONSORED BY IN DEREG
* Rate increases in Maryland are on the way as soon rate caps begin to come off,
says Baltimore Gas & Electric (BGE). The caps were imposed when retail dereg
began in '00. PEPCO's rate cap for residential consumers ends in June '04; BGE's in
'06; and Allegheny Power's in '08.
Last week the state regulatory comm'n approved of rate regulation for "standard
offer service" that utilities must provide (for up to four years after the rate caps end)
to those who don't switch suppliers.
A BGE guy said that competition will give Maryland voters "the lowest price
possible in the marketplace."
[Ed. note: And that price is moon-cubed.]
A state legislator bemoaned that "standard offer service" would hinder the arrival of
[Ed. note: The legislature ordered rate caps for a "transitional period", so that
competition could develop. Of course, it didn't, so now politicians are again
promising that competition will arrive after yet another "transitional period". What
Source: Baltimore Sun, 10/8/03 (by Lorraine Mirabella)
* Competition in Pennsylvania is still *so* not happening that yet another batch of
PECO Energy residential ratepayers was handed over to Dominion Retail and It's
Electric & Gas Co. Those two companies bid at auction for the right to serve the
households at 1.5% less than PECO's price to beat. They were the only bidders. An
earlier auction attracted *no* bidders.
Source: Restructuring Today, 10/6/03
* The SEC is investigating El Paso Corp.'s (the natural gas pipeline company)
accounting scheme of power contract deals. El Paso is said to have charged utilities
less for power supplied under long-term contracts in exchange for the right to buy
that power cheaper on the open market. Then El Paso treated the contracts as
derivatives, booking the profits from the life of the contracts right away (instead of
when the power was generated and customers paid).
Source: Reuters, 10/6/03 (by C. Bryson Hull)
* The Commodity Futures Trading Comm'n (CFTC) fined William H. Taylor, a
former veep of Avista Energy, $155,000. Taylor is accused of manipulating the
settlement prices of electricity futures contracts traded on NYMEX in order to
increase Avista Energy's net gain.
Over the last two months, the CFTC settled similar charges against three other Avista
Energy folks: Thomas Johns, a former veep; and Michael T. Griswold and Robert
Kristufek, both former traders.
Sources: Dow Jones Newswire, 10/7/03 (by Joseph Rebello); CFTC press release,
* The CFTC sued American Electric Power (AEP) last week, alleging that AEP
earned $63.5 million in profits from manipulating natural gas prices. AEP traders
are said to have submitted false gas price data about 2,400 times to industry
Sources: Reuters, 10/8/03 (by Matt Daily); Restructuring Today, 10/6/03
THE MONTANA COLUMN
* Bankrupt NorthWestern Corp., the parent of Northwestern Energy (One-
Company-Formerly-Known-As-The-Montana-Power-Company), is seeking an
injunction in the bankruptcy court in an attempt to halt the dozen or so lawsuits filed
by shareholders against various company officers and subsidiaries.
The lawsuits were filed before NorthWestern filed for bankruptcy, and are against
non-bankrupt people and entities. NorthWestern, in fighting the injunction, claims
that the litigation is siphoning off its money in legal costs.
Source: Associated Press, 10/7/03
* Last July, NorthWestern Energy terminated its contract to sell power to the city
of Great Falls and its school districts (see 7/18/03 RTO Car Talk). Great Falls is
therefore thinking of becoming its own power supplier by joining with five electric
cooperatives and building a coal-fired generating plant.
Sources: Great Falls Tribune, 10/8/03 (by Mike Dennison); Associated Press,
* Touch America, The-Other-Company-Formerly-Known-As-The-Montana-Power-
Company, has now completely croaked.
During Touch America's 3-year life, Bob Gannon, its big cheese, reaped a fabulous
harvest. He enjoyed a salary and bonus' of at least $500,000 a year. He is enjoying a
$2 million-plus mansion on Flathead Lake and lump-sum payments of more than $3
million to reward him for "change of control" of the company. He will enjoy an
annual retirement of $226,000 when he turns 65.
[Ed. note: Yup, dereg was very, *very* good to a few ratepayers.]
Source: Great Falls Tribune, 10/12/03 (by Mike Dennison)
AND IN RTOville --
* NEW ENGLAND: Despite NEPOOL's "nay" vote against morphing ISO New
England into an RTO, the ISO is gonna do it. It plans to file its RTO plan with FERC
by Halloween. Various state attorneys general are preparing to protect consumers
by fighting off an RTO.
