20040209Lafferty Exhibits Part III.pdf

DAVID J. MEYER
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
AVISTA CORPORATION
O. BOX 3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-3727
TELEPHONE: [phone]
FACSIMILE: [phone]
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICA nON
. OF A VISTA CORPORATION FOR THE
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR ELECTRIC AND
NATURAL GAS SERVICE TO ELECTRIC AND
NATURAL GAS CUSTOMERS IN THE STATEOF IDAHO
CASE NO. A VU-04-
EXHIBIT NO.
ROBERT J. LAFFERTY
FOR A VISTA CORPOR T AnON
(ELECTRIC ONLY)
(SCHEDULES 16,21 & 31 OF THIS EXHIBIT ARE CONFIDENTIAL)
SCHEDULE NO
SCHEDULE 16
SCHEDULE 17
SCHEDULE 18
SCHEDULE 19
SCHEDULE 20
SCHEDULE 21
SCHEDULE 22
SCHEDULE 23
SCHEDULE 24
SCHEDULE 25
SCHEDULE 26
SCHEDULE 27
SCHEDULE 28
SCHEDULE 29
SCHEDULE 30
SCHEDULE 31
CASE NO. A VU-O4-
EXHIBIT NO.
TABLE OF CONTENTS
DESCRIPTION
Natural Gas Purchase & Hedge Transactions - Graph
(Confidential)
21-01 L&R - Critical Water
12 Month Rolling - Forward Electric-Gas Implied Heat Rate
Spread
Forward Natural Gas Purchases - Apr. 2000 thru Dec. 2001
Natural Gas Requirements for Avista Generation
Natural Gas Transaction Records for Medium-Term
Purchases (Confidential)
High Electric Prices - Dec. 2000 - Articles
California Potential Blackouts - Apr/May 2001 - Articles
PAGE
Federal Position - No Price Caps - May/June 2001 - Articles 1 - 3
Weekly Load Variability (By Month)
Load & Resource Position Summary - 90% CI
Forward Natural Gas Price Curves - April/May 2001
Medium -Term Power Purchases
Natural Gas Forward Price Information - Publications
April/May 2001
Medium-Term Power Purchase - Articles
Position Reports - Hedge Transactions (Confidential)
CO NFID ENTIAL
Natural Gas Purchase & Hedge Transactions - Graph
THIS PAGE CONTAINS CONFIDENTIAL MATERIALS AND IS SEPARATELY FILED
Exhibit No., Schedule 16 Pages 1
R. Lafferty
A vista Corporation
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Avista Utilities
Summary of Forward Monthlv Natural Gas Fixed Priced Purchases Compared to Electric Market Prices
pril 2000 throuJlh December 2001
Transaction
Transaction Delivery Volume
Date Period Dthlda
4/12/2000 Au -000
5/1/2000 Aug-OO 5,000 $3,03 Rathdrum $35.87 $56.13 $20.27
5/1/2000 Sep-OO 5,000 $3,10 Rathdrum $36.67 $56.13 $19.46
5/5/2000 Sep-OO 5,000 $2.885 Rathdrum $34.20 $57.00 $22,80
5/10/2000 Jun-OO 5,000 $2.81 Rathdrum $33,34 $37.30 $3.97
5/17/2000 Jun-OO 5,000 $3,10 Rathdrum $36.67 $49.00 $12.33
6/1/2000 Jul-OO 10,000 $3.85 Rathdrum $45.30 $75,08 $29.79
6/1/2000 Jul-OO 4 500 $3.77 Rathdrum $44.38 $75.08 $30,71
6/12/2000 Oct-OO 5,000 $4.10 Rathdrum $48.17 $81,00 $32,83
6/13/2000 Aug-OO 10,000 $3,80 Rathdrum $44.72 $139.50 $94.78
6/23/2000
6/23/2000
6/23/2000
Oct-
Noy-
Dec-
000
000
000
$4.50 Rathdrum
$4.50 Rathdrum
$4.50 Rathdrum
$52.
$52.
$52.
$73.
$73,
$73,
$20.
$20.
$20,
6/30/2000 Noy-000 $4.Rathdrum $52.$82.$29.
6/30/2000 Dec-000 $4.Rathdrum $52,$83.$30.
6/30/2000 Jan-000 $4.Rathdrum $52,$57.$4.
6/30/2000 Feb-000 $4,Rathdrum $52,$54.$1.
6/30/2000 Mar-000 $4,Rathdrum $52.$54.$1.
7/18/2000 Jan-000 $4.Rathdrum $47,$58.$10,
7/18/2000 Feb-000 $4,Rathdrum $47.$58.$10.41
7/18/2000 Mar-000 $4.Rathdrum $47,$58.$10.41
8/29/2000 Sep-25,000 $4.Rathdrum $47.$134.$80,$86 64-----S;32.
8/29/2000 Oct-000 $4.Rathdrum $47.$136.$80.$88,$32.
8/30/2000 Noy-000 $5.Rathdrum $58.$96.$37.
8/30/2000 Dec-10,000 $5.Rathdrum $61.$96.$34,
8/30/2000 Jan-000 $5,Rathdrum $59,$90.$30,
8/30/2000 Jul-000 $4.Rathdrum $48.$140.$91.
8/30/2000 Aug-000 $4.Rathdrum $48,$150.$101.
8/30/2000 Sep-000 $4.Rathdrum $48.$144.$95.
Note: LLH Margin is shown when enough natural gas is purchased to run some LLH in addition to all HLH.
Exh. 7/ Schedule 19
R. Lafferty
A vista Corporation
Pg. 1 of 3
Avista Utilities
Summary of Forward Monthly Natural Gas Fixed Priced Purchases Compared to Electric Market Prices
April 2000 through December 2001
Transaction
Date
9/12/2000
9/12/2000
9/12/2000
9/12/2000
Delivery
Period
Nov-
Dee-
Jan-
Feb-
Plant
Rathdrum
Rathdrum
Rathdrum
Rathdrum
$1,
($3,70)
9/15/2000 Nov-000 $5,Rathdrum $62.$118.$70,$55.$7.
9/15/2000 Dee-10,000 $5,Rathdrum $62.$120,$65,$57.$2.
9/15/2000 Jan-10,000 $5.Rathdrum $62,$108,$60,$45.($2,78)
9/15/2000 Feb-10,000 $5.Rathdrum $62,$94.$60,$31.($2.78)
9/15/2000 Mar-10,000 $5.Rathdrum $62.$92.$60,$29.($2,78)
9/15/2000 Apr-10,000 $5.Rathdrum $62,$66.$3.
9/15/2000 Oet-000 $5.Rathdrum $66.$137.$80,$71.$13.
9/15/2000 Nov-000 $5,Rathdrum $66,$118,$70,$51,$3.
9/15/2000 Nov-000 $5,Rathdrum $65,$118.$70.$52.$4.
9/15/2000 Dec-000 $5.Rathdrum $65.$120.$65.$54,($0,77)
9/15/2000 Jan-000 $5.Rathdrum $65.$108.$60.$42.($5.77)
9/15/2000 Jun-01 10,000 $4.Rathdrum $54.$88.$33.
9/15/2000 Jul-01 10,000 $4.Rathdrum $54.$152.$97.
9/15/2000 Aug-10,000 $4.Rathdrum $54.$162.$107.
9/15/2000 Sep-10,000 $4.Rathdrum $54.$157.$102.
9/15/2000 Oct-01 10,000 $4,Rathdrum $54.$90.$35.
9/15/2000 Nov-10,000 $4.Rathdrum $54.$80.$25.
9/15/2000 Dec-000 $4,Rathdrum $54,$80.$25.
9/15/2000 Jul-30,000 $4.Rathdrum $54.$152,$50.$97.($4,38)
9/15/2000 Aug-30,000 $4.Rathdrum $54.$162,$50.$107,($4.38)
9/15/2000 Sep-000 $4.Rathdrum $54.$157.$50.$102.($4,38)
9/15/2000 Oct-000 $4,Rathdrum $54.$90,$50.$35.($4,38)
9/15/2000 Nov-000 $4.Rathdrum $54.$80.$50.$25.($4.38)
9/15/2000 Dec-30,000 $4.Rathdrum $54.$80.$50.$25,($4.38)
11/29/2000 Dee-000 $15.Rathdrum $187.$215.$27.98
12/28/2000 Jan-000 $12,Rathdrum $154.$500,$345,98 I
1/26/2001 Apr-10,000 $6.Rathdrum $76.$377 ,$300.
1/29/2001 Apr-000 $5.Rathdrum $71.$377 .$150,$305.$78,181
2/9/2001 Aug-000 $6.NECT $83,$345,$278,$261,
2/9/2001 Sep-000 $6.NECT $83.$333.$266.$249.
2/9/2001 Oct-000 $6,NECT $83.$353.$298.$269,
Note: LLH Margin is shown when enough natural gas is purchased to run some LLH in addition to all HLH.
Exh, 7 Schedule 19
R. Lafferty
Avista Corporation
Pg, 2
Avista Utilities
Summary of Forward Monthly Natural Gas Fixed Priced ,Purchases Compared to Electric Market Prices
April 2000 throuGh December 2001
Transaction Delivery
Date Period
2/12/2001 Aug-
2/12/2001 Sep-
2/12/2001 Oct-
2/12/2001 Nov-10,000 $8.NECT $121,$304.$249.$182,
2/12/2001 Oec-10,000 $8,NECT $121.$359,$304.$237.
2/26/2001 Mar-000 $5,NECT $76.$227.$200.$151.
2/26/2001 A r-000 $5.NECT $76.$235,$206.$158.
3/1/2001 Mar-10,000 $5.NECT $77.$300.$264.$222.
3/1/2001 Apr-000 $5,NECT $75.$291.$256.$215.
3/1/2001 Ma -10,000 $5,NECT $75,$272.$239,$196.
3/8/2001 Apr-10,000 $5.Rathdrum $65.$290.$255,$224.$189.
3/8/2001 May-15,000 $5.Rathdrum $66.$288.$253.$221.76 $187,
3/8/2001 Jun-15,000 $5.Rathdrum $66.$284.$249.$217.$183.
3/12/2001 Apr-10,000 $5,Rathdrum $64.$282.$248,$217.$183.
3/12/2001 May-10,000 $5,Rathdrum $64.$273.$240.$208.$175.
3/12/2001 Jun-000 $5.Rathdrum $64.$292.$257,$228.$193,
June-02 -
4/10/2001 Oct-10,000 $6,CSII $46,$ 126.$ 105.$80.$59.
Nov-01 -
4/11/2001 Oec-000 $6.NECT $94.$ 309,$ 271,$214,$177.
Nov-01 -
4/11/2001 May-10,000 $6.Rathdrum $83.$ 230.$ 212.$161.$140.
Jan-02 -
4/11/2001 May-10,000 $6.Boulder Pk $67.$ 199.$ 188,$131.$121.
June-02 -
4/11/2001 Oct-10,000 $6,CSII $48.$ 108.85.$60,$36,
Nov-01 -
5/2/2001 May-10,000
--,
~~Q~,NECT $83.$ 254.$ 223,$171.$140.
Nov-01 -
5/2/2001 May-000 $6.Rathdrum $73.$ 187,$ 147.$104.$66,
Jan-02 -
5/2/2001 May-10,000 $6.Boulder Pk $59,$ 161.40 $ 117.$101,$57.
June-02 -
5/2/2001 Oct-000 $6,CSII $42.84,61,$42,$19.
June-02 -
5/10/2001 Oct-000 $5.41 CSII $38,06 $ 100,99 $ 79,$62.$41,
Note:0000th/day purchase from Enron on 10/25/01 for Aug-Sept-02 at $3.07/0th with Enron was terminated
in conjunction with the Enron bankruptcy.
Note: LLH Margin is shown when enough natural gas is purchased to run some LLH in addition to all HLH,
Exh, 7 / Schedule 19
R, Lafferty
A vista Corporation
Pg, 3 of 3
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1
CONFIDENTIAL
Natural Gas Transaction Records for Medium-Term Purchases
THIS PAGE CONTAINS CONFIDENTIAL MATERIALS AND IS SEP ARA TEL Y FILED
Exhibit No., Schedule 21 Pages 1 - 70
R. Lafferty
A vista Corporation
II
Megawatt Oaily's'3'-~'3.
",,:,,: ~; ~-
~\i,~ r ?1
~ t""""y, D~.....- 11 , ZOQO :::J '-1:i
;g:~ ~ - ""' '
ik/7 'S e ortIndexes and Transaction Record for 12/11/00
:Co ""
Explanations
Index - Volume-weighted
average 01 au !lades "'POtted.
AbsaIUIe Law - Lawest !ladeleported,
AbsaiUIe High - Highest lradereported.
Trading Volume Reported
Volume 01 lr2c:Ies per hour loreach 01 16 peak hours. This
figure is a telal 01 all trading
........
reported ro MWD lor each
delivery site: becauat !Wery effcrt
is made 10 caplUle bolll sides 01
every deal reported. MWDrecagnilU that this ligure
includes dupjicate "OIumes, and
IlIa ligule shaukI be used as a
!rend indicater no! necessarily as
an indicator lor transmitted
volumes.
Talal Peak Volume - Volumelor all peak hours, found bymultiplying lI1e trading vojume
by 16.
Number of Trades - This /iqunois C3ICuIaIl!d by dividing me !lading
VOlume /8POft8CI by SO MWIh lor
all Central and east listings:
numllers 01 trades lor delivery
points in lIIe West ale calcUlated
by dMcW1q by 2S MW/h.
