Once considered the most complex solution, we are now driven by
the need to satisfy new regulatory issues such as HSR, the integration of
increasingly heterogeneous grids, and the need to improve grid security.
Achieving this will help us to avoid another energy debacle and create new
opportunities for the private sector.
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As these complex problems continue to be solved through innovative thinking
and real-world testing, the energy markets will continue to improve. The
result will be increased investment and lower energy costs for the consumer.
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We need
to make certain that there is adequate public discussion about these changes,
which are very technical and complex. Without a doubt, this is not the
"politically correct" issue that Enron would like to talk about -- or even
have anything to do with. But there are significant opportunities for energy
utilities, electric service providers, oil and natural gas suppliers,
marketers, and more.
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I strongly believe that there is a need for private sector leadership.
However, that can't be accomplished if our industry continues to be blinded
by bureaucracy, regulatory uncertainty, and complex, one-size-fits-all
regulations.
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We are at a critical moment in time. The free market is now driven by some
very powerful forces that have been unleashed by deregulation.
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Today, we have the opportunity to introduce the new competitive energy
markets.
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But in order to seize this opportunity, we must move quickly, remove
obstacles, and focus on a common sense solution.
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By all means, let's continue to let our regulators, politicians, and
academicians address these issues -- because they've been spectacularly
inept.
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But we in the private sector must make certain that our voices are heard.
We have to take the lead, introduce solutions and create markets for what
the future will require.
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Let's use our ingenuity and creativity to make certain that the solution
continues to improve for the consumer.
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Let's show the world that Enron can raise the bar higher in the energy market.
This solution must enable consumers to reap the benefits of competition,
while ensuring that new market entrants are not held back by current
regulatory and political barriers.
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As a leader in a free market, I urge you to come to Houston -- and witness
the delivery of a comprehensive, common sense solution.
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Thank you for your continued support.
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Will Eberle
Chairman and CEO
GWF Energy, Inc.
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This is a follow-up to last week's article regarding the "Next Stage" of
deregulation, "A View From the Top."
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Top Story - Wednesday, June 6, 2001
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Energy
More Information Is Needed To Help Bailout Fail
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Opinion, S. L. Price, N/Pg1
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U.S. Rep. Billy Tauzin, chairman of the Energy and Commerce Committee, is in
charge of legislation to bail out power companies to prevent the bankruptcy of
Pacific Gas and Electric Company (PG&E) or Southern California Edison Company
(Edison).
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?Entergy Corporation CEO John Rowe, who heads a committee advising the
president on the bailout plan, said it is crucial that the legislation be
passed because if it is not, "the whole deregulated system in the western
states is going to come unraveled."
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?Both Edison and PG&E are struggling to deal with soaring wholesale power
costs. The utilities sold their electric generating plants to third parties
(called asset buyers) who have been in turn forced to sell their available
energy to out-of-state generators.
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?Not surprisingly, the generators claim they are not being paid enough by the
utilities. This has led to a dramatic situation in which wholesale power
prices have soared to $1,900 per megawatt, compared with a recent level of
about $30 per megawatt.
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?This situation has greatly exacerbated an existing shortage in the western
states. The Western Systems Coordinating Council, which represents the energy
industry, reported that California consumers face a supply shortfall of 10% to
20% this year.
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?Bowing to enormous public pressure, President Bush instructed Mr. Tauzin to
act in support of consumers by considering helping the utilities out of their
financial plight. It is widely assumed that the two Senate sponsors of a bill
that has so far stalled in the Senate -- Sen. Dianne Feinstein and Sen. Gordon
Smith -- have little interest in helping the utilities.
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?The White House bill would have the Department of Energy supply short-term
financing for California, Nevada and Washington, no matter what happens to
PG&E and Edison. It would keep the California utility companies out of
bankruptcy, provide the buyers with long-term commitments for future
electricity supplies, and set up programs to get the utilities paying down
their debts.
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?The bill is a good one and deserves Senate support. However, many are worried
that Republican Sen. Frank Murkowski will not support the plan because it does
not impose equally strict restrictions on the utility buyers.
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?The Bush bill is preferable to a much worse proposal by Democrats in the
Senate. That proposal would leave the matter to the California Public Utility
Commission and the California legislature, which would probably make matters
worse.
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?The only alternative to a bailout plan for the utilities is continued
bankruptcy, which would lead to dramatic increases in wholesale power
prices. However, bankruptcy also has its disadvantages.
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?The utilities have been ordered to file financial reports with the Securities
and Exchange Commission within the next few days. Such filings allow for
public disclosure of utility data that is more in-depth and detailed than what
is available on the Internet. This will provide much better information about
how the utilities can be held financially responsible for their actions.
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?In a May 26 editorial in the Wall Street Journal, Mr. Rowe called for
legislation similar to the bankruptcy alternative. The Wall Street Journal
urged that the law be changed to help out California utilities. "If
California's laws allowed the utility to cut off customers who could not pay
their bills, it could start to reduce the risk that utilities could be driven
to bankruptcy," the Wall Street Journal editorial said.
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?The Journal further suggested that "Congress should allow power generators to
claim a portion of their losses through the rates they charge the utilities.
The FERC should use some of the $6 billion in refunds it plans to seek to
make this change retroactive."
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?That is, the current power price formula already allows generators to claim
all of their losses from any transaction. The price formula requires the
utilities to pay more if prices are above a certain level, but the generators
are allowed to keep all of their gains from all transactions. The generator
losses are covered by the utilities, while the utility gains are not. It is
time for the current laws to be changed to allow the generators to have some
part of their losses covered by the utility ratepayers.
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?The generators are in bankruptcy not because they are greedy, but because
they have been gouged by the utilities. At the time the power producers sold
to the utilities, the price of power was much higher. There was a mistake
between the amount of power the utilities were selling and the revenue that
the utilities collected.
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?This is similar to the utilities' mistake in buying ice cream for $1 per
pound, but