Sources: Reuters, 10/9/03; Hartford Courant, 10/10/03 (by Stacy Wong)
* VIRGINIA: The state's regulatory comm'rs said they will oppose any attempt by
FERC to allow American Electric Power (AEP) to join PJM. A few days ago, AEP
proposed a compromise that would allow it to move ahead with limited participation
in PJM, but the state comm'rs opposed that plan. The comm'n is still awaiting a
"credible, comprehensive cost-benefit analysis".
The Kentucky comm'rs have also refused to approve AEP's request for its affiliate to
join PJM. Regulators in Louisiana and Arkansas have raised questions, as well.
Source: Reuters, 10/9/03
PPC RTO Car Talk – 10/03/03
RTO WEST's REGIONAL REPRESENTATIVES GROUP (RRG) NEWS
The RRG has been discussing three options (see 8/22/03 RTO Car Talk). When the
three sub-groups reconvened as one to present each option, an RRG member asked
point blank, three times, if the FUs (Filing Utilities, for you new readers) that are
gung-ho for option 3 (the RTO West stage 2 filing) are willing to negotiate and move
away from option 3. No one responded. Indeed, the question was utterly ignored
each time it was asked, and the subject immediately changed.
One member reported that during the first few meetings of the option 3 sub-group,
members talked about making improvements to the stage 2 filing. This person
missed a meeting, and upon returning, discovered that all discussions of improving
option 3 (the stage 2 filing) had been stopped. Now the sub-group is focusing solely
on how to package it in pretty wrapping paper and implement it.
[Ed. note: The fix is in, folks, unless you hold your ground and become a broken
* "Energy giant Scottish Power dipped 2.25p to 353.75p despite unveiling a new
board member in the shape of Judi Johansen, president of its US subsidiary
Source: Irish Examiner, 9/30/03
* The head of FERC's Division of State Relations has departed. FERC will replace
him with four regional directors.
Source: www.dailyferc.com, 10/2/03
* Merry Marketeer Dynegy is talking with Merry Marketeer Exelon (home of dereg
fan Betsy Moler) for the sale of Dynegy's Illinois Power tx and distribution unit for
between $2.3-$2.5 billion. Dynegy evidently wants to dump Illinois Power because
it feels its subsidiary has little or no opportunity "for significant revenue growth".
If the deals goes through, and a proposed merger of Ameren and Central Illinois
Light Co. were completed, most Illinois voters would get their power from one of
the two companies.
[Ed. note: So much for FERC Chairman Pat M. Wood's dereg promise that power
will be supplied by a multitude of sturdy yeomen-suppliers dressed in humble
homespun. We are rapidly rowing back toward the pre-PUHCA days of Sam Insull
and the robber barons, which was doubtless Wood's intent all the while.]
Sources: Houston Chronicle, 9/27/03 (by Laura Goldberg); The News -Gazette
(Champaign-Urbana, IL), 9/29/03
* The Securities & Exchange Comm'n (SEC) wants to determine whether Ken Lay
was involved in Enron's numberless fraudulent activities. Thus it has asked the D.C.
District Court to compel Lay to hand over documents containing Enron memos and
other papers "bearing Mr. Lay's handwriting and annotations". Lay has refused,
asserting his Fifth Amendment right against self-incrimination.
Source: Houston Chronicle, 9/29/03 (by David Ivanovich and Mary Flood)
* Enron employees sued Enron and its auditors, banks, lawyers, directors and
officers under RICO (the federal Racketeer Influenced and Corrupt Organizations
Act) for fraudulently depleting the employees' retirement fund. A federal district
court recently dismissed the claims against Enron's lawyers (Vinson & Elkins),
outside directors, ex-CEO Jeff Skilling, ex-CFO Andy Fastow, ex-Fastow aide
Michael Kopper, and six banks. Ken Lay, Arthur Anderson and Northern Trust Co.
remain as defendants.
A similar suit filed by the U.S. Dep't of Labor in late '01 still pends.
Fun facts: In its boisterous, dereg-cheerleading heyday, Enron had over 20,000
employees. Now it has about 13,200, and is about to axe 200 of those.
Source: Houston Chronicle, 10/2/03 (by Mary Flood); Associated Press, 10/2/03
* The Connecticut, Rhode Island and Massachusetts att'ys gen'l, and consumer
counsels of Maine, Connecticut and New Hampshire, blasted ISO New England's
plan to become an RTO, saying that a study shows ratepayers will face $70 million
more in higher bills immediately, and $1.4 billion more over the next 19 years.