Methodology
The prices dispIayect in II1e IaIIIe ro
II1e riqI1I Icr power. in MAWh
traded at II'Ie detivery paims and
noqD1s isred. Peak hOurs are 0600-
2:2!XJ In.; PJM and New YOI1C peak
hours ant 1J7CO..2:IOO. OII~ak
I'on qI!f18I3My SQIt at 22CO Ius.
en II1e dale befare II1e deWety dale
and end at 06C0 en IJIe deWery
date. Not induded are 24-11ourdea c:aIIIqarized in NERCregians as OII~ak hours OllerSaturtlays and Sundays.T IanSICIions at IJIe IUIs linea in
IJIe SIIpaI8Ie at IJIe Icp at II'is
page ani ftnanciaIy linn. Deals at
OI'I8r IOcIIians may be uniI-linn or
system-conlingent. and mayindude capacity reservationcnarqes. Transactional dala is
qaIhon!d Iran UIiIities. markeIers.co-ops. blOke/:!. municipals and
power agencies. Dealsdent in !lie West I!JdLoded if
aone alter 1015 Mrs. PT; deals
done in IJIe East and CenIraI _asare 8Jdudec1 ~ da1e alter 1100 Ius.
CT. The middle COlumn is lI1elIOIumlt-Weighled average 01 all
deals te!IOIIed and Should be used
lor indeJonq purposes, The CDrII'Cn
range pricing lor ITXISI atIIIe !radinq volume: IIIe absolute
range represenlS lowest and
/1iqIIesI prces tepOrted. Copyrignl2000 by Finarcial rmes E/1en1y.
Trades for Standard 16-Hour Daily Products; iillil pric:es "rid volumes in SMWhDelivery Weighted Absolute Absolute Trading All Peak NumberPoint Average Low High Volume Hours at TradesIndex Reported Volume ReportedWest
COB $3,000.$3,000,000.400Four C
~OO.
Mead, Nev,
Mid-Columbia 175.$3,000,100 600NP15
Palo Verde $395.S360.$425,200SP15$350.S350,S350.400Central
ERCOT.B $65.$60,$75.850 600Ameren
Com Ed. into $44.S40,$52.900 400MAIN North $63.$58.$120.300 800MAIN South
MAPP North $60,S50,$75,150 560MAPP South
Entergy. into $67.40 $50,$75,000 000SPP$65.$58,$75,500 000East
Cinergy $48,S44.$53.550 104 800 131North ECAR $51.52 $45.$55.405 22,480PJM-West $49,S46.$54,800 800Nepoo'$74,$72.S80.500 000NY Zone G $67.$67.S67.200 200NY Zone A $57.SS7.$59.600 600NY Zone J $81.00 $81,S81.00 800VaCar$46.S46.$46,150 400Southern$45.$45.00'$45.800TVA, into $43.S43.S47,200 200Aa.-Ga.$42.$40.$45.100 600Aa. in-state
Trades for Standard Forward Products (all pri~s in $IMWh)Delivery Next Week Balance at Month Prompt MonthPoint12/18 to 12122 12/12 to 12/31 01/01 All pk. No. atLowHighLawHighLowHighIndexhrs. val.TradesWest
COB
Mid.Columbia - 2,000.575.800.575,200NP15- 320,320.400Palo Verde 250.375.300.200SP15
Central
Com Ed, into 75.58,Entergy, into
East
Cinergy. into 72,85.70.PJM-West 61,NEPOOL 82.90.82.85.NY Zone G
NY Zone A 50.50,
NY Zone J
TV A, into 66.
Copyright 2000 by Financial Times energy
Reprinted with pennission of MegawattDaily and Financial Times Energy, lnc,
Visit www,ftener com
Exh, 7 / Schedule 22
R. Lafferty
A vista Corporation
Pg, 1 of 2
.. ;~;:
, Page 4 Monday, December 11, 2000
Ranges and Indexes ofTrades for Standard
Off-Peak Products
Delivery Dale: 12111/00
WId.Av. -Ab0ai08Tt3dIngVoI.Indou UM I-tgII West
COB
FawC S275,5275.00 $275.
Mead. Nev.
Mid-C sz.01 6.6751 550.IJOS2.SQO,OO..NP15
!"aIa Verde S275,5275.00 5275,
SP1S
Ce..n.
eReOT-S
-....
Com ed, inlO 519.519.519.JOCIMAIN Nann
MAIN Scull!
MAPP Noftn 521.00 521.00 521.00 125MAPP Scull!S20.520,520,100
Enlerqy. inca
SPP 517 51:1,sz:uo 250bst
C"*9Y
Nallll SCAR 519.519.519.157!"JM-Waz
NepaoI
NY ZoneG
NY Zone A
NY ZoneJ
VoI:;M
SoutIIem
TVA,;"IO
FI;a. -G;,.SZS.SZS.SZS.Fla. i....tal8
MGE, Alliant propose
plant for university
A praposa1 betwe:nMadison Gas &Elec-
tric (MGE), Alliant EDergy, the University of
WLSalnsin-Madisonand W'ISaIDSin'sDepart-
ment of AdmiDisttaIian may =It in a S170
million, 90-10 lOO-MW naturalgaHiIo:i~
plant onschcol ground thatcould solve a long-
term energy crunch facing both the: university
and the: city, the parties said last week.
If the plant gets ail approvals ne=ssary,
the tWo utilities will jointly plan and ovcrscc
cansttuction of the: facility, wbic:h is anticipat-
ed 10 st3It in summer 2002. Plant opcation is
e."cpected to begin in lace 2003 or spring 2004.Ona: COnstruction is complete. MGE
would own the facility with a third-partyinvestor but would retain full operational
control. Alliant will act a.s project manager.
Although not aspcci:fied owner, Alliant will
be paid for its services. company represen-
tative Chris Schoenherr said.
The prcposcd site at the univasity has the
necessary iIIfr3structurc in place 10 5UppOn thefacility, inducting dcctric transmission lines, a
power substation and aatUraI gas lines. MCM
M~awattOaily
Dailies scream to $5 000 at Mid-C, $3 000 at COB
e relentless upswing in next-day prices prevailed, with dailies trading to S5 000 at iIMid-ColumbiaandSJ OOOatCOB.
1his is history," one source said. "Someone who buys power at that price (S5 000j iswa.lking wounded. Actually. they re not even walking,
Overall, ne."Ct-day volume was sparse. Deals an-anged for today
delivery traded up to S425 at Palo Verde and near SJ50 atSP15.
In the bilateral market, o.ff-peak for today traded near 5275 at Palo
Verde and at Four Comers,
The e."Ctreme pressure on priccs carried over into the term markets, where balance-of-the-month sold for S2.000 at Mid-C and January there sold for saGo for a third
consecutive da
Crippled by idled power plants and tight energy importS. the state s power grid strainedto meet the load going into the weekend. The danger ofblackauts, caused by cold weather
2.!Id an unprecedented drop in the energy supply, was e."CpeCted to grow severely today, asan Arctic front blows down the West Coast from Canada.
Going into the weekend, California Power Excl1ange prices for Saturday peale wereS251., with off-peaic S256,79 and the N-hourweighted average at S252, 79. A day earlierprices were fractions of a cent above S250.
The Bonneville Power Administration had no surplus power to sell at least through
Saturday.
Friday began with a Stage 2 declaration by the Califomialndcpendent System Operatorthe fifth such declaration in as many days and the ninth in three weeks,
Also fuming up power prices was the cOSt of natUral gas. wbich reached as nigh as S63at COB/Malin, Ore" S61 at the Pacific Gas & Elecaic Citygate and S55 at the SouthernCalifomiaBorder,
At Palo Verde, JanuaryrangedS250-SJ75 and near 5320 atNPl5.
Second-quaner200 1 tradedas bighasSZ15 atMid-C and in a tight range toSl90 atPaloVerne.
Third-qualter 200 1 sold at or above S290 at Palo Verde.
Western
Markets
KW INM
Transmission problems force Entergy to mid $70s
ntergy dailies opened at S50, about S23 lower than the previous day s trades.However, they soon regained ground, passing the high from the day before,
By the end of the day dea1swc:redoneatS76, a D.et gain ofSL Traders were notccrtainwhat was drivi.ng prices up, but suspected transmission constraints.
InMAIN, ComEddailiesfelleven.fwtb.er aboutS 16 to the lowS50s.
Off-peale sold near S
Weekend trades moved in the low S30s and ofi'-peaic sold in thelow $20s.
After undergoing a hot shutdown last week, ComEd' s 828-MW nuke unit, Quad Cities
, began powering back up after repairs.
Northern MAIN dailies moved around the low S60s. However, the same unfottUIlate
playcrwho aillastweekc:aught the: high deals paid around S 120 fora much-needc:dpaclcage.Weekend peak sold in the upper SZOs.
Amercn reponed weekend off-peak deals near S20.
Light weekend demand helped push northern MAPP dailies down about no. to S75.
Central Generation Outage Report for December
In/oftnalian from 1118 Nuclear Aegui;lcaryCarnmisSian is sometime. ouldaled. andnalaU uli~lie. respond" requestslot ..nficaIian al unit sra..... Copyright 2000 by FT EnOf9Y
Central
Markets
UnllNa....
"""
UnilSlaru.Scheduled talart0...""""Regian or aut=lge ctUe
'-'Salle 2 1!21!MAIN Nuclear, apet311ng allom',FuU_rCon6:I IaUawing Oct. a reftJeling outage Oee. a
OuadCIUu 1 1!21!IIoIAIN NUClear, aperaling all". aller Start upCon6:I llal snuldawn Dee. 6 on Oec. 7
Copyright 2000 oy Financial Timtfs r:nergy
Reprinted with permission of MegawanDaily and Financial Times Energy, /nc,Visit www.ftenergv.com
Exh, 7 / Schedule 22
R, Lafferty
A vista Corporation
Pg, 2 of2
"'n :!'rann.", lLIJ",nirl,
SUNDAY, MAY 6. 2001
Count up the losses
of each wasted week
N APRIL. California spenl m avenge of rolled by this bua:aneer behaYior.
~58 million per week 10 buy e1r:crricity. When a handful 0/ companies ha... a man-
The figure will only climb as hor wearh. siebold on a viIal commodity, a windfall prol.er dri.es up energy we. its tax makes sense. A mollunaioning mar....
This summer, more than 30 cI.1ys 01 rolling pbce serves only rile suppben, nor buyers wilh
blac:koulS are expeeled in Northern CoJjJor. lew altemaIiYes. A windIalI protilS Ie")' actS as a
~ The ,egion s mojo, ulilifY is in bankrulll rosrrainI apirar mar... monipulalion.
~n. Soulhern CoJjJornia may Ket 44 clOys Anorher amwer 10 runaway prices is lem.
o! inlelTUpled elearicity wbile iu power porary caps on wholesale e1r:crricity CQSU.
~~.!er le- ou O'edll,,",Uncler rhis plan Kenenlors would be limiled
The power market is broken. Irs a danger. in wballbey can c:Iw;e California. The Fed.
ow mol unpredidable disasler wilb era! EnerlD' Regulalory Cornmisoion hasthe parential to darkeu aoplighls adollled loose-fit maximwns aI.
and close faCiories. ler pressure was pul on rho re.A colossal gomble on IUClanI lederal a.eney
quasi-deregulalion has -
"-
by Calilornia and Or..
failed. The aa.e has IOn politici.ano. Theended up wilh in. mc re...aints,conceived rules and a .ame and limited asmark.. dominaled rhey ar.. are a firs!
by powerful energy Slop thai should betraders. expanded.The power crisis The mc IIIOYecontinues to build to moy be as much asseemin.ly wuol.. CoJjJornia can ex.able hei.hu. Bul peel !rom Wash.there are siRniflCant inllon. The Bwh
steps lhat can tame rho '- adminismlion ' has
problem in the shon run.
~ ~
repealedly rejecred
Some actions already calb 10 intervene or
taken should pay 00: Alter stabilize Calilornias lop-sided
GoY, Gray Davis grudgingly P"" in,
- ~
morket. GoYemmenl conlrob
rales will begin rising JO pen:enl will chase away inw:srmenl in new
This change should CO""""". power plants, according 10 Bwh.
lion from rhriJty users and brinK The presidenl is right in saying
monlbly power biIb .......... Sc....---..TIw Oooo;d,lbal more supply-inlo the real world, power planu andnor Ibe anifici.ally efficienl tra....
~:~~o
:' ~
r:~i~8 ~~3Sl~~~ ~:nlin
passed in 1996. ~....-....,........__7~10 tricity - is need.The higher bi1b ed, Bul it willshould also SlOp the take years tobleeding lor major achi... Ihis bal.ulilities. These fimu ....e in the formwere obliged 10 buy 01 new planu.power al risinz tales Alter a decadewhile limiled to 01 no construc-1996leYe1sinselling tion, CoJjJornia
10 CUSlomers. II already on a
~~uge
= ~~ .
,9qQ-
~~~
,r.' ::~ CDThe Legislarure
" ':;:~;';:..';:";;-
"~.1:~~.'t-planu. Nine
should aW'- ~:::!Jl~.
!~ """"""', ." . .. ~,-. ~
plants are under
512.5 billion bond ':GPomanooif&n~*,~~:2 waywithenough
measure, the largest Ii:.JIio~:JF8.;.oo;p.;;: ~ " '" o,eoo OUlputlO light 6
in stale hislory. The ~'pI!oO.
~~:!!:!!~ ---
million homes.
~:~:=::e
~:
~~~E~fi~~~ ~~Ies ,. past and lulure pow. rhese generating
or buys il mU51 maJce on behalf of credit.weak. faciliti.. are stretched over the nex! Iwo
enod ulilities. The bonowing will be paid bac:k yean, with Ihe r..... balch not expeaed 10 be.
on lutwe power bills. The As1embly is due to gin unti1 late summer, when tbe rolling
""'e on Ihe bone! package 'omorrow. blackauu have long since O'esled.
