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Strategies & Market Trends : Commodities - The Coming Bull Market -- Ignore unavailable to you. Want to Upgrade?

To: craig crawford who wrote (248)	6/14/2001 8:47:05 PM
From: craig crawford	Read Replies (1) \| Respond to of 1643

June 14, 2001 Bush Administration Looks Isolated In Opposition to Energy-Price Caps By Jim VandeHei and Rebecca Smith Staff Reporters of The Wall Street Journal public.wsj.com (subscription req) electricity wholesalers and Republican leaders in Congress are seeking to launch television advertising campaigns depicting price controls as a siren song, one that would lead to energy rationing reminiscent of the shortages of the 1970s. In early discussions, lawmakers have talked of asking those energy suppliers, such as Enron Corp., Southern Co. and Reliant Energy Inc., to stake at least $5 million toward the advertising. They still haven't figured a way around a thorny problem: how to cap prices in the 10 other Western states that are electrically connected to California, since none of them has an organized market in which wholesale power is traded. It is impossible to say, at this point, what will emerge from an emergency meeting of FERC on Monday afternoon California is the only Western state that has an organized market for power. In the rest of the West, utilities still mostly produce enough electricity to meet the needs of customers in their monopoly territories, cutting deals with suppliers only when they run short. "We can't figure out how you'd cap prices without a centralized market," said Jim Steffes, a vice president at Enron, the nation's biggest energy trader. "It would cause tremendous confusion." At a minimum, Mr. Massey is applying pressure to extend the hours in which FERC's price-control measures are in effect in California. Currently, the controls only kick in during periods when California's energy reserves slip below 7% of demand. At that point, suppliers' bids are compared against a "proxy price" that approximates the generating cost of the least-efficient plant operating in the market. Prices below that proxy are deemed fair. Prices above that proxy are deemed excessive and subject to refund unless the supplier can prove the charge is justified by higher actual costs.