On Friday, the New England Power Pool (NEPOOL) voted 80 to 20 against
morphing ISO New England into an RTO. IOUs, tx and distribution companies,
munis, costomers and Merry Marketeers are represented on NEPOOL.
The NEPOOL vote is advisory only. The ISO's board of directors will meet next
week to decide whether to file its RTO proposal with FERC. They say they will take
into consideration the NEPOOL vote.
Sources: Connecticut Post, 10/1/03 (by Rob Varnon); letter to NEPOOL dated
9/30/03; Providence Journal (RI), 10/4/03 (by Timothy C. Barmann)
* Dominion Virginia Power has filed an application with the Virginia regulatory
comm'n to join PJM. Dominion Virginia says that its cost-benefit study shows
consumers could save $163 million over 10 years by replacing its higher-cost power
with cheaper power from the PJM market, and another $314 million by not having to
build power plants.
The state comm'n wants info based on four scenarios not considered by the study,
and in a form such that comparisons can be made among scenarios.
Source: Richmond Times-Dispatch, 9/30/03 (by Greg Edwards)
DOMESTIC DEREG UTOPIAS -- CRIMES, FINES, LAWSUITS, ETC.
* The Commodity Futures Trading Comm'n (CFTC) has charged American Electric
Power (AEP) with pocketing $63.5 million in profits from manipulating U.S. natural
gas markets. If it loses the lawsuit, CFTC could impose a civil penalty of up to $336
million ($120,000 for each of the 2,800 allegedly bogus trades reported to industry
publications) or a $190.5 penalty (triple AEP's profits).
AEP has fired the five traders who, it says, engaged in the false reporting.
[Ed. note: AEP is the Merry Marketeer that hired John Forney, the Enron whiz-kid
hauled off in handcuffs and indicted last June. Forney, a trader in Enron's Portland
office from 1997 through 2000, is allegedly the brains behind illegal trading
schemes such as "Ricochet", "Get Shorty" and "Death Star" (aka Forney's Perpetual
Loop). Forney joined AEP in March 2002. See 6/6/03 RTO Car Talk.]
Sources: Platts, 10/1/03; Reuters, 10/1/03
* Bankrupt Merry Marketer Mirant has reached a settlement of $332,411 with
FERC staff over allegations that Mirant manipulated the market during the '00-'01
western energy "crisis" (specifically, engaging in "Ricochet" trades). FERComm'rs
and the bankruptcy court must approve the settlement for it to become effective.
Source: Dow Jones Newswires, 9/30/03 (by Jessica Berthold)
* A federal trial judge denied Merry Marketeer Xcel's motion to dismiss a lawsuit
filed by shareholders, and thus a securities fraud case can proceed. Investors sued
Xcel and its top dogs on the grounds that they failed to disclose the full extent of
Xcel's financial ties to its subsidiary, bankrupt Merry Marketeer NRG.
Source: Saint Paul Pioneer Press, 10/1/02 (by David Hanners)
* Earlier this summer, J.P. Morgan Chase agreed to pay a $135 million fine to the
SEC for helping disguise loans and otherwise hide Enron's debts from the public
(see 8/1/03 RTO Car Talk). Now, the investment bank has agreed to pay a $25
million penalty to the SEC to settle claims that it manipulated the share prices of
new public companies during the technology bubble.
Source: Financial Times, 10/1/03 (by Adrian Michaels and David Wells)
* Fitch Ratings cut its ratings on Merry Marketeer Allegheny Energy's debt deeper
into junk, from "BB" to "BB-".
Meanwhile, Allegheny is considering selling its corporate headquarters in
Hagerstown, Maryland, and moving to Pittsburgh, as an economy move.
An energy analyst noted that Allegheny seems to be getting back on schedule with its
financial reporting. "No fraud has been discovered, just stupidity."
Fun facts: The four new big cheeses at Allegheny (CEO; CFO; gen'l counsel; and
prez of the tx-distribution unit Allegheny Power) have a combined initial base salary
of $2.25 million, and annual bonuses that could range from 100%-200% of base
salary. The CEO got $6.3 million in "make whole" cash as compensation for his
sacrifice in leaving his former employer. The CFO got $250,000, and the gen'l
counsel $800,000, for the same reason. Stock options are also part of the
compensation packages. And, to top it all off, the CEO will get $66,667 for each
month of service if he leaves Allegheny for any reason.
[Ed. note: Yup, dereg has been *very* good to a few ratepayers.]