The bond measure will be a financial bul. The manl.. of more supply and Ir...mar.
wark against lunue damage. Bul il addresses k.. boIan"" can t work in today's chaos. Cali.only pan 01 rho problem. lornia needs sa/eguardr against Ihe abwes of
Under deregulation, rho so-alled spar rho energy market. Sacnmenlo should pur.
market lor daily power purchases was de. sue a windlall profits lax. mc must we jlS
SIgned as a way to IRlloduce compe,i';on that authority 10 put reasonable caps on prices.
would hold down energy cosu. Bullhis ....1. Until Sacramenlo and Washinllon m""e
"If has bac:k.fired: soaring demmd dri.en by more forcefully 10 SlOp the gouging. Calilor.
population and economic grOWlh has driven nia will continue 10 squander lens of millionsup Ihe cost 'enJold or more. of dollars each cI.1y 10 subsidize elr:crricity
Generators can withhold needed power purchases.
unlil peak prices are r..ched,The cOlI ofprDo There must be a million bener ways 10
ducing power has nolhing 10 do with itS ..Ie spend the money than 10 ..uff the pocket. of
price, s..e..1 investigalions are under way 10 the generalon and middlemen who are
detemune whelher Calilomia is getting show1ng no stwne in exploiting a ens;"
. )
R!x~lm--""'"
The 5aaa'nento Bee . 'Thnday. Api 26. 200 1
Tile San-Dieqo Union-Tribune' Sunday, April 290 2001
End market power
Sue to block energy price gouging
rivateenergy companies
gouging billions of dol-
lars from California are
seeking reauthorization
. from the Fedef3i Energy
Regulatory Commission to con-
tinue charging as much as they can
for electricity,
And FERC will give it to them-
unless California s leaders stop
them, both through filing objec.
tions with FERC and through the
feder2l courtS.
Under FERC regubinon5, private
energy companies are allowed to
sell wholesale power at unregu.
lated rates in California
as long as they can
prove they don t engage
in "market power; rai&-
ing prices above com-
petitive levels for a sig.
nificantperiod of time,
Each of these compa-
nies is supposed to tile
an analysis this spring
showing that it hasn
been eXercising rDarket
power. If FERC accepts
these analyses. the companies will
be allowed to continue gouging
California. But ii FERC finds that
these companies were in fact gam-
ing the market. then it would sup-
posedly order them to begin sell-
ing at a cost.based !'3te. not a mar.
ket rate. Cost-based rates would be
much lowerthan market rates. per.
haps 9() percent lower,These reauthorizations haven
gotten much attention. and FERC
is expected to approve them with-
out much scrutiny. Some compa-
nies. such as Dynegy Corp.. which
owns the Enema power plant in
Car1sbad, have asked for long ex.
tensions ofFERC s reauthorization
of their market-based rate author.
ity, Dynegyrequested an extensionuntil next year, so it can continue
gouging Ulifornia without having
to justify itseI1.
Several California entities have
liIed motions to try to block. FERC
from renewing these companiesmarket~ rate authority. South-
ern California Edison. Pacific Gas
& Electric. California Independent
System Operator (which nms the
state power grid and lasows market
power when it sees it), the Califor.nia Public Utilities Commission
and the City and County of San
Francisco have a1I1i1ed documents
urging FERC to reject the compa-nies' requests. Rep. Bob Fllner, D-San Diego. sent a letter requesting
that FERC revoke market-based
rate authority for 18 com-
panies.Each of these filings
specifies how these com-panies possess market
power in violation of
FERC rules. Several of
them demand that FERC
suspend the entire reau.
thorization process and
set a hearing to re-exam-
ine the matter.The state, via GOY,Davis and Attorney General Bill
Lockyer, should also file motions
opposing FERC's reauthorization
of these companies that are drain-
ing billions from our economy. Sim-
ilar 1ilings should be made by each
member of Ca1ifornia's congres-
sional delegation. plus every major
city and county govenunent
IfFERC grants any of'these mar.
ket.based rate reauthorizations,
every opposing party should be
ready to appeal to federG! court
ThestateofCaliforniashouid bring
this matter before a federal judge.
A few good lawyers should be
able to prove what most Californi-
ans already know - that private
power gener2tors are dominating
the market But the window of op-
portunity here is very short. Cali-
fornia's state and local leaders
must not miss this chance. .
Energycrisis
\~,_..)).. .. ",",'; '::" "
Exh, 7 / Schedule 23
R. Lafferty
A vista Corporation
Pg, 1 of 4
aJ..r::::'::"1:JaJQ..=aJE..r:::~
t== cu =' -;;; cu ,~ Bc-'"1:J E~;S.o d~ 0 =' r::: 0.
..r::: ,I.. 0 0 0
CJ:)CIJ a.
CALIFORNIA ENERGY MARKETS. April 27, 2001 . No. 615. Page 6
Regulation Status
IMany months
have been wasted
bickering.
(13) Real-Time Pricing Crucial, Says Tiered-
Rate-Design Witness (from (21)
Severin Borenstein, director of the University of
California Energy Institute, told the California Public
~tiliti~s Commission on April 25 that real-time pric-
mg thiS summer would help the state to avoid dire
economic straits. Borenstein offered testimony as one
of three expert witnesses in the CPUC's rate design
hearings (AOO-II-038 et aLJ.
Without aggressive conservation efforts, Bore
ste!!!.. warned
.....
the state will face a summer of rollin
!,lackouts and.p.ower payments that could top $1 bi
~on per week. Payments of that magn e would
erase e state s budget in a week and "bum through"
funding necessary to maintain class-size reduction pro-
grams for grades K through 3, calculated Borenstein.
The good news is that it is still possible, albeit
with great effort and with some sacri-
fice, to avoid dire consequences. But I
believe this is only possible now only if
we recognize the emergency situation
and treat it as such. Many months have
been wasted bickering over who will
shoulder more of the burden. If we don
all start shouldering the burden,. the
losses to all of California will dwarf the sums that are
being discu:sed in this rate-design proceeding," said
the economist.
Rate design must both achieve aggressive conser-
vation and raise enough revenue to cover the costs of
buying and producing power, asserted Borenstein.
The economist's proposal for large industrial and
commercial customers would give each customer a
baseline consumption profile based on past usage.
For consumption above baseline in a given hour
customers would be charged the real-time wholesale
price, while for any conservation below baseline, cus-
tomers ~ould be rebated the real-time wholesale price.
While the proposal ~uggested that real-time pricing
be voluntary, Borenstem recommended that it be im-
plemented on a default basis. All customers with real-
time meters, which by July should be all customers
above 200 KW peak demand, would be on the pro-
gram but could opt out by signing contracts with
private energy brokers. If real-time pricing is imple-
mented on a volun~ basis, Borenstein suggested that
customers choose either real-time pricing or the
interruptible program.
For large customers without meters, Borenstein
said that a whirlwind effort could be made to install
meters, using the $35 million allotted in ABxl-29 for
meter purchase, installation and related equipment.
In addition, Borenstein recommended a conserva-
tion plan for residential and small customers,
Because these customerS do not have real-time
meters, the plan would use baseline and time-of-use
tiers instead of hour-by-hour consumption.
The economist stressed that conservation will help
minimize rolling blackouts and will lower wholesale
energy costs by reducing both quantities purchased
and the price in the market. Analyzing data from June
2000, he noted that during peak demand, around
000 MW, the wholesale price was about $700/MW,
At those times, a 1 MW increase in demand was asso-
ciated with a wholesale price increase of more than
$O.20/MWh. Since the net short of the utilities was
more than 15 000 MW during peak, this meant that
buying one more megawatt cost not $700 but that plus
another $3,000 (15 000 multiplied by $0.20/MWh) for
a total cost of over $3,700/MWh.
"When we consider the economics of conserva-
tion, this is the magnitude of costs that can really be
saved " said Borenstein.
The previous day, expert witness
George Sterzinger, consultant for
EER Consulting! Advanced Renewables,
also pushed real-time pricing, Sterzinger
recommended modifying Enron Energy
Service s proposal, which would meas-
ure consumption against a benchmark of
up to 87 percent of last year s consumption. For con-
sumption above benchmark, Enron proposed charging
market rates, while customers consuming below the
benchmark would be refunded at market price.
Sterzinger recommended that customers consuming
less than the benchmark be paid savings over a ten-
year period.
Another expert witness, Vermont-based energy and
regulatory adviser Peter Bradford, acknowledged that
his weekend review of close to 20 rate-design propos-
als left him little time to analyze them in detail.
"Even if I could master the facts, the charts, the
acronyms, I would not possess the sensitivity to the
ongoing interactions betWeen the public, the
stakeholders and the regulators that is critical to wise
and sensitive regulation," said Bradford.
The former Maine Public Utilities Commission
chair said the regulation crisis following the Three
Mile Island nuclear accident offered important sign-
posts for the current crisis, including the need to re-
view time-tested rate-design principles.
Bradford offered for consideration eight rate-
design principles laid down in the 1960s by economist
James Bonbright. Two of the three top principles-
fairness and encouraging efficient use-i11esh with rate-
design goals stated in the assigned commissioner s ruling,
said Bradford. The third., assurance of recovering rates
is "difficult to implement in the absence of a revenue
requirement," said Bradford.
Copyright iC 2001, Energy NewsOm Corp. Unauthorized rcp-
:-- :. .
"';~.I" "",h;hil~rl
Exh. 7 / Schedule 23
R. Lafferty
A vi~t~ rnrnnT~tinn
Pg. 2 of 4
The Sacarnomo Bee . FnIay, April 2.9, 200 1
State
might
balk on
power
But refusing to pay
ridiculous' prices
could add to crisis.
By~leKuler
lEE Sf AFF WIII1U.
AddiDg 10 the riak of summer-
lime bLac:kaws. the st.ale waler de-
panmenl .aid Thursday il migblnol pay "ridiculous" prices for
elecllicity ~en II WI leaves Cali-
fornia short of power.
The Departmenl of Waler Re-
sources. which has been buying
electricity for the stale s tWo be-
leaguered utilities since mid-Jan-
uary, wouldn't spell OUI wbat It
coll5iders ridiculous. But if prices
get too high, the st.ale might be
better off ordering blackoutS or
implementing proposed new con-
servation programs designed at
cutting usage on snort notice.
said Raymond Han, the depan-
men!'s deputy director in charge
ofpowerpurcbases. .
Gov. Gray Davis took a differ-
ent view, saying: 'We will con.
tinue tn keep the lightS on, When
you re fighting a forest. fire, you
don t say, 'Letmesee.howmucb
is Ibis going to cost mel Maybe 1
can t write the check. maybe I
can l put the fireouL' You put the
fire out and then worry aboul the
cosllaler. "
Bul Davis' SpokesllWl. SI~e
Maviglio. said the Governor s Of-
fice indeed is contempLaIiD8
whether to refuJe to buy power at
any COSI, "AI what poinl does the staie
say, 'Enough is enough 1 Those scenarios
are certainly under discussion, " Maviglio
said,
The Water department until recently re-
sisted buying aU the power Southern Cali-
fornia Edison and Pacific Gas and Electric
Co, needed. refusing to purchase electric-
ity it deemed 100 costly. Butlatelyi!'s had
to relax that stance because of an order by
the Federal Energy RegulatDry Commis-
sion. Hart said.
That April 6 order said power genera-
tDrs can nD longer be forced to sell electric-
ity ID uncreditworthy entities such as the
Independent System Operalor, which
manages the slate s power grid. Because
the 150 - which gels its money from the
utilities - can no longer buy the power,
the water depanmenl is now buying aU
the electricity required by the utilities,
Hart said. But he said the depanmenl
could back of! if prices gel DUI Df hand.If the prices jusl get ridiculous allO-
gether, there s a policy call to be made,
and we ll cross thai bridge when we get
there, - Han said,
The ISO bas Dredicted thai s~ere shDn-ages could bring 34 da s of ro
outs thiS summer. The polenu re the water depanmenllo buy ulua-expen-
sive power could funher suain the grid,
On a daily basis we re dealt a let of
cards," said ISO spokestnall Patrick Dorin-
son. "It sounds like ,.. we re going to be
banded anDthersel of cards, and we re go-
ing ID bave 10 try 10 maintain the reliabil-
ity Df the grid as besl we can. .
Han s comments c:ame amid an increas-
ingly rancorous debale between Davis
and PC&.E over the water departlllent's
power expenditure. Slate spending shOI
up following PC&E's April 6 filing for
bankruPICY prolection,
Davis said generalors began demand-
ing a "credil penalty" from the water de-
panmenl because of the PG&E bmJr.-
ruplcy proceedings, As a result. the
st.ale s daiJy costs shol up last week to
S73.l million from $57,4 million in the
week before PG&E went bankrupt, me.
sovernor s office said.
Hart agreed. saying several generalDrs
raised their prices, "Every lime there s a
major hiccup in the 1IW'Ul, such as PG&E
bankruptcy Dr a st.aged alert by the ISO.
there s i price run-up." Han said.
But prices bave settled down this week.
After pealling al S345 a megawatt hour
April 12. prices for north st.ale power were
al S243 on Thursday, jusl below wbat
they were prior to the bankruptcy filing,
iCCDrding 10 the Eneriax news service,
PG&E. however, said its bankruplcy 51-
ing nad nothing 10 do with the stale s in-creased spending,
This claim is simply not accurile.. the
utility said in i memo tD reporters.
Rather. the increased sPending is due
solely to the fict thaI the waler depan-
menl is buying more units of electricity in
the wake Df the mc order. PG&E said.
Regardless of the cause. the ilu:reased
-f"pending by the water departmenl could
further strain the Slale s budger- and com-
plicale Davis' plm 10 finance the power
purchases through a bond Dffering,
The stale bas C,ommitled S5.2 billion
from its general fund for power purchases
since January. Those mounting pur.
chases. alDng with PG&E's bankruptcy fil-
ing and other energy crisis Wtcertainties.prompled i third Wall SlRet credit rating
agency. Fitch, tD plice the slale Dn. "ral-
ings watch" this week. meaning the raling
migbl be downgraded,A downgrade could raise CalifDrnia
borrowing costS. All three nf the leading
Wall Street credit agencies now have Cali-
10rnii on a ratings watch,
Meanwhile. the Slate Public Utilities
Commission on Thursday Drdered an in-
vestigation of why hundreds of cogenera-
IDrs and other alternative energy provid-
ers haven t resumed production even
though they've begun receiving pay-
ments again from Edison ind PG&E.
These generators. under contract 10 the
utilities, provide more than 20 percenl of
the stale s energy supply. Hundreds shut
down, wnrsening California s power situ-
atioll, because they d received little or no
money from the utilities since November.
