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To: Second_Titan who wrote (85187)	1/23/2001 10:15:10 PM
From: Second_Titan	Read Replies (1) \| Respond to of 95453

FERC Chmn Cites Lack Of Compliance With Calif. Pwr Order By BRYAN LEE OF DOW JONES NEWSWIRES WASHINGTON -- California government officials are failing to comply with the Federal Energy Regulatory Commission's Dec. 15 order restructuring the state's failed competitive power market, FERC Chairman Curtis Hebert said Tuesday. "We're trying to communicate to them that it's important that they follow the order," Hebert said in a telephone interview with Dow Jones Newswires. "We're looking for compliance." Hebert, whom U.S. President George W. Bush named chairman Monday, wouldn't comment on what actions the commission is contemplating. But he appeared to indicate that FERC is considering something short of an enforcement order, given that the commission has no formal authority over state government officials. If the electricity and financial crisis gripping California is to be resolved, "it is fundamentally important to follow the (Dec. 15) order," Hebert said. The new chairman said the California Legislature is taking important steps toward resolving the crisis by pursuing legislation to allow the state's Department of Water Resources to enter into long-term power supply contracts on behalf of the cash-strapped utilities. But he expressed concern that the state isn't taking aggressive enough actions fast enough to prevent an even larger-magnitude problem this summer. The outlook for California heading into this summer is "really dim," Hebert said. He also said New York's power market could experience similar supply-demand imbalances as hot weather sparks demand. FERC's restructuring order sought to temper the volatility roiling California's spot power markets by moving the state's investor-owned utilities into long-term power supply contracts. The state's 1996 restructuring mandate required that the three utilities buy all of their power from spot market auctions administered by the California Power Exchange. Those spot market purchases became highly volatile eight months ago, when the region entered a supply shortage. The state's two largest utilities, Edison International's Southern California Edison (EIX) and PG&E Corp.'s Pacific Gas & Electric Co. (PCG), have been pushed to the brink of bankruptcy by high wholesale power prices that they have been unable to recoup due to a state-mandated retail rate freeze. By requiring the utilities to purchase the vast majority of their required power through fixed-price, long-term contracts, FERC's order has sought to end the utilities' financial bleeding, caused by an estimated $12 billion in uncompensated wholesale power purchase costs. The order also called for ending the Power Exchange's single-price auction when supply bids exceed $150 a megawatt-hour. The hourly auction gives all suppliers the highest price bid during the auction. FERC called for suppliers to receive the prices they actually bid into the auction when prices exceed $150 a megawatt-hour. But the PX has refused to comply with that requirement, and the utilities are still obtaining most of their power requirements through the exchange in a process that FERC believes is further driving up unrecoverable costs. The commission was believed to be considering an enforcement order against the Power Exchange, which last week said it would cease operating as of April. -By Bryan Lee, Dow Jones Newswires