Sources: Reuters, 10/1/03; Tribune-Review, 10/3/03; Herald-Mail, date unknown
but recent (by Julie E. Greene)
* FERC approved a $50 million settlement with Merry Marketeer Reliant regarding
allegations that it made three round-trip power trades with BP Energy in order to
manipulate power prices during the '00-'01 western energy "crisis". BP settled with
FERC earlier this summer for $3 million (see 7/25/03 RTO Car Talk).
This settlement is separate from a pending settlement between FERC and Reliant
over claims that Reliant used Enron-style tactics to game the California market. It is
also separate from refunds Reliant may owe California for overpriced sales. And it
is separate from Reliant's settlement with FERC for $13.8 million over charges that
it withheld power during two days in June '00 (see 2/14/03 RTO Car Talk).
[Ed. note: What good corporate citizens these Merry Marketeers are.]
Source: Dow Jones Newswires, 10/2/03
* The bankruptcy court approved Merry Marketeer Mirant's request to reject its
below-current-market-price power sales contract with Brazos Electric Power
Cooperative. Mirant will continue serving Brazos at current market-priced rates.
See 9/26/03 RTO Car Talk for background info.
[Ed. note: Whotta surprise. Dereg rapes ratepayers once again.]
Source: Dow Jones Newswires, 10/1/03
* Merry Marketeer Powerex, the trading arm of BC Hydro, has heard that FERC is
considering ordering Powerex to forfeit up to $280 million in unpaid bills owed it
[Ed. note: Save those tears. Powerex made $2 billion off the western energy
Source: Vancouver Sun, 10/3/03 (by Scott Simpson)
FOREIGN DEREG UTOPIAS -- POWER TOO CHEAP TO METER!
* NORWAY: With no relief in sight, rates have jumped 70.5% higher than they
were in the third quarter of last year. Energy, tx and taxes now average US10.37
Source: Aftenposten Nettutgaven, 10/1/03
* CENTRAL EUROPE: Average central European offpeak prices rose by 41.4% in
the third quarter of '03 compared with those prices in the third quarter of '04.
Baseload prices rose by 48.5% during the same time period.
Source: Platts, 10/2/03
* EUROPE: The European Union (EU) plans to create a single market by '04 that
would interconnect the entire continent. Competition and interconnection -- ending
the electrical isolation of some countries -- will help prevent blackouts, asserts the
EU's top energy official.
[Ed. note: Hmmm. The Italian mainland, which is interconnected to the rest of
Europe, suffered a blackout when bad things happened in Switzerland and France.
Sardinia and other Italian islands, not connected to the mainland, suffered no
blackouts. But the energy bigwigs want more interconnections and more
competition. You be the judge.]
Source: Associated Press, 9/28/03
* AUSTRALIA: The energy minister of the state of South Australia wants to cut
retail power prices on the grounds that distribution companies have been cherry-
picking the profitable consumers and providing no benefits to small end-users.
The distribution companies oppose the move. TXU's local manager says, "There is
very little room for downward movement in prices."
[Ed. note: Whotta surprise.]
Source: Advertiser Newspapers, 9/30/03
THE SECOND COMING IS HERE
Utah's and Wyoming's governors, and about 150 energy guys, met in Salt Lake City
recently to form a "Sub-regional Transmission Initiative". The plan is to identify the
most critical tx and generation improvements needed in Wyoming, Utah, Colorado,
Idaho and Montana.
But wait! The answer has arrived! An outfit called Western Interconnect, L.L.C.,
incorporated in Delaware last May, naming Robert K. Wilmouth as chairman and
Camden L. Collins as president, filed with FERC (Docket No. ES03-61-000) to
form a west-wide, for-profit RTO (replacing RTO West, Cal ISO and WeCon) based
on its board members' experience as bankers, Internet money-men, CPAs and
Best of all, Western Interconnect will have the benefit of advice from Bill Hogan,
dereg's chief theorist and high-priest academic from back east.
Western Interconnect has made two requests of FERC: one for a declaratory
judgment that it is qualified and may operate an RTO, and one for FERC-
collateralized debt financing.
The outfit proposes first to become the security coordinator for the western
interconnection, and then to operate the tx system and sell tx services using
locational marginal pricing (LMP) to manage congestion. Western Interconnect
estimates that it can build an RTO for $300 million while the "ultimate downstream
rate impacts on retail volumes, evenly applied, are approximately half a cent per kwh,
based on 2001 volumes."
In order to get this fat goose off the ground, Western Interconnect asks FERC to
authorize it to borrow $100 million "secured with collateral FERC can create given
its exclusive jurisdiction over wholesale sales." Because there are no utility assets
to guarantee its debts, Western Interconnect wants allowance-for-funds-used-during-
construction (AFUDC) rate treatment, a "used and useful finding" for its activities
and "a legally certain method of securing collateral."