The PUC ordered Edison and PG&E to
resume payments, swUng this week. for
new power deliveries,
But the generalors say the payments
aren t enough 10 gel them back online.
So PUC Presidenl Lorena Lynch said
the commissioll will investigate wnether
to Drder Edison and PG&E to begin repay-
ing them the hundreds of millions owed
for pasl deliveries.
a a a
The s D~ Kaslecan be reached
cu [phone] ordkasle~
sacbee. Q7nt. Emily Bazar of The ~o
, Capitol Bureau ammbwed co chis
port.
F-.n :!Too,i.... Q:J)....irlr
FRIDAY, MAY 'ZOOI
~~r~~~
~L ~OU~r.~.
",-.p.JStJ(:,EI'y.oI ~i\. \ I , :
(01)'-"l\." -
.'," .
The San DieQo Union-Tribune' Wednesday, tolay Z. ZOO!
GOP explores
alternatives
to Davis plan
One would see customers get
break on covering energy tab
By Ed Mendel
and Kar.n Kucher
STArr WRIYtRS
SACRAMENTO - Assembly Republicans are
looking at alternatives to Gov. Gray Davis' solu-
tion ID the elecnicity aisis. including an "!Ition in
which ratepay= would nol have to repay the
stale general fund for S5 billion speRl on power
purchases so far.The Republicans are sugges!ing thai letting
the state surplu$ absorb much of the power CO$I
would sharply reduce the size of the $12.5 billion
ratepayer bond proposed by DaVis, lowering
monthly power biDs in the decades ahead.
1nen:: are some members of our caucus who
believe we ought nol ID burden the l21epayers
with a certain amounl Df thaI concibution: said
Assembly GOP leader Dave Cox of Fair Oaks.
Davi$ wanL- swi1t approval o( a bond o( up 10
512,5 billion that would be paid off by ratepayel"!'
over 15 years, The money would repay the gen-
en! fund for power purchases and finance long-!eITIl power cODtnClS.
Bul after Assembly and Senale Republicans
mel yesterday. Cox said the Republicans want 10
c:arduJly study the numbers and assumptions in
a detailed plan for ending the electricity aisis
prepared by the governor s consultants,
"We are nol going 10 be Stampeded inlO mak-
ing a bad business transaction: he said,
The GOP leader said the size of the bond may
become a stale budgel issue as the governor
prepares on May 14 10 issue a revision of the
spending plan he proposed in January for thefiscal year beginning July 1.
Cox also said Assembly RC!Nblicans see no
need for a SoI.1 billion shon-tenn loan sought by
Slate Treasurer Phil Angelides, The "bridge
loan would repay the general fund unliJ the big
bond is issued next month or later,
I! the stale needs cash beJore the big bond i.
issued, Cox said, the treasurer s own reports
Exh, 7 Schedule 23
R, Lafferty
Avista Corporation
show thaI the state has up
$12 billion avaiLablc that can beborrowed fronl internal
sources.
The governor finance direc.
lor. Tun Gage, said Monday
that a bridge loan would send a
signa!1D Wall Slreel of a strong6nanciaJ eommianent by the
state and help pave the way for
the big bond.
I! you forgive the S5 billion.
you don t need the bridgeloan: Cox said, "You donneed to 110al a $13 billion
bond.
- .
In another development San
Diego Gas & E1ecI1ic Co. ha$
sued a pow"r generator thaI
shut down threl" power planL-
last month thaI typically pro-
duce about 102 megawatts.
The lawsuit Wed Monday,
says Sithe Energies r"fused to
operate nalural-ga.-fuelcd
plantS at North Island Naval
Station. the Marine Corps Reoa1.Iit Depol and the San Diego
Naval Station at 32nd Streel be-
cause of a ~Lalory change the way small generalor,; arc
paid.
Yesterday, Sithe begullO op-
erale the plants again, bul
SDG&E Presidenl Debra Reed
said the utility will pursue aninjunction to ensure reliable
supplies in the sununer, Sithe
is W1der conlrac:t unliJ 2019.
Even if thcy are opera!ing
loday, w" don l havt' much con.Gdence Ihal Ihey wi" continue
10 operate: ~ccd said.
Sithc """ke$Wnmall M$t.inVeUandi said the compan)' was
forced 10 shut down because itS
fuel coStS exceeded what il was
paid for power, She said thecompany is seeking a long-term
solution in talks with regulalors
and SDG&E.
In March, the stale Public
Utilities Commission CUI the
price paid for small generatorspower, The commission
switched the paymenl bench-
rnark from the price of gas al
the Arizona borner 10 the price
o( gas at the Oregon bordero
which is significantly lower.
The new formula left many
Southern California generators
operating at a 10550 said Jan
Smulney-Jones, executive di-
rector of the Independent Ener.
gy Producers A."5OCialion.
Pg, 3 of 4
io. :J'n.risco QJjrnirir
California municipal bonds are suddenly out
Utility, Internet cri~e~
take a toll, but investors
are seeing better yields
B~' Eliubetlt S,.nlon..oow...' NEW,
BOSTON - Mun...l lund, INt in-
solely in municipal bonds wued in c..h.
10mi.1. ,""men loa year a' "a" linances
impl...d and dOl ",om milli......r.. cIi.
venilied, ... I..... llus ...r bea...
Ihe "aIe'l """'" crisu .i.! Ihe evapora-
lion ollnl.met -.Jth.
In Ih. lint quanrr, 17 01111. 25 """"-
performing municipal bond fund, California Iunds.
'"-
solely in
bond, issued '" Ihe "ale. according
upper Inc. w. ye... 10 oIlhe 25 be5I.
performing muni h,nds _e from c..li-
lornia.
c..lilomia municipal bonds have been
hun lis' thE ulililY crisu .. IhE ...,,
finance and economic outlook ha.. de.
letioraled and oIiiciab ha.. nude plans
... Son hnm... CDJroAirlr
to ISSU. .. much .. SH billion 01 n....
mulli debt, And ..hile lIWIy investon
ha.. snapped up bonds thi, yeas ...msg
,,'uge trom a WI1' "oc:k ow"" d..
IIWId lor Caliiomu muniopals from
IreshJy nwned Silicon v.tIey lIIi11io.wr..
hu evaporaled.w. yeaso lII"e .... a "emendous
amounl 01 demand lor lCalifomialmwUs
chasing ""y limned ..pplyo. said Sa...
Krupa. who ""'nag.. about SI billion 01c..lilomia bonds lor 1'1....... In_.
ments. "This yw', there', a u_ndous
amount 01 ..pply Wllh demand Ieoebna
oU .. dOl""""",en ... nOI wIw
lIIey once -.. . h. said.
Municipal bonds, Or ..." aDd
local poernmenu 10 !inana: public
-"'- ..e ......'" trom federal ,-,e
wes. Many in_on !nor bonds
in their home ..." because '" mOS! cues
they ..e ex...... from ..... income ... ..
well
I..uI yw'. lhe a..rage California mu-nicipal bond lund pined n pe=n~
mole than any other sm,J""a" fund
aDd more than lhe II per..." "'urn 011
SUNDAY, APRIL 22, 21101
Blackouts
alone could
cost billions
State s economy will take
big hit, business group says
By Sam Zuckmndn
CHaONICLE ECONO"'" Warna
Blackou.. could wallo)! Cali.
fornia s economy to Ihe rune
S16 billion this summer, wworse
than the hI! from higher power
prices. a new Study of the energy
crisis contends.
The report, released yesterday
by the government. and bwiness-
funded Say Area Economic Fo-
rum, is one of the fim attemprs to
PUI a price lag on power interrul'"
lions.. distinct from the eflects
eleCtricity price incre......
For Ihe Say Area alone. theStudy forecasts thai blackouts
could reduce Ihe annual outJIUI
goods and services by .. much
S; billion and tnm economic
growth by as much.. I percenl..
laCtories, omces and laboralori..
~~e
~~PO~~~
dwarfs the 5500
million loss 10
Ihe area econo-my the report
estima,es would
result from a 50
percenl jump in commercial en.
ergI' rates,
Although higher prices pres.
enl a significant risk 10 the Bay
Area economy, Ihe lack 01 a reli.
able power supply is a much more
seriow threal," the report con.
clude~
experu prediCt that theslate lace at least 34 days 01
olliOR blackouts thIS summer
when demand will rise .. air con.
dlllone" are cnnIted up in
mes, ,chools and workplaces.
The report concludes that con.
sume" and bwinesses must pay
higher prices to encourage con.
se""'lion and ensure thaI electric.
ity suppli.. are adequate. "While
revising electricity rales is a politi-
cally charged issue, it is apparent
that significant increases will benecessary 10 make up lor the
shortlall of Ihe past year and accu-
rately reneCt the higher COSt of
energy," Ihe report argues.
It is clear. . , that the Say Area
economy and the state can absorb
significant rate increa... if allo-
caled equitably," Ihe stUdy adds.
The Forum s report reflects the
,'i..... of big bwiness.. in Ihe Bay
Are.. especially Silicon Valley
..chnology communilY, wbich
need dependable electricity suI'"
plies 10 power sensitive opera.
!Ions.
Sleady, reliable power is abso-
lutely essential," said Don Mcin.
tosh, (acilities director for Sunny.
val. chipmaker Advanced Micro
Deyices, aboul Ihe report s find.
ings, "The cOSt 01 energy is much
Ie.. imponant 10 w than reliabili.
ty of energy,
Ihe a....ge mu"""" fund.
c..lifomia bonds Wed """", in pan,
because 01 lIIe ....., improvln& eredil
raw.g..
Moody, In-on Servia and Stan-
dard &. Poor, both upgraded Calilornia
in September. ciung iu suong econamy
and sound Iinan= "The economy was
doing _II and they had been budgeting
",",""""",,Iy," said DMd Hilchaxk. d~reaM of S&P'I ..... and local govem.01"'" group.
A! the ..me nine, lhe supply 01 ....
California bondsdedined.1aIling 14 per-
cem '0 S22.9 billia.. ao:arding 10 Thom-
son Financial Scauilics 0... Ca. The
dedine in n.... issues was a nationwide
rrmd led Or '-' refinancings.
Muni buyen, many seeking 10 pre.
se... pial on lheir aocJr. ponfolias,
plenlilul.
Uso year at this time, - -e halo
iDe abo.. inqWries WI John DoI-Com""'Ied a !addered ponIolio of SlOG mil.
lion bonds lor bis awn accoun1 and ....
reblively priCMlUCDSiuve," 1'1"""",
KnqIo said..
AMD's main production lacili.ti.. are looted outside Ihe Bay
Area, bur it does operate a design
center and an experimen..1 chiI'"
making lacility here.
Potential disaster
A one.hour loss 01 powerwould be disastrow lor w," said
Mcintosh. "You hay~ the polen-
lial for ruining an ~ntire batch
(silicon) wafers. In addition, it
could take up to three days to
,ealib..te all the tools,
To guarantee its electrical suI'"
ply,AMD buill a pow~rsubstation
d..wing directly from Pacific Gasand Electric Co. transmission
lines aboUI 10 years ago.
Until now, rhat substation wu
exempt from blackouts. But under
emergency rui.. set to take elfeet
the stalion willi.... its exemplion.
AMD is currently looking at otherways 10 deliver uninterrupled
power 10 its chip lacility this sum.mer.
While stressing the dire effects
on businesses, the report con.
cedes that most residential wers
aren t.. vulnerable. For them,
blackouts are largely a matter
inconvenience.
The Say Area Economic Fo-
rum and its pamers are using the
shock value 01 the report's big
blackout cost projections to press
their argument that supply is
more important than price,
Reliability is paramount The
economic numbers say so," said
Justin Bradley, director 01 energy
programs for the Silicon Valley
Manulacturing Group, which
helped produce Ihe study.
Estimates questioned
Bul several economists said
they are skeplical about th~ re-
pon s blackout cost estimate.
They say it , wrong 10 assume thai
there is a 1.10-1 r~lationship be.
TWeen economic activity and en.
ergy use, In many cas.. business
lost du"n~ blackouts could be re-
gained later. they poinl out
The repon s biackoul calculi'
lion ~is pretty crud.." said Mark
Bernstein, an ~n~rgy specialist
with Rand, the Southern Calilor.
nia research group,
Nowo ra,ing agenci.. Ole rethinkiD8
September upgrades, ,.pply ~thrUleNng 10 NasP, and lIIe SIIIO mil.
Iian buyen ..en, cornisIg ..ound any.
more.
Slan4ud &. Poor', and Moody" have
slapped negative outlooloa on III.... raling
of lhe "'Ie, "The power crisu Iw in-erased lhe rioloa 10 the ...,,, curT'"
IisoJ and economIC condilion," said Ray
MW'pIsy. a vico presidenl al Moody'.
CaliIornia hu au'honud iu Dep;sn......" 01 Wiler Resowces 10 isu.
much .. SI4 biJbon 01 municipal bonds
10 IUDd purdwes. The........
so much freslt supply Iw hlUt priocs
existing boNIs. 1'1....., Klupa said.
Yields oa c..'iIomia genenl oblip.lion bonds, wItidt _e OJ
-..,.
paml below those 011 gmerie MA-raled
boooIs laic ba year, Ole -- 0.1
OF paUli atoo... California mWli bonG
funds gained OIl...,... 011.4 percenl in
tile first quan.., the poorest perfonssanf:e
of any siJIaIMSa.. 121"10'\',
AIDCIng Ibe ........ Dseylus CaliIarnia
Slil~ expons agreed with the
report's overall conclusion lhat an
unreliable electricity supply is a
greater economic threat thanhigher prices. "1 certainly think. ., lhal the reliability issue is
more seriow,' said Tom Lieser
an economic forecuter al the
business school 01 the University
01 Ca\ilorni.a aI Los Angeles. Bul
consumer groups ar~ swpicious
01 claims thai rate incre.... ar~
needed 10 gua..ntee electricity
supply. Higher prices, they con.
rend, will simply support price.
gouging by power producers and
will not significantly add 10 SUI'"
ply,
"They are giving w the choice
01 darkness or higher rales," said
Nettie Hoge, director olThe Utili.
ty Relonn Nerwork in San Fran.
cisco. "In lact, were going 10 get
both."
