BACKGROUND Supplies are tight prices are rising in
BACKGROUND • Supplies are tight, prices are rising in many N. A, . Power markets (prices at 14 of 17 wholesale locations have doubled over 3 years) - economic growth fueling demand; power plant siting and construction have lagged. - most end users don’t see real time price signals (so conservation lags). (- gas prices are also likely to become controversial as heating season approaches. ) • Media: blackouts in some markets and widespread high prices have put electric markets on the front page - San Diego customers exposed to wholesale price volatility. - California blackouts/threats of blackouts report in USA Today, CNN, NY Times, WSJ and local press. • Politics: Policy makers responding awkwardly - Price caps in Northeast and California - Calls for “reregulation” in California legislature - Potential Presidential Election Issue Sense of crisis and high profile of electric deregulation producing both risk and opportunity 1 1
OPPORTUNITIES • Regulatory - Added impetus to FERC’s RTO efforts (filings due this October) - Expedited siting legislation in California (8000 MW pending approval) - Potential political pressure for administration to take bolder (emergency) action to open system • Commercial - Price volatility in power presumably raising profile of price risk management - Commercial/Industrial end user price risk management - Utility & utility marketing affiliate interest in shedding sales “books” and residential default service obligations 2
PUBLIC AFFAIRS ACTION PLAN • Develop key messages/advocacy - background - “soundbites” - detailed discussion - policy solutions • Develop advocacy group (Enron can’t do it alone) - editorial writers - merchant generators - marketers - political leaders/regulators • Circulate messages, organize media/political contacts, keep updated • Develop proposals - legislation for California - RTO proposals at FERC - Proposed emergency action at FERC • Develop political pressure for action. 3
ACTION PLAN - KEY MESSAGES • The “deregulated market” is working; the “regulated market” is not. - Our customers bought fixed price power, we hedged our positions; our customers and shareholders are just fine. - The regulated market is failing. - - utilities are prevented from hedging (they purchased an “adjustable rate mortgage” for their customers) - - The market has responded with 8, 000 Megawatts of proposed new capacity (150% of the peak demand increase over the last four years). This capacity is tied up awaiting state and local approvals. These are problems with regulation not the open market • Opening the market is the answer - Transmission must be open and nondiscriminatory so power can move from where it is to where it is needed. - Siting and interconnection of new generation must be expedited. - Customers must have a choice; when they do, companies like Enron will help them manage their demand (not just build new supply). 4
ACTION PLAN - POLICY PROPOSALS • California legislation - Expedited siting - transmission - distribution - CEC override of local authority - Allow utilities to hedge outside exchange? - Demand side bidding - Others? • RTO proposals at FERC - prepackaged plan for reliability function - building the software - work within existing RTO efforts - filing at FERC • Emergency action at FERC - develop political support - Gore campaign, Gov. Davis, Richardson - draft rule (or outline) h: presentationsElect. Dereg 5
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