[Ed. note: The pleadings and letter are a stream of buzzwords, non sequiturs and
sales pitches. This proposal is just the ticket -- the boys' band from The Music Man.
"[H]e's just a bang beat, bell ringing, big haul, great go, neck-or-nothing, rip roarin',
every-time-a-bull's-eye salesman . . . He's a music man and he sells clarinets to the
kids in the town with the big trombones and the rat-a-tat drums, big brass bass, big
brass bass, and the piccolo, the piccolo with uniforms, too with a shiny gold braid on
the coat and a big red stripe runnin' . . . No, the fellow sells bands, boy's bands. I don't
know how he does it but he lives like a king and he dallies and he gathers and he
plucks and he shines, and when the man dances, certainly boys, what else? The piper
pays him. Yessir, yessir, yessir, yessir, when the man dances, certainly, boys, what
else? The piper pays him." Copyright The Music Man by Meredith Wilson, 1957.]
Sources: Star-Tribune, date unknown but recent (by Dustin Bleizeffer); Platts,
10/1/03; Declaration for Declaratory Order, Application of Western Interconnect,
L.L.C. Under Section 204 of the Federal Power Act to Issue Note in Support of
Construction Loan, and letter to FERC dated 9/29/03
PPC RTO Car Talk – 09/26/03
MORE BIG BLACKOUTS
* Parts of Denmark and southern Sweden enjoyed a noon-to-7:00 p.m. blackout on
9/23. Reportedly, over 4 million citizens were without power, meaning everything
from airports and abattoirs to subways and underwater tunnels croaked.
The exact cause is unknown, although a storm downing a tx line running between the
two countries, and two Swedish nuclear power plants tripping off line, were
implicated. The Swedish parliament has ordered the country's tx grid company to
'splain the power failure.
The blackout struck as seven Danish, Swedish and Norwegian experts traveled to
Canada and the U.S. to investigate our 8/14 blackout.
Sources: Associated Press, 9/23/03 (by Jan M. Olsen); Associated Press, 9/23/03;
Dow Jones Newswires, 9/23/03; Platts, 9/23/03; Reuters, 9/23/03 (by Per
Thomsen) Platts, 9/24/03; Nuclear News Flashes, 9/23/03; Dow Jones Newswires,
date unknown but recent (by Robb M. Stewart); Platts EU Energy, 9/25/03; Platts,
* Almost all of Italy (population: 58 million) except the island of Sardinia enjoyed
a blackout on 9/28, beginning at 4:00 a.m. Power had been out for three hours in
Geneva, Switzerland, earlier on Sunday when a tree took out a tx line. Two high-
voltage lines in France went paws up at the same time, and then Italy went dark.
Italy enjoyed rolling blackouts earlier this summer (see 7/18 RTO Car Talk) when
hot weather led to record peak loads on the power system.
Source: Associated Press, 9/28/03 (by Tom Rachman); Associated Press, 9/28/03
OTHER NEWS FROM FOREIGN DEREG UTOPIAS
* GREAT BRITAIN: Independent Energy (IE), a British Merry Marketeer that
"collapsed spectacularly" in '00, had big problems with its billing system, preventing
it from collecting from its customers.
[Ed. note: As in parts of Texas, dereg can actually result in *free* electricity, owing
to billing problems. See 6/13/03 RTO Car Talk.]
The problem was evidently not disclosed to investors when a 100 million-share
public offering was made in March of '00. Now that the former top dog and two
former directors have agreed personally to cough up UKpound 1.2 million (as part
of a UKpound 29 million settlement) for U.S. investors' claims, the former top dog,
and IE itself, face huge lawsuits in Great Britain.
[Ed. note: The former top dog is now the head of a wind farm developer. Whotta
Source: Daily Mail (London), 9/23/03
* According to a UBS Warburg/Deloitte analysis, the average economic margin (a
guide to value creation) in the European utility sector has declined every year since
1999, despite 10% per year increases in invested capital.
"[T]he sector appears to be destroying value at a frightening rate . . . [T]he leakage of
value through competitive . . . pressures is a fact of life . . . Unfortunately, most
companies seeking to break the pattern through growth or acquisition have destroyed
even more value," says the analysis.
Source: Platts, 9/25/03
* NEW ZEALAND: Customers of Contact Energy, controlled by California's
Edison Mission Energy and one of the big retail suppliers in New Zealand, will enjoy
20%-30% increases in their variable usage rates come 10/1. Contact Energy
blames it on higher wholesale power rates.