How estimates were calculated
To calcula.. the effect 01 black.
outs, the report s aulhors, a ream
from Ihe consulting linn McKin.
sey & Co. measured Ihe relation.
ship between electricity con.
sumplion and economic growth.
They found that lor I!YefY
SI6,ooo increase in outJIul
goods and sorvi... in California,
an additional mega"",n hour
electricity is consumed. Hence
they said, a blackoUI thaI deprived
wers 01 000 megawans of power
would reduce output by roughly
S75 million to 5100 million.
Depending on the frequency
and severity of blackoutS this sum.
mer, the total loss to the Calilor.
nia economy could range from S2
billion 10 S16 billion, the stUdy
concluded.
The stUdy focused on the Say
Area and did not calculate the
statewide eflect 01 ral" increases
lor bwinesses. Loc:aIIy, the 5500
million loss it projects represenlS
less than I percent 01 the region
5350 billion annual outpul 01
goods and services. Thai translates
into a loss of aboul 15,000 at...
jobs over the next three years.
A 30 percent high.. residential
rate combU1ed with the increases
lor bwine:sses would trim the dis.
posable income 01 ar... house.
Exh, 7 / Schedule 23
R. Lafferty
A v;"til C'nmoration
~1-;~~~:~1~~""" ~ ~'
.; ~1~ ~~j,;;.
~ ~
~~'~i~
'-.... ~ ",~~'
-:,o4E2."
of r~~\%.\,~!.s~~o.~"'c~1
""
~~-s.sT ...Eoms", Bond, which ba year pined ,
15 per"",,~ rruIung il one 01 the best_.
=\)
fomun& municipal bond Iund., loa
0.2'1
_,
dWUII lIIe f'n! q....
..,
'I
Some funds sulf"ed lIIe adcliUonai '
iniury 01 holding Califomiamunt bonds
backed Or the trou- utiliria FOl c.
ampl.. Franklin Califomia T...Free In.
come Fund, lIIe largest municipll bond
fund wilh SIll billion. holds a ~ue
bond issued Or the OnMIJe Wyunlone
Imption District tN' is an obliga,ion 01
Pacific c.. and Electric Co. The eompa-
ny bas DOl ddawled OIIlhe bonds. which
acasunl lor leis lban """,enth 01 I per.
""" of lIIe Franklin Iund, but III.., ba..
laJIen in pn.:e.
The rdalive!y poor pcrIonn.ance 01
California bonds this yw' ,."..,..... an
opponunily in Klupa , view. The
crisis "is goiq lowark i...lSou~. hcsaid.
In lhe m_lime. _on.... buy Cali.
fornia bonds aDd bond munul funds al
higher yields INn they OIUld """
months ago."W. still... Califomia..a ""y sowod
in.............. Klupa said.
holds by 5750 million 10 S1.2 bil-
lion, a drop of one-third 01
percen..ge point, the report esti.
males.
Such a small hit suggests
"there may be some room for
resid~nts to pay higher ral"," the
Sludy claims.
~. ~
E-mail Sam Zuckmndn at
szuckennanlisfchronic1e.com,
Pg, 4 of 4
111
FII'AHCW. TM$
E~....
- nursday, May 31,2001
'.." '. -., "~ .-"", , , - '$.
1 ,~
: F:,he pubijsher 01 Ga:~Iy'" and Coal Outlook
Massey calls for inquiry into market power methodology
RC Commissioner William Massey, dissenting from two
orders yesterday, strongly called for the commission to give
up its CUITent method of market power analysis.
Our current standard is just plain outdated. inadequate and
unreliable " Massey said.
Massey has previously attacked the "hub-and-spoke" method
of market power analysis, which presumes market power if any single
market participant holds a 20% market share.
In April, Pacific Gas & Electric and Southern California Edison
made a similar argument in asking FERC to deny renewal of market-
based rate authority to Williams Energy Marketing and Trading
(fvfWD 4/4). The two utilities argued that while Williams controls
WESTERN MARKETS:
0 Dailies rise to upper $100s
Drop in imports forces Cafifomia into
emergency ..--.-.--.-..---.-_____,
CENTRAL MARKETS:
0 Dailies sink to teens, $20s
Enlergy lands at $25 .------.---..-_
EASTERN MARKETS:
0 Cinergy takes a beating
NA barely moves in Ihe teens -.--.____.
Key Hub Trades forStandard 16-Hour DailyProducts
Weighted average index pnces (in $IMWh)
and volumes are shown for selected major
hubs. More detailed price information is available
on page X.
Delivery
Point
COB
Mid-Columbia
alo Verde
~COT.
":omEd
Entergy
Cinergy
P..M
TVA
Weighted
Average
Index
180.
176.
175.
35.
16.
27.
17.
24.
17,74 '
Trading
Volume
Reported
125
425
375
500
350
150
620
600
450
less than 20% of the generation resources in the state. it is still able
to exercise market power. To renew its market-based rate authority,
Williams should perfonn an analysis of market power using other
means, the utilities said.
Massey said the events of the California wholesale power
market - where no single generator or power seller holds close to
20% market share - during the past year indicate that market power
can be exercised by any player holding a much smaller piece, Thc~20-
percent share threshold is too simplistic," he said,
In one decision issued yesterday in draft fonn. the commission
granted market-based rate authority to Sierra Southwest ~ooperative
(Continued on page
~ush, Davis agree to disagree on price caps
esident Bush and California Gov, Gray
Davis have a "fundamental disagree-
ment over whether or not California is
entitled to price relief " Davis said after the
two met privately in Los Angeles on Tues-
day to discuss the state s energy crisis.
Despite intensified arguments that con-
tinuing high wholesalepowcrpriccs will hurt
California and the larger U.S. economy,Davis
was unable to persuade Bush to support
temporary price controls in the state.
Bush a~ain declined Davis' requests
for caps on power prices. But California is
legally ~entitled" to price caps, Davis ar-
gued during a press briefing following his
meeting with Bush,
The president did not create this prob-
lem, "Davis said of the power crisis. ~Likeme
he inherited a mess," Davis has lately stuck
to his message that California is doing all it
can to bring new power plants online and to
reduce consumption.
The governor, who acknowledged the
president s efforts in other areas ,to help
California, Said he and Bush have a "funda-
mental disagreement" over the issue of price
caps. Davis said caps are necessary for Cal-
ifornia, wruch is short generation and could
pay SSO billion to S70 billion this year for its
(Continued on page
State regulators add, views to Bush energy plan
tility regulators from 13 states this
week issued a set of national elec-
tricity policy recommendations direct-
ed at both state and federal lawmakers and
officials.
We feel timing is critical," Montana
Public Service Commissioner Bob Ander-
son, leader of the effort, said, "President
Bush issued his energy policy recommenda-
tions recently, and we commend him for II. '
Our recommendations will complement his
and enrich the policy debate,
The report identifies seven principal
policy areas. ~These comprehensive policies
present a balance between supply and de-
mand, while recognizing the important role of
R'o,oduo"on oy 'ny moon,.. iII.ge/. CI COOy"g",ZOO I oy F'nen..,' Tim.. Energ1
energy efficiency, as well as environmental
and consumer protection, .. Anderson said.
Policy-makers should improve existing
generation technologies to increase efficien-
cy and minimize environmental impact, the
report says, Policies also should promote fuel
diversity including "green" power sources,
To ensure reliability, transmission and
distribution, companies should provide
adequate and efficient generation " the
report says, Delivery companies also should
provide a certain minimum level ofreliabil-
ity to all customers "as a part of basic
electric service. "
Because 95% of customer outages re-
(Continued on page
Reprinted with pennission of MegawarrDaily and Financial Times Energy, Inc.
Visir www ftener com
Exh, 7 Schedule 24
R. Lafferty
A vista Corporation
Pg. I of 3
Thu:rsday, May 31, 2001 Page 7MegawattOaily
Davis ready to take his case to court
.ver purchases. Davis told Bush he would
pursue every recourse available" to "en-
sure that markets are functional and rates are
just and reasonable.
Davis also said he hoped Bush would
communicate to the two new FERC members
that California is entitled to price relief.
" .
So far, federal regulators have taken
steps to ensure a competitive power market
in the long term, but they have refused to
implement shon-term caps.
In a meeting that Davis described as
cordial " the governor said he informed the
president that he would do all he could to
fight for Californians against high power
prices charged by generators that Davis
accuses of market manipulation.
Davis indicated that action would in~
elude lodging a lawsuit against the regula-
tors at FERc. The agency s legal mandate is
to ensure that power prices are "just and
reasonable " andFERC ruled in a December
order that the market was not competitive,
In that order and in subsequent actions,
FERC implemented a series of measures aimed
ironing out faults in California s market
ucture and at limiting wholesale prices
during power emergencies.
Davis and other state officials claim
those actions have failed to limit price spikes
and will not help the state avoid blackouts
and high costs for power this summer. 'Three
state agencies and the state Assembly have
filed petitions within the last few days re-
questing a rehearing oftbe agency s latest
order on price mitigation measures during
power emergencies.
Speaking after his meeting with Bush
Davis indicated those filings are the (lCSt
step in a legal process that could result in
lawsuits against FERC. The state must first
exhaust all legal and procedural remedies
with FERC before tUrning to the courts, he
said.
A lawsuit filed last week in federal coWt
by senior Democrats in the state Senate and
Assembly was dismissed Tuesday because
those legislators had not first gone through
all appeals channels directly available with
FERC. Davis said. A three-judge panel at the
\,1;nth Circuit Court of appeals dismissed the
lion, saying only that the "petitioners
have not demonstrated that this case war-
rants the intervention of this coun.
FERC Chairman Cun Hebert seemed
unfazed at the prospect of Davis' threatened
legal action.
I think the Ninth Circuit made it clear
FERC is doing our job appropriately," Heben
said at yesterday s commission meeting,
In addition to legal remedies to force
federal regulators to act, Davis also pointed
to Senate Democrats, who will take control of
that body early next month, as potential
partners who could help California by ap-
proving price cap legislation. California
Democratic senators. Dianne Feinstein and
Barbara Boxer, have both introduced bills
that would impose price caps in Western
markets.
I'm looking forward to working with
the newly constituted United States Senate
to make sure that the problems of California
and tlle West.., get a full airing," Davis said,
Davis attempted to sway Bush in favor
of price caps by arguing that a crisis-dam-
aged California economy will bun the nation
and that the federal government is required
by law to ensure reasonable rates.
But Bush, who has been steadfastly
against price caps, explained his opposition
to the caps in a speech at the World Affairs
Council in Los Angeles. He also noted that
the Clinton administration did MIca II for the
imposition of price caps,
We will not take any action that makes
California s problems worse, and that s why
I oppose price caps " Bush said. "Price caps
do nothing to reduce demand. and they do
...
(from page
nothing to increase supply. This is not only
my adImrostratlon s posiuon, this was the
position of the prior administration
. "
The president said his administration
would help California by expanding the state
main north-south transmission line, Patll 15;
requiring federal facilities in the state to
reduce demand 10%; and providing addi-
tional funding to low-income consumers to
help offset rising electricity and gas prices.
The president also told Davis that he
would dispatch newly installed FERC Com-
missioner Pat Wood, the former head of the
Public Utility Commission ofTexas, to Cali-
fornia to investigate why natural gas prices
are higher in tile state than in other parts of
the country.
Davis called Bush's offer "good news
and said the president agreed with him that
it "made little sense for California to receive
Texas natural gas at roughly $15 per British
thermal unit. when New York is receiving the
same gas at roughly $5,95 per B ritish thenna!
unit
The president wants Wood "to see if
there is market manipulation" in the Califor-
nia natural gas market and "to review the
wisdom of the Federal Energy Regulatory
Commission s decision two years ago,"
when, Davis said, FERC suspended a tariff
that controlled the transportation prices of
natural gas when it flows from Texas to other
parts of the country. MS/ADP
Energy economists to testify on market manipulation
ifOmia legislators will hear testimo- officials on plant outages and their effect on
ny later today from two prominent prices. Within the next several weeks, the
energy economists on allegations that committee also plans to hear from genera-
power generators have colluded to drive up tors, according to the representative.
prices in the state s wholesale power mar- The "big five" ou!-i)f-state generatorskets. - Duke, Dynegy, Reliant, Williams! AES
Severin Borenstein and AlftedKahn are andMirant - will be invited to give their side
scheduled to testify before the state Sen- of the story, as will energy marketer Enron,
ate s Select Committee to Investigate Price he said. Those companies have been repeat-
Manipulation of the Wholesale Energy edly accused by state officials of gouging
M:1rket. Kahn may address issues ofphys- consumers and engaging in illegal activity.
ical withholding of power supplies by gener- Borenstein, Kahn and eight other econ-
ators. while Borenstein would likely brief omists last week co-signed a leaer to Presi-
senators on economic models exhibiting dent Bush arguing for the imposition of
generators' ability to exercise market power short-term price caps on wholesale markets,
to raise prices, a representative of committee The economists asserted that the failure of
Chairman Joseph Dunn indicated. deregulation in California could harm the
The select committee has taken testimo- development of competitive electricity mar-
ny in three earlier hearings from state energy kets across the nation, ADP
COPYrlgtTI 2001 oy Financial Timss Energy
Reprinted with permusion of MegawattDaily and Financial Times Energy, Inc.
Visit www.ftenergy.com
Exh, 7 / Schedule 24
R. Lafferty
Avista Corporation
Pg, 2 of 3
ItIWCIAI. T1MES
low,..
Thursday, June 14, 2001
" ~ . _
!i
!tf
From the publisher 01 G~:1y" and Coal OuUDDk
Calif. inks deal with QFs, will release details on long-term contracts
lifOrnia officials have reached agreements with two groups
of small generators that will return the full amount of power
contracted by those facilities back to the market. adding be-
tween 100 MW and JOO MW of additional power to the slate s grid
this summer, Gov. Grny Davis said yesterday,
Contracts signed with two groups of qualifying facilities estab-
lish new prices for the power they will supply to the second largest
investor-owned utility in the state, Southern California Edison
Davis said.