[Ed. note: Ah, Deregville -- where power is too cheap to meter.]
The new Electricity Comm'n (with Roy Hemmingway at the helm) will have its work
cut out for it in avoiding conflicts of interest between its role as the maker of
"transitional governance rules" and its job as an active market participant as a "reserve
Sources: Southland Times, 9/19/03; The Press (Christchurch), 9/21/03
* ONTARIO: The Ontario Electricity Coalition (OEC) has accused the Liberal
Party (the challenger) of planning to further the Conservative Party's (now in power)
march to Dereg Utopia at the expense of ratepayers and for the benefit of Merry
OEC's purpose is to oppose dereg in Ontario -- http://www.electricitycoalition.org/ -
- and the organization is supported by labor unions, the Canadian Ass'n of Retired
Source: CNW, 9/24/03
* RUSSIA: United Energy System (UES, the country's state-controlled utility, led
by oligarch Anatoly Chubais) has decided to reorganize its largest power plants into
10 wholesale generating companies.
The companies would become the major suppliers for the market that will be
"liberalized" over the next three years. Evidently the plants are now owned in part by
private investors, and selling them off entirely will aid in the march to the Radiant
Source: Reuters, 9/26/03
BANKRUPTCY & OTHER BAD FINANCIAL NEWS
* NewPower Holdings, a bankrupt unit of bankrupt Enron, settled a number of class
action lawsuits for $26 million. The plaintiffs claimed the company violated federal
securities law by misrepresentations and omissions in connection with its initial
public stock offering in '00. Ken Lay is a former director of NewPower.
Source: Platts, 9/19/03
* Bankrupt Enron Corp. itself says that creditors might receive 16.6 cents, rather
than 14.4 cents, on the dollar. Enron raised the value of its assets from $12 billion
to $13.6 billion. Claims against it remain valued at $66.5 billion.
On the other hand, the recovery rate for Enron Broadband Services' creditors
declined from 12.7 cents/dollar to 10.5 cents/dollar.
The bankruptcy judge authorized Enron Corp. employees to seek $53 million in
deferred comp payments made, just before the company croaked, to 125 favored
Last week, Enron Corp. sued six of its former banks (Merrill Lynch; Citigroup; J.P.
Morgan Chase; Deutsche Bank; Barclays; and Canadian Imperial Bank of
Commerce), claiming that they bear "substantial responsibility" for Enron's collapse
by engaging in schemes to manipulate and misstate Enron's financial condition.
Enron wants to recover payments it made to them, and to move their claims to the
bottom of the payout priority list.
[Ed. note: The banks have been under investigation by the SEC for breach of
financial duties. Citigroup and J.P. Morgan Chase paid the SEC $305 million in
fines for disguising loans. See 8/1/03 RTO Car Talk.]
* Portland Gen'l Electric (PGE, an Enron subsidiary) has agreed to pay $8.5 million
to settle charges that it engaged in fraudulent energy trading (e.g., "Death Star")
during the western energy "crisis". PGE says the money will be paid by shareholders,
not by ratepayers.
California will get $6.1 million; Tacoma Power, $1.1 million; Oregon business and
residential consumers, $800,000; industries, $250,000; and one paper mill,
The Oregon PUC has signed on to the settlement, thereby waiving its right to
continue its own investigation into those trades.
Fun fact: PGE and Enron traders worked on separate floors of the same office
building in downtown Portland.
Sources: The Oregonian, 9/24/03 (by Jeff Manning and Gail Kinsey Hill); The
Oregonian, 9/25/03 (by Jeff Manning); The Oregonian, 9/27/03 (by Jeff Manning)
* Bankrupt Merry Marketeer Mirant and one of its wholesale customers, Brazos
Electric Power Cooperative (a buyer for many Texas rural co-ops and munis) are
renegotiating a power sales contract. Mirant claims that the contract is a $7
million/year loser, and wants out.
[Ed. note: Either way -- via renegotiation, i.e., Brazos paying a higher price to
Mirant, or abrogation, i.e., Brazos having to buy on the market -- co-op and
municipal voters will doubtless enjoy higher rates. Whotta surprise.]