The deals also provide for marginal payment ofback debts owed
by the utility to the generators, provided the individual facilities
produce additional energy at their facilities.
INSIDE THE MARKET REPORT
WESTERN MARKETS:
Q Prices hold
Good supply, weather avert increases _
CENTRAL MARKETS:
Q Dailies fall back
Weather cools ._____.
EASTERN MARKETS:
Q Dailies soften
Wide range in Cinergy continues
-.
Key Hub .Trades forStandard 16-Hour Daily
Products 06/14/01
Weighted average index prices (in SlMWh)
and volumes are shown lor selected major
hubs. More detailed price informalion is available
on page 3.
Delivery
Point
COB
Mid.columbia
Palo Verde
ERCOT-B
CornEd
Enlergy
Cinergy
P.M
TVA
Weighted
Average
Index
57.
56,
62.
41.17
49.
51,
53.
. 55.
52.
Trading
Volume
Reported
100
025
950
050
900
000
750
000
But the effective date of the agreed-to prices is linked to
approval by the state Legislature of an agreement between 50-
CaJEd's parent company and the state. The memorandum of under-
Standing between Davis and Edison International would pave the
way for the state s purchase of the utility s power lines.
Negotiations between the State and the QFs have resulted in
bringing 95% of the power produced by those generators back onto
the market. Davis said, Numerous QFs had been withholding their
output from the market in protest over nonpayment of past bills by
California s largest utilities.
The output ofQFs serves up to one-third of California s total
(Continued on page
Cheney, Hebert hold .firm on energy policy
ce President Dick Cheney and FERC
Chairman Curt Hebert both pledged
yesterday to stay the course when it
comes to energy policy. But while both men
faced a friendly audience at the Energy Effi-
ciency Forum yesterday at the National Press
Club in Washington, their remarks seemed
aimed more at winning over a skeptical audi-
ence in California,
Cheney and Hebert emphasized the im
portance of market remedies - and reaf-
finned their opposition to price controls.
Hebert, for one, was adamant that recent
FERC measures would suffice to create a
better-functioning market out West.
California does not mean an end to
competition " he said.
, Cheney repealed the main selling points
of the administration s recently introduced
national energy policy. Andwhile he warned
ofLhe possible economic impact of the cur-
rent supply situation, the vice president said
that the nation s energy problems could be
fixed with a dose of"rcsolve, rngenuity and
clarity of purpose.
The remedies that Cheney listed include
the construction of a new gas pipeline that
would run from Alaska's North Slope, a
proposal that Cheney called "relatively non-
(Continued on- page
FERC clears National Grid purchase of NiMo
th a specific provision on account- United Kingdom under the name National
ing procedures, FERC yesterday Grid Group (the same name as the existing
approved New York-based Niagara overall company). would serve J,J million
Mohawk Holdings' proposed acquisition electricity customers in the United States
by National Grid USA, the U,S. branch of the . placing it among the top 10 in tenns ofcus-
British transmission utility. . tomers served.
National Grid USA, which operates two NiMo will continue as the local utility
transmission and distribution utilities in New and will remain under the regulations ofNew
England, offered to buy NiMo last Seplem- York state,
bcr in a SJ billion cash and stock transaction Both companies have sold substantially
that includes assumption ofS5.9 billion in all of their generation assets-NiMo 's major
NiMo debt (MWD 9/6/00). NiMo serves 1,remaining asset, its interests in the Nine Mile
million electricity and 540 000 natural gas Point nuclear plantS, has been committed to
customers in upstate New York. ConstellationEncrgyGroup-soFERCfound
The combined company. which would no competitive market issues there.
be a new holding company registered in the (Continued on page
R.proouo,'o. .,o.ym...... iII.go', " Copyng"' 200'.y Fino."o' Tim.. E..rgy
Reprinted with permission of MegawarrDaily and Financial Times Energy, lnc,
Visit www,ftener!!com
Exh. 7 / Schedule 24
R. Lafferty
A vista Corporation
Pg, 3
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Comparison of Hedge Price VS. Forward Curve
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R. Lafferty
A vista Corporation
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Avista Corporation
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Comparison of Hedge Price VS. Forward Curve
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A vista Corporation
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joliday reminder
, . ,
Gas Daily will not publish April 13 in obser-(pee of Good Friday. The next issue will ap-
f'ear Apri/16. The Daily Price Survey published
in the April 16 issue will cover transactions con-
dueled April 12 for gas flow April 13-16.
NYMEX will be closed April 13. NYMEX
Access will be closed April 12 and is scheduled
10 reopen the evening of April 15.
Gas Daily reader survey
Gas Daily s new 2001 subscriber survey
your chance to win a $200 Golfdiscount.com gift
certificate. Visit ww~nergyusa.comJgasd~lnyl
gdsurvey,aslJ,
FUTURES
NYMEX cg Henry Hub
Results from TuesdaySen'ement High Low Change VolumeMay" 2001 5.559 5.620 5.520 8.2 22,204June 5.611 5,660 5.540 7,5 7965July 5.657 5.700 5.630 7.2 1 311August 5.692 5,740 5.675 7.2 2,473September 5.672 5.710 5.660 7.873October 5.682 5.720 5.675 7.029November 5,807 5.850 5.780 7.2 517December 5.920 5.970 5.890 7.2 1,358Jan" 2002 5.957 005 945 7.938February 5.767 5.820 5.760 6.7 1 272March 5.422 5.480 5.410 6.667April. 4.832 4.860 4,830 4.770May 4.687 4.750 4.680 3,309June 4.698 4.750 4.660 3.335Iy 4.728 - - 3.~ust 4.735 4.750 4,720 3.479""phlmber 4,712 4.750 4.720 3.622October 4.712 4.700 4.670 3.November 4,827 4.890 4.810 3,December 4.932 4.950 4.935 3.Jan.. 2003 4.962 5.030 4.980 3.298February 4.789 4.810 4.810 3,March 4,549 4.610 4.560 3.April 4.254 4.270 4.250 1.23 1May 4.192 - - 0.280June 4.205 - - 0.130July 4.230 - - 0.August 4.255 4.280 4.280 0.September 4,245 - - 0.October 4,245 - - 0.. November 4.355 - - 0.December 4.475 4.472 4.472 0.Jan.,2OO4 4,515 4.550 4.512 0,106February 4.395 4,380 4,380 0.March 4.255 4.250 4.240 0.April 4.113 - - 0.Volume of contracts (unofficial) 45,669Front-months open interest Monday:
May, 41 900; Juneo 21,783; July. 17 326Total open interest Monday: 372.720Weighted average 01 )t number 01 trades in the last two min-utes of trading. Change is from previous sentement price.
OPTIONS
NYMEXcgHenry Hub
Results tram TuesdayStrike Calls-Senle Puts-SenlePrice May. Jun. Jul. May. Jun. Jul.40 - - 14,2= 28,9= 40.45 - - 16.2= 31.1= 42.50 - - 18,4= 33,4= 44.55 - - 20.8= 35.8= 47,60 19,2= 39,4= 57.0= - 38.3= 49.65 17.2= 37.2= 53.4e - - 52.
. ~
t:re 15.4e 35,1= 51.2= -' 13.7= 33.1e 49,1= -
.0) s!imaled Volume: Calls: nIB Puts: nIB
Tolal open inlerest Monday Calls: 149,832 Puts: 206 259Not all strike and settlement prices lisled,
Implied Volalility lor at-lhe-money slrike price
Calls: nIB Puts: nIB Source: Bloomberg
Gas Daily Wednesday, April 11, 2001
Talisman spins plan to acquire Petromet
alisman Energy will acquire Calgary-based Petro met Resources in a cash offer at a price of
C$13.20/share, representing a 26% premium over the closing price of the Petro met shares
on April 9.
This is a good marriage of assets, infrastructure and upside poter.' i " saidTalisman President and CEO Jim Buckee, "We intend to consolidat~ - omet
Canadian assets into a pannership following completion of .
Petromet's assets tie nicely into our rapidly gel"~
building on our existing land base near the T~
year with the acquisition of midstream a.-
tion of propenies acquired from F\~
A Talisman spokesmafl '
June I, is expected t('l"
With this I'r
than 850
2002. P
een
1.St
cUd
....11 and liquids
dgh(& to more than
- drilling locations.
...t pools is approximately C$638
" and C$1.l2/mcfe (C$6,72/boe) proved
..rate more than C$250 million of cash flow in
-I-'roduction for the remainder of 2001 at approximately 110
mh.. obl/d of liquids, More than 90% of the asset value is concentrated
in two properties Bigstone and Wild River. Petro met s average working interest in its pro-
duction is 85%.
The company said it expects to mail its offer to Petro met shareholders and debenture
holders on or about April 20. The offer will be conditional upon not less than two-thirds of the
Petromet shares and 90% of the Petromet debentures being tendered.
Petromet s board of directors has unanimously voted to recommend acceptance of the
offer by the Petromet shareholders and debenture holders,
Questar signs deal for portion of Southern Trails
uestar Pipeline said it has concluded a contract with Duke Energy covering all of the ca-
pacity for the 80,000 dthld east zone of its $155 million Southern Trails Pipeline project, a
project that involves convening a crude oil pipeline to natural gas. The 70S-mile pipeline
runs from the Four Comers areas near Blanco, N.M" to Long Beach, Calif.. and is divided into
east and west zones,
The east zone can transport gas from multiple receipt points in the San Juan Basin to
multiple delivery points near the California border, "This contract moves us one very large step
closer to making the Southern Trails Pipeline a reality," Questar Pipeline President and CEON, Rose said,
The company also is soliciting interest from customers for Southern Trails' west zone,which runs from the California state line to Long Beach. The west zone will have a capacity of
120 000 dthld, Questar began work on the east zone last year after receiving FERC approval
for the entire project last July.
The west zone is encountering regulatory and utility tariff barriers in California, similar to
resistance confronted by other interstate pipelines that have tried to supply gas service into the
state s market areas, Questar is proceeding with the east portion as if it were a separate project,
Questar spokesman Chad Jones said, The project has received interest in the west zone from
pOtential shippers, contingent on SoCal Gas changing its tariff to make it economically fea-
sible to take gas from a competitive pipeline.
Questar pointed to a Residual Load Service fee imposed by SoCai GO!; that "deters exist-ing customers from using alternate natural gas suppliers if they .oiecr to switch part of theirtransportation to a competing pipeline in Southern California Gas' serv; .e area,Options that SoCal Gas has proposed in response to California Public Utilities Com-
Copyright 2001 by Financial Times Energy
. '
Exh, 7 / Schedule 29
R. Lafferty
A vista Corporation
Page I of 11
Page 4
Michigan clicks on choice
'\ According to the Michigan Public S!!rvice
bmmission, gas customers in the state are show-
Ing more interest in the state s customer choice
program, As evidence, the PSG pointed to the
number of times that the program information Web
page has been accessed in recent months.
During March, the PSG's choice comparison
of suppliers and prices page received nearly 12 000
hits. Moreover, seven other choice program-related
pages were viewed an additional 16 000 times.
The increased consumer interest "will encour-
age expanded participation by natural gas mar-
keters in Michigan s customer choice programs:
said PSG Chairwoman Laura Cha elle. VK
FUTURES
NYMEX ~ Henry Hub
Results from WednesdaySemement High Low Change VolumeJun.,2001 4.202 4,315 4.145 -July 4,273 4.385 4.220 -August 4.343 4.450 4.290 -8.
September 4.369 4.465 4.330 -8,October 4.400 4.500 4,360 -November 4.574 4.674 4.550 -0 IDecember 4.748 4,855 4,710 -10.
Jan~2OCI2 4,813 4,925 4,775 .11,0 .February 4.693 4,820 4,650 -11.0 March 4.510 4.679 4.490 -10.April 4.200 4.300 4.190 -May 4,131 4.230 4,130 -9.2 June 4.173 4.265 4.170 -July 4.223 4,315 4.200 -,..gust 4.242 4,340 4.230 -9.
J !ember 4.247 4.345 4.270 -tober 4.267 4,305 4.285 -
November 4 407 4.505 4.420 -
December 4,537 4.635 4.550 -Jan~ 2003 4.587 4.685 4,600 -9,February 4.442 4.535 4.475 -March 4.255 4.295 4.287 -April 3.970 4.055 3,995 -8,May 3.935 3.960 3.930 -8,June 3.975 3,975 3.975 -July 4.025 4,160 4,160 -8,August 4,070 4.070 4.070 -7,
September 4.087 4.087 4.087 -October 4.102 4.102 '102 -6.November 4.214 4.240 4.230 -6,
December 4.349 4.349 4.349 -6,
Jan., 2004 4.407 4.407 4,407 -6.February 4.287 4,287 4.287 -6.March 4,148 4.148 4,148 -6.April 3.978 3,978 3,978 -6,May 3.948 3.948 3.948 -6,Volume 01 ccnlraC15 (unolflCiaQ
Front-monlhs open interest Tuesday:
June. 44 175; July. 24 183;Augus~ 28 813Tolal open inleresl Tuesday: 409.385
Weighted average 0/ . number 01 trades in the last two mi...
utes 01 !Jading. Change is lrom previous sentement price.
OPTIONS
NYMEX~Henry Hub
Results from Wednesday
Calls-Settle Pub-Sem..Jun, Jut Aug, Jun. Jul. Aug,
11.54: 22.44:
- 13.6e - 30.
- 15.8e 26.74:17.5e - 18.24: 29.0; 35.2;16.3; 33.5; - 18.5; 31.5; 37.
14.2; 31.1; 47.5; - 40.04:
12.44: 28.9c 41.5; - 42.
10.7; - 39.2; 27.
Strike
Price
...
'1;15
..(,45
Estimated Volume: Calls: nla Puts: nla
Tola! ..pen interest Tuesday Calls: nla Puts: nla
No! all strike a~d settlement prices osted.