The bankruptcy judge has urged Mirant and PEPCO to mediate a similar power sale
Mirant cut 700 jobs in '02, and plans to give the heave -ho to another unspecified
number. The day it filed bankruptcy, Mirant got permission to offer severance
packages to about 1,000 union employees and 100 highly compensated (over
Sources: Houston Chronicle, 9/19/03 (by Eric Berger); Reuters, 9/22/03;
Bloomberg, 9/25/03; Fort Worth Star-Telegram, 9/24/03 (by Dan Piller); Dow
Jones Newswires, 9/25/03 (by Kristen McNamara); Atlanta Journal-Constitution,
9/25/03 (by Margaret Newkirk and Robert Luke)
* Merry Marketeer Allegheny Energy at last filed its '02 annual report. Its auditor
says "there is substantial doubt about Allegheny's ability to continue as a going
concern." The company threatened bankruptcy several times in the past, and managed
to squeak by this year by refinancing part of its $5.2 billion of debt last February. It
says it needs to refinance another $1.45 billion by the end of this year.
Source: Reuters, 9/25/03 (by Nichola Groom); Dow Jones Newswires, 9/26/03 (by
* Merry Marketeer Aquila, in its quest to avoid bankruptcy, asked the Missouri
regulatory comm'n for permission to use its regulated utility subsidiaries' assets
located in Missouri (worth $1 billion) as collateral for loans. (See 9/12/03 RTO
Comm'n staff recommended denying the request, noting that Aquila's plan is so bad
that not even conditions imposed by regulators would make it palatable. Staff says
Aquila's plight was caused by its failed venture into unregulated businesses, and that
the company now wants to "squander" its regulated utility assets. The comm'n is
expected to rule next month.
Source: The Kansas City Star, 9/19/03 (by Steve Everly)
* Xcel (the parent of bankrupt Merry Marketeer NRG) reached an agreement to
refund $1 million to customers in connection with allegations that another of its
subsidiaries, Northern States Power, lied on its power outage reports to the
Minnesota regulatory comm'n. Xcel will also pay $15 million for outage prevention
Source: Reuters, 9/24/03
CONNECTING THE DOTS -- an editorial
Enron's demise reportedly wiped out 5,600 jobs. God knows how many indirect jobs
bit the dust, such as those at Arthur Anderson. Enron's collapse wiped out or sorely
depleted the pensions of 28,000 folks -- the company's retirement fund having from
gone from $2.1 billion in early '01 down to $10 million now.
The bankruptcies of the Cal PX, Mirant, NEG, NewPower, NorthWestern Corp,
NRG, PG&E, Portland General Holdings, Texas Commercial Energy and Touch
America have resulted in countless other direct and indirect job and retirement fund
losses. At least 14 energy firms have slashed or suspended dividends in the past 18
Ironically, the villains simultaneously lost their shirts (though perhaps not their own
personal shirts) in every business venture they tried, with the exception of cheating
western ratepayers during the western energy "crisis". Then they lost our money to
Meanwhile, FERC and other dereg fans, the original perpetrators responsible for the
shambles, shamelessly keep spewing their drivel.
For example, FERC Chairman Pat M. Wood just declared that the west must get
moving on dereg by quickly forming RTOs so that investors will fund new tx
facilities and power plants. (Source: Reuters, 9/24/03, by Nigel Hunt) Wood is
evidently ignorant of a study released last November in the Dereg Utopia of New
Zealand. The study shows that dereg's features do not provide tx expansion
incentives. (See 2/28/03 RTO Car Talk.)
Another example: CAEM, the ever-strident dereg fan club, once again claims that
billions and billions of dollars have been and will be saved in PJM's Dereg Utopia.
(Source: Dow Jones Newswires, 9/23/03, by Kristen McNamara.) This claim is
fascinating, inasmuch as the club's top dog said last May that "the biggest mistake the
procompetitive movement made was that we lied" to consumers about how dereg
means lower prices. (See 5/23/03 RTO Car Talk.)
And listen to Rep. Joe Barton (D-TX, chairman of a House Energy subcommittee):
"In 1992, Congress began a wonderful new era [by passing the Nat'l Energy Policy
Act] where companies compete to sell your utility power at prices far below what
they had previously been." (Source: Roll Call, 9/23/03) Has this guy -- or his
speechwriters -- read any reports in the past three years about the energy biz?
Finally, we have dereg fan Betsy Moler, former FERC chair, former DOE deputy
sec'ty, and current lobbyist for Merry Marketeer Exelon, weighing in on standard
market design (SMD). In a written statement, she urges Congress to oppose a delay
in implementing SMD -- otherwise, she claims, FERC will be hamstrung and the
Radiant Future will not arrive. (See
%20Unintended%20Consequences%20of%20Delay%209-24-032.pdf) I myself
cannot imagine a loftier goal than hamstringing FERC.
End of editorial.
Incumbent utilities in New Jersey will have invested over $1.5 billion in tx upgrades
and replacements between '02 and '08. But owing to dereg -- for power can now be
imported from almost anywhere in the NE, MW, mid-Atlantic states or eastern
Canada -- trees falling on lines in Ohio can cause blackouts in New Jersey.
There is no such thing as a 100% secure system that won't ever collapse. "The best
systems with the best engineering designs still fail with human errors," says a big
cheese of Public Service Electric & Gas Co. The issue comes down to who should
pay (tx owners, Merry Marketeers, ratepayers or the gov't) how much to minimize
the chances of blackouts.
Source: The Record (Hackensack), 9/21/03 (by Kevin G. DeMarrais)
DOMESTIC DEREG UTOPIA NEWS
* CALIFORNIA: Ratepayers in this state will take it in the shorts again next year.
The long-term power sale contracts the state signed in '01 will cost $3 billion above
pre-dereg rates (even though some of the contracts have been renegotiated). The
contracts translate in '04 to $91/MWh. The pre-dereg cost in California was about
$29/MWh. The current spot market sits at between $35-$50/MWh.
To top it all off, ratepayers will shell out $873 million in '04 to pay interest on the
bonds the state floated in order to pay for the '01 contracts.
Source: The San Diego Union-Tribune, 9/20/03 (by Craig D. Rose)
* CONNECTICUT: Connecticut Light & Power (CL&P, the utility in a battle with
bankrupt Merry Marketeer NRG over whether NRG should comply with the terms of
its contract to sell power to CL&P) has asked the state regulatory comm'n for an
11.1% rate increase for its ratepayers' enjoyment.
Source: The Hartford Courant, 9/23/03
GRAB YOUR SOCKS, OREGONIANS --
On 10/3, three FERC staffers will land in Salem to meet with reps of the Oregon
PUC; PacifiCorp; PGE; BPA; and others as part of FERC's "outreach" program.
After lunch, attendees will discuss "What's Needed to Remove Transmission &
Ancillary Service Barriers to Development of a Competitive Retail Market in
Oregon". The session will conclude at 3:00 p.m. after a one-hour "Questions and
[Ed. note: Let's hope FERCers are too busy rafting and otherwise enjoying
themselves to put any effort into the "Dialog". And Lord knows we don't need
FERC's advice on a "Competitive Retail Market".]
Source: Clearing Up, 9/29/03 (by Jude Noland)
MORE FERC OBSTRUCTIONISM
Last year, the D.C. Circuit Court ruled that FERC has no authority to stop a tx owner
from leaving an RTO (Atlantic City Electric Co. et al. v. FERC, 295 F.3d 1; see
7/12/02 RTO Car Talk). FERC re-wrote its offending order, thumbing its nose at the
court and declaring that it did so have the authority. The court slam-dunked FERC
again (see 5/23/03 RTO Car Talk).
Now, in an amazing 2-page pleading dated 9/10/03 and entitled, "Guidance on [RTO]
and [ISO] Filing Requirements Under the Federal Power Act" (Docket No. PL03-5-
000), FERC regally proclaims that it damn well does have the authority -- under the
guise of determining whether member entrance and exit rights are just, reasonable
and not unduly discriminatory.
In other words, FERC evi dently claims that indeed it does have authority to stop a tx
owner from leaving an RTO if the departure would cause such (another?) entity to
have unjust or unreasonable rates. Apparently FERC believes its authority reaches
any action at all by a jurisdictional utility that might affect rates. I suppose that a
utility's paying a third floor janitor a salary that would cause the utility to have
"unjust and unreasonable" rates gives FERC jurisdiction over janitors' salaries.
Let's hope this "Guidance" thing finds it way back to the D.C. Circuit Court.
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-
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
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
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)
* 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
[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.]
* 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,”
[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
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
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
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
Source: Houston Chronicle, 9/15/03 (by Mary Flood); Reuters, 9/17/03 (by C.
* 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.
* 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
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
* 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
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
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
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
* 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
* 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
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
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
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)
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,
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
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-
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
* 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
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.]
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
We have FERC, of course -- but in the end, ourselves -- to blame.
End of editorial.
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
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,
Source: Austin Business Journal, 8/29/03 (by Mary Alice Kaspar)
* NEVADA: Merry Marketeer Sierra Pacific Resources, owner of Nevada Power
and Sierra Pacific Power, 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 terminated its wholesale power sales contracts wi th 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
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)
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
* 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-
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 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
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
* 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 $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
* 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
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
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
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
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"
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
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;
Editor: Jerry Leone, PPC Manager