Implied Volel:;;1y for at-the-money strike price
Calls; 55.39% Puts: 51.320/. Source: Bloomberg
41.5c
Gas Daily Thursday, May 10, 2001
SoCal Ed presses FERC to ma'~y public
iring off another round in the paper war over Califo'
nia Edison on Tuesday asked FERC for permi~'
that it says proves that El Paso and its affil;-
prices in the state. And the New York TImer
lishing an article that focused on the uti"
As reported in Gas Daily, So('-
blaming El Paso for alleged mar
and capacity manipulation, ..
dismissed the CPUC's ct.
pipeline capacity in r
Now SoCaJ ..
based consul'
the repC"
ity .
~uthem Califor-
power study
0 drive up
ry, pub-
,es.
;u-e
sachusetts-
.oned the study,
, .vithholding capac-
ed to the lack of suffi-
!fect of raising both natural
, said SoCal Ed.
ate market manipulation by El Paso
1. SoCai Ed reckoned that its electricity
c:sult ofEI Paso s anticompetitive practices,
dSe are concerned about the protection of s~nsi-
.: contained in case proceedings as well as in The
" FERC Chief Administrative Law Judge Curtis Wagner
6e of materials in the case.
6 FERC to reconsider the protected status of study, According totlI... - s right to know outweighs any possible confidentiality concern over
material wtucn IS mere historical data, which is not contract or customer specific and which is
the product of a study perfonned on behalf of (SoCal Ed).
The conclusions of The Brattle Group study, however, are already circulating in public.
Most recently, the TUTlI!s ran an article that gave considerable play to The Brattle Groupfindings,
El Paso has forwarded its own version of the California gas price controversy, According
to a study conducted by Lukens Consulting Group and commissioned by El Paso, broader
market forces were at work in driving up the price of gas in the Golden State (GD 4/25).
Joan Dreskin of the Interstate Natural Gas Association of America, which represents the
pipeline industry. said that there,should be no rush to judgement in the capacity case. "Nei-
ther the press nor the public should jump to conclusions that there was any wrongdoing by
either El Paso or its marketing affiliates," she said. "There s a hearing at FERC that will
review their conduct... without having all the facts, the allegations should not be decided bythe press:' she said. NIl
GAO prepares to investigate high gas prices
ven as gas prices fall toward the $4 mark, the investigations continue. The U.S, Congress
got in on the act this week, launching a probe into the cause of high natural gas prices,
In response to several requests by members of Congress, the General Accounting Office
the investigative arm of Congress said it would begin a search into why gas prices have
risen over the past couple of years and what caused the record-high costs this past winter,
In a March 30 letter, six House representatives sent a letter to GAO Comptroller General
David Walker, questioning why gas prices have risen so dramatically, The letter was signed by
Reps. John Spratt, D-C" Jan Schakowsky, D-lll., Bud Cramer, D-Ala., Bob Etheridge, D-
C.. Ed Markey, D-Mass" and Mike Thompson, D-Calif,
We are alarmed at this spike in the cost of natural gas and the impact on our constitu-
ents," the letter stated,
The letter requests that the GAO investigate gas supply availability from domestic and
imported production during the recent period of high prices; changes in gas demand by cus-
tomer class; and the impact of increased demand for electric generation on gas prices.
In addition, the legislators asked that the GAO look into the role of trading futures on the
NYMEX, gas forward contracts, and any over-the-counter derivative contracts involving gas
Copyright 2001 by Financia/1imes energy
Exh. 7 / Schedule 29
R. Lafferty
A vista Corporation
Page 2 of 11
Table 4, U, S, Energy Prices
Nominal Dollars
Crude Oil Prices
Imported Average" .,........,................... 26.84 26.55 29.11 28.27 24.57 24.50 26.00 27,00 26.33 26.00 26,50 26.83 27.72 25,52 26.41W11" Spot Average............................., 28.82 28.78 31.61 31.96 28.82 27.67 29,04 30,01 29.34 29,00 29.50 29.83 30,29 28.88 29.42
Natural Gas Wellhead
(dollars per thousand cubic feet)..........., 2.26 3.27 4.50 4,5.40 5,4.42 4,62 5,
Petroleum Products
Gasoline Retail C (dollars per gallon)
All Grades ,....................................,.....1.47 1.47 1.46 1.49 1.49 1.46 1.47Regular Unleaded................................1.43 1.49 1.43 1.42 1.46 1.45 1.42 1.49 1.46
No, 2 Diesel Oil, Retail
(dollars per gallon) ................................1.41 1.42 1.46 1.43 1.42 1.42 1.45 1.48 1.44 1.43
No, 2 Heating Oil, Wholesale
(dollars per gallon) ................................
No, 2 Heating Oil, Retail
(dollars per gallon) ................................1.40
No.6 Residual Fuel Oil, Retail d
(dollars per barrel) ................................ 23.64 24,55 25.10 27.40 24,52 23.35 23,79 25,53 25.02 23,38 23.61 24,62 25.34 24,30 24,
Electric Utility Fuels
Coal
(dollars per million Btu).......................... 1.20 1,
Heavy Fuel Oil .
(dollars per million Btu),......................... 3.74 4.34 4.46 83 3.97 4,07 3.84 3.94 3.25 3.
NabJral Gas
7!:- l (dollars per million Btu).......................... 2.85 3.15 5,02 6.03 4.25 5,
Other Residential
NabJral Gas
(dollars per thousand cubic feet)........., 6.53 7.77 10.09 8,91 10.58 11.04 9,12 9.47 10,12 11.02 9,69 9.
Electricity
(cents per kilowatthour)........................ 7.78 8.37 8.59 8,21 7.97 8,56 8.81 8,35 7,98 8.54 8.81 8.33 8.25 8.Refiner acquisition cost (RAC) 01 imported crude oil,
~est Texas Intermediate.
Average self-service cash prices,
Average lor all sulfur contents,
lncludes fuel oils No., No.5, and No.6 and topped crude fuel oil prices.
Notes: Data are estimated lor the fourth quarter of 2000, Prices exclude taxeso except prices lor gasolineo residential natural gas, and diesel, Theforecasts were generated by simulation of the Short-Term Integrated Forecasting System,Sources: Historical data: Energy Information Administration: latest data available from EIA databases supporting the following reports: Petroleum MarketingMonthly, DOE/EIA-OJBO; Natural Gas Monthlyo DOE/EIA-01JO; Monthly Energy Review DOE/EIA-00J5; Electric Power Monthlyo DOE/EIA.0226,
8.43
(Energy Information Administration/Short-Term Energy Outlook -. ADril 20011
Exh, 7 / Schedule 29
R. Lafferty
A vista Corporation
Page 3 of II
Table 4, U, S, Energy Prices
Nominal Dollars
Crude Oil Prices
Imported Average" ...m........,.............., 26.84 26.55 29.12 28,25 24.57 25,00 27,00 27,00 26,33 26.00 26,50 26,83 27,72 25,91 26.41wIT' Spot Average..,........................... 28.82 28.78 31.61 31.96 28,82 28,44 30.14 30,04 29,34 29,00 29,50 29,83 30.29 29.36 29.42
Natural Gas Wellhead
(dollars per thousand cubic feet)............ 2.26 3.27 4,57 4,52 5,4.48 4.62 5.27 4,
Petroleum Products
Gasoline Retail C (dollars per gallon)
All Grades .........,................................,1.47 1.48 1.47 1.49Regular Unleaded",........."".."..,...."..,1.43 1.44 1.47 1.49 1.46
No.2 Diesel Oil, Retail
(dollars per gallon) ................................1.47 1.47 1.48 1.49 1.45 1.43 1.43 1.46 1.48 1.48
No.2 Heating Oil, Wholesale
(dollars per gallon) ................,..............,
No.2 Heating Oil, Retail
(dollars per gallon) ................................1.40
No, 6 Residual Fuel Oil, Retail d
(dollars per barrel) ................................ 23.62 24.57 25.10 27.41 24,99 24,52 25,22 26.27 25,57 23,83 23,90 25.24 25,34 25,26 24.
Electric Utility Fuels
Coal
(dollars per million Btu),......................... 1.1.23 20
Heavy Fuel Oil .
(dollars per million Btu).......................... 3.74 4.18 4.34 4,
;(
Natural Gas\ I (dollars per million Btu)...............,.......... 2.85 3.78 4.
90 4,02 4.20 18 3.27
62 5,24 6.11 4,33
Other Residential
Natural Gas
(dollars per thousand cubic feet).......... 6.53 7.77 10.09 8.91 10,59 11,12 9.26 9,58 10.20 11,08 69 9,
Electricity
(cents per kilowatthour)...,.................... 7.76 8.35 8.57 8,26 10 79 00 8,50 11 8.63 8.87 8.38 8.25 8.Refiner acquisition cost (RAG) of imported crude oil.
\vest Texas Intermediate.
Average self-service cash prices,
Average for all sulfur contents.
lncludes fuel oils No, 40 No.5, and No, 6 and topped crude fuel oil prices,
Notes: Data are estimated for the fourth quarter of 2000, Prices exclude taxes, except prices for gasolineo residential natural gaso and diesel, Theforecasts were generated by simulation of the Short-Term Integrated Forecasting System.
Sources: Historical data: Energy Information Administration: latest data available from EIA databases supporting the following reports: Petroleum MarketingMonthly, DOE/EIA-0380; Natural Gas Monthlyo DOElEIA.0130; Monthly Energy Review DOElEIA-0035: Electric Power Monthly, DOE/EIA-0226.
(Energy Information Administration/Short-Term Energy Outlook - May 2001)
Exh, 7 / Schedule 29
R, Lafferty
Avista Corporation
Page 4 of 11
Non-OPEC production is expected to increase by another 0,6 million barrels per day in 2001. with much ofthis increase coming from Russia, Although the Caspian Pipeline Consortium has begun filling its new
pipeline to transport oil from Kazakhstan to world markets, this is not expected to support greater Caspianproduction levels until end-2001.
International Oil Demand. World oil demand remains expected to grow, despite concerns over a gradualeconomic slowdown in the industrialized countries. EIA projects world oil demand growth of 1.4 million
barrels per day in 2001 (higher than the lEA's 1.3 million barrels per day prediction), with slightly higher
demand growth expected for 2002. Besides the OECD, non-OECD Asia is still expected to be the leadingregion for oil demand growth over the next two years, although this growth now appears to be weaker than
previously assumed.
World Oil Inventories. EIA does not attempt to estimate oil inventory levels on a global basis, However,
the direction in which global oil inventories are headed is discerned from EIA's world oil supply anddemand estimates, Stocks are currently below "normal" levels, although not by so wide a margin as EIApreviously believed, and these low inventory levels are expected to put upward pressure on prices, U.
crude oil stocks, for example, are expected to remain below normal levels for most of
2001 and to improve
in 2002 but only into the lower end of the normal range (Figure 9)
U. S, Energy Prices
Motor Gasoline. As noted above, pump prices have been soaring due to high demand and lowinventories. The tightening of motor gasoline stocks, which are less plentiful now than they were this time
last year and have helped push prices into new territories.
As a result, we project that the average monthly pump price for regular gasoline will range between $1.
and $1.75 per gallon, perhaps more, during the peak months of the driving season. Last year, the highnational average prices were skewed by exceedingly high pump prices in the Midwest (over $2.00 pergallon at times), which, in turn, were the result of critical regional supply problems. Although in our basecase we do not necessarily project a repeat of last year, the current situation of relatively low inventories for
gasoline sets the stage for potential regional imbalances in supply that could bring about significant price
volatility in the U.S. gasoline market.
Distillate Fuel Oil (Diesel and Heating Oil). The recent surge in motor gasoline prices may impact theretail price of diesel fuel oil. Since there is currently a supply deficit for rnotor gasoline. refiners will needto emphasize gasoline production at the expense of distillate. Even though inventories of distillate fuel areadequate. supplies of this fuel may become tighter during the summer as distillate production lagsresulting in a premium for its price, As a result, retail diesel prices are expected to remain fairly high in
historical terms, averaging close to $1.50 per gallon during the driving season. Moreover, consumption ofdistillate fuel in place of natural gas for power generation could put additional pressure on the diesel fuel
market, although such a development is rather unlikely unless electricity demand surges sharply in key
gas-consuming regions,
Natural Gas. Last winter (October 2000-March 2001) natural gas prices at the wellhead averaged $5,74 perthousand cubic feet, more than double the previous winter s price. Natural gas prices (Figure 10)beganclimbing last summer primarily in response to low levels of underground gas storage, Compared to thistime last year storage levels are still low, As a result, spot prices are currently averaging about $5.00 per
thousand cubic feet. We continue to believe that, iven the current state of the natural as market, it willbe a while before rices at the wellhead return to the low eve 00 er thousand cubic feet ex erienced
ust one year ago, About 90 percent 0 e panned additions to electric generating ~aRacity over the nextfew years are designed to primarily use natural gas as a fuel jource,For the spring and summer, average
(Energy Information Administration/Short-Term Energy Outlook - May 2001)
Exh, 7 / Schedule 29
R. Lafferty
A vista Corporation
Page 5 of 11
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R. Lafferty
A vista Corporation
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wellhead prices are projected to decline only modestly, averaging an unseasonably strong 65 perthousand cubic feet.One factor that should keep prices relatively high is the need for unusually large refillvolumes for underground storage.The gas supply situation this injection season bears close monitoring. Ifthe spring and summer weather is particularly hot in regions that consume large quantities of gas-firedelectricity, (California and Texas for example), then injections into underground storage for the next winter
would again be strained, resulting once more in sharply rising prices from already robust current levels, In
2001, the annual average wellhead price is projected to average over $5.per thousand cubic feet. Nextyear, we expect the storage situation to improve somewhat and with that, we expect a dip in the average
annual wellhead price, Increases in production and imports of natural gas needed to keep pace with the
rapidly growing demand for natural gas will be accompanied, for the time being, bv relatively expensive
supplies for gas due to rising production costs and capacity constraints on the pipelines,
Electric Utility Fuels. The rapid rise in gas prices last summer and fall has pulled delivered gas prices
above heavy fuel oil prices on a cost per Btu basis (Figure 11 ), As this situation is likely to persist, weanticipate some recovery in the amount of heavy fuel oil used for power generation over the very low levels
seen since late 1999, In 2001, the cost of coal to electric utilities is projected to increase slightly, after years of
slow but continual decline, as coal, like oil, is being used more intensively for electricity generation in lieu
of expensive or unavailable natural gas. On an inflation-adjusted basis, however, coal prices should still
show a decline this year.
U ,S. Oil Demand
Petroleum demand data for 2000 have been revised, (The more detailed view of the revisions is provided in
EIA's latest Petroleum Supply Monthly
).
Compared to previous Short-Term Energy Outlook, these revisionsbrought about primarily by revisions to imports data, result in an overall 0.percent increase in total
estimated demand in 2000 compared to the preliminary figures, As a result, total demand increased from
19,52 million barrels per day in 1999 to 19,68 million barrels per day in 2000 an increase of 0.8 percent. Thiscontrasts with a OJ-percent decline based on the original data. The demand revisions involved upwardadjustments in most major product categories. In contrast to the 0.percent decline based on the original
data, motor gasoline demand now exhibits a O.percent growth rate from the 1999 level, a revision of 1.1
percent. The year-to-year increase in jet-fuel demand has been revised from percent to 3.2 percent. Inaddition, distillate fuel and residual fuel oil demands registered increases of 3.4 and 9.4 percent, up from 3.and 1.8 percent based on the preliminary data. The liquefied petroleum products group also underwent an
increase but the year-to-year change was still slightly negative, Other minor petroleum products generally
registered downward revisions. In general, these revisions reduce the responsiveness to price change that
one may reasonably attribute to the petroleum demand weakness witnessed in 2000, As it turns out, thenumbers now line up somewhat better, on balance, with the sorts of results one would expect using theshort-run price elasticities embedded in the model used for the Short-Term Energy Outlook. However,these elasticities have always been small in absolute value, so the change is not one that is particularlyworrisome from the standpoint of consistency with accumulated experience,
Total petroleum products demand is projected to climb an average 250 000 barrels per day, or 1.3 percent, in2001. Data for the first quarter of this year indicate a sizable year-to-year 510 000 barrels-per day, or 2.percent, increase in total petroleum demand, But much of that increase stems from special factors. Themost important is the weather, which, although only moderately colder than normal, was more than
percent colder in terms of heating degree-days than during the mild winter quarter of 2000, Weathercontributed to the II-percent growth distillate fuel oil demand compared to the same quarter last year. An
additional factor was the change in relative prices brought about by the unprecedented spike in natural gas
prices, which, in combination with the cold weather, helped boost residual fuel oil demand by 25 percent.Another factor was the concern about thE-. pussible impact of Y2K. which boosted deliveries in December
1999, but depressed shipments in january, 200C.
(Energy Information Administration/Short-Term Energy Outlook - May 2001)
Exh. 7 / Schedule 29
R. Lafferty
Avista Corporation
Page 7 of 11
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Monday, April 30, 2001 Page 7
Longs dispelled by shorts
The bears were on the prowl last week as
the May contract neared expiration. Short posi-
tions dramatically increased, creating the reality
or a deteriorating market. As summer begins to
heat things up, though, prices could lollow sui!
sources say.
Short posilions overtook long positions at
an unusually large margin 01 more than three to
one in the Commodity Futures Trading
Commission s latest Commitments or Traders
Report lor the week ending April 24.
Short positions increased considerably last
week, jumping to 14 524, compared to the prior
week's report or 10 481. Long positions remained
virtually unchanged coming in at 4,430 Irom last
week's 4 137,
Spreading positions also increased slighUy
with the current report, showing 13 771 , com-
pared to the previous report 0113 630. Overall
open interest increased to 388 7161rom 385 794.
As the May contract approached expiration
a daily erosion 01 the screen began to take
shape, sending prices below key support levels
on Thursday and ultimately resulting in the May
contract settling at $4.891 upon expiration.
The reason for the slump in prices appeared
lundamentally based, as mild weather lorecasts
persist. In addition, a moderately bearish Ameri-
can Gas Association injection estimate also hap-
pened to coincide with the usual pre-expiration
liquidations, adding ruelto the sell-off,
Even though the week ended with prices
trending downward into the $4.80s , some trad-
ers believe that gas prices have possibly hit bot-
tom ror the rest 01 the year,
A little over a week ago, $5 was consid-
ered an attractive buy, so now that we are below
, we should begin to see a nurry 01 activity as
the June contract begins 10 actively trade: a
lutures trader said.
Summer heat is just around the corner
hurricane season begins in just a month rrom
now, and to top it all olf, we will be seeing a sub-
stantial increase in the number or gas-lired power
generation plants coming online. It all adds up
to the likelihood of higher prices to come, from
what I can see ' the trader said.
Commitments of Traders
This table shows long, short and spread positions
01 non-commercials, as reported weekly to the
CFTC,
Apt. Date
24-Apr
17-Apr
1Q.Apr
Long
430
137
908
Short
524
10,471
693
Spreading
771
630
911 I
Gas Daily
PRICE HEDGING REPORT
A Weekly Supplement to Gas Daily
Traders fear winter price repeat at Sumas
ith traders coughing up more than $40/mmBtu for gas at Sumas. Wash.. last December.
~Iayers find themselves this spring attempting to hedge off any repeats of those bad memo-
nes.
One source said trying to detennine what Sumas prices will do next winter is very diffi-
cult. "Weather and demand are big factors. And then there s the uncertainty of when Northwest
Pipeline will call an operational flow order at Kemmerer. Wyo,," the source said,
He said constraints on northbound gas out of Wyoming on Northwest forced traders to
buy Sumas gas last winter, helping drive the price up there. 'That forced a lot of people to buy
Sumas gas when they nonnally wouldn t buy there, If people try to shove g;as throu(!h the
constrained points like they did last year, we ll definitely see expensive gas again:'
Because temperatures plunged so early last winter, there were strong storage draws in the
Pacific Northwest and Rockies that led to storage worries for the rest of the season, another
trader said, And California s power woes statted around the same time.
All of that combining is why we saw $40 gas," the source said. "If all that happens again.
ll see a return of $40 gas.
California s energy crisis will once again have an impact on Sumas price direction next
winter, another source said. "If Southern California Gas goes to $40. Malin and Sumas will go
there too, It s not just a point-by-point problem. (t s a western region problem, A lot of these
markets are connected.
To hedge themselves against that kind of volatility for the upcoming winter. most traders
are working the November-to-March strip. "Sumas is trading at a small discount to Malin right
now," one trader said. "Anywhere from 401t to $1.10 over the last few months,
Even though there is a certain spread. there is a big premium to the physical molecule
in the wintertime. People trade financially
to lock in positions, but if they want to con-
vert to a physical position they pay big dol-
lars. he added. "Physical molecules will
create the Btus, not the financial paper," he
explained,
Utilities have to make sure they are
covered against the big price spikes too. no
matter what factors enter the picture. a
source said. "As a utility, we probably do
more hedging than a marketer. We typically
do it every year and not because of what
happened last year at Sumas," the utilitysource said.
N. American rig count stable
After two weeks of big drops, the Cana-
dian rig count stayed relatively flat last week at
188. The number of rigs exploring for oil and
gas in Canada had dropped a total or 80 in the
previous two reports released by Baker Hughes.
The U.S. rig count remained about the
same, as well, The number or rigs exploring for
oil and gas stood at1 ,212 last week, down one
from the previous count.
For all or North America, the oil and gas rig
count dropped one to 1,400.
Henry Hub Futures and Strips
This table shows selected NYMEX Henry Hub conlract senlemenl pricBS 'rom Ihe pasl week and calculates the 3.0 6-, 9'
and 12-monIh spreads. The chart 10 the right olll1e table data shows slrip movement over the past 20 trading days. A dash
indicales no data; an H indicates a holiday.
04123 04124 04125 04126 04127Mon TUII Wed Thu Frl
May.OI 5.125 5.078 4.981 4.891Jun-Q1 5.175 5,114 4.994 4.940 4,867Jul-Q1 5.240 5.177 S.057 5,002 4.935
Aug.OI S.298 5.232 5.110 5.055 4.990Sep-Ol 5.310 S.245 5.12S S.070 5.010Oct-Q1 5.338 5.275 5.15S S,IO2 5,045Nov-Q1 5,482 S.420 5.300 5,252 5.198Dec-Q1 5,618 S,562 5.450 5.402 5.354Jan-Q2 S.672 5.617 5.507 5.462 5.415Feb.O2 5.512 S.462 S.357 5.317 5.275Mar-Q2 5.242 5.205 5. t 15 S.086 5.050
Apr.02 4 792 4 749 4.665 4 646 4.620
3Islnp S,180 5.123 S.011 4.944 4.930
6/slrip S.248 5.187 S.070 5.010 5,007
9/slrip 5.362 5.302 S.187 5.131 S.121
121slrip S.317 5.261 S.151 5,102 5.022
b;-
a I.
t1;) r.npyril7ht 2nO1 hy Financial TImes Ener'lY
..................-.."",."
'.....n
........,,......,
""WI
Exh, 7 / Schedule 29
R. Lafferty
A vista Corporation
Page 10 of 11
Page 2
605
205
405
065
095
790
055
050
335Cltygal..
Chicago-LDCs, large e-us 4.230 4.14-30 4,19-27Mich,.consum. Energy'. 4.355 4.32-42 4.33-38Mich.-Mich Con'. 4.345 4.:JG.41 4.32-PSCo citygate 3.515 3,33-67 3.43-60PG&E citygate 8.295 7,40-9.10 7.87-8.Northwesl(angales) 4.160 4.15-22 4,15-17Fforida gales via FGT 4.465 4.40-51 4,44-49Algonquin citygales 4.505 4.42-56 4,47-Dominion (deMvered) 4 580 4,57-59 4.57-Columbia Gas (delivered) 4.550 4.54-56 4.54-56Tenn. zone 5 4.450 4,42-46 4.44-46Tenn, zone 6 (delivered) 4.440 4,41-49 4,42-48Iroquois. Zone 2 4.465 4,45-48 4,46-47Texas E.. M-3 4.490 4.41-60 4.44-54Transco Z6 (non-NY) 4.480 4.41-80 4,43-53Transco Z6 (NY) 4,515 4,45-62 4,47-NOTE: Price In CS per gl: CS1=USSO,64918 (Canadiancurrency senlemenl from one bualnesa day prior EST,
Large end-user prices. -.Dellverles Inla SaCal alTopack, Blythe, Needles, Ehrenburg; deliveries InlaPG&E al Tapack and Daggen.Valurne-_Ighled forall poinla excepl AECo-C and Weslcaasl 51. 2. --TheNOVA (same-day) midpalnl and ranges are for flaw on
Ihe transacllon dale.
Daily Price Survey continuedTrans. dala SI9 5/9Flaw dale(s) 5110 5110
Midpoint Absalula
New Mexico-San Juan Basin
EI Paso, Bondad 3,615 3.50-68EI Paso, non-Bondad 3.630 3,50-75TW (Ignacio, pis south)
TW SJ (Blanco)
Rockies
CIG (N, sysl) 3.470 3.1&-65
Kern River/Opal plant 3,610 3.38-74. Stanfield 4.170 4.05-25Cuestar 3.570 3.40-72Cheyenne Hub 3.700 3.38-82
, Wyoming Pool 3.570 3.50-69. soulh of Green River 3.465 3.15-65Canadian GasIroquois 4,400 4,37-41Niagara (NFG, Tenn) 4.395 4,37-43NW Sumas 4.060 3.98-4.
NOVA (AECo-C, NIT)' C5.665 CS.&2-69NOVA (same-day)"'" C5,635 5.58-&8
Emerson (VikinglGL) 4.100 4.05-17Dawno Ont 4.405 4.38-44PG&E-GTNW (Kingsgate) 4.000 3,99-4,Weslcoasl, St 2' C5.745 C5.&7-77Appalachia380 4,36-40395 4.34-51345 4,29-4:)Mlssl8S'ppI-A18bama025 4.110-05990 3.95-4.4.235 4,20-27150 4,12-OthersAlgonquin 4.470
SoCal gas. large pkgs'" 12,430
PG&E, large pkgs'" 8.305
Kern River Station
Malin
Amance (inlo Interstates)
ANR ML7 (entire zone)
NGPLAmaril1o receipt
NGPL Iowa-III, receipt
Northern (Mid 13)
Northern (VenIUra)
Nonhern (demarc)
Dracut (Into TN)
Dominion Nonh Point
Dominion South Point
Columbia. App
FGT, Mobile Bay
Gull South. Mobile Bay
Texas E.. M-I (Kosi)
Transco, SL 85
46-48
12.00-95
5G-8.
4.25-95
18-24
36-49
02-
03-16
77-81
01-15
110-15
30-44
519
5110
Cammon
35-59
3.52-
12-22
49-65
59-81
3.52-
3.34-59
39-41
38-4 I
02-
C5.6s.&8
&1-66
07.13
311-42
99-4,
CS.72-77
37-
35-44
31-
OI~
97-4.
22-25
13-17
46-48
12.19-&7
9NI,
43-78
19-22
37-44
04-09
0&-13
77-
02-119
01~9
30-37
Gas Daily Thursday, May 10, 2001
57-
57-
willingness to absorb both positive and negative financial performance.
In first quarter 2001. TransCanada s gas marketing operation lOok a major hit supplying
gas under a contract with a Midwest utility that calls for lower than market prices. The effects
of that contract and the costs of exiting the retail gas business caused the unit to record a C$6
million loss for the quarter. In the 2000 first quarter, the marketing unit reported C$IO million
in earnings.
Gas marketing revenues grew by some C$4.5 billion in the first quarter compared to last
year, mostly due to higher gas prices.
TransCanada said it had considered other options for the business. such as refocusing and
downsizing, but decided it would be more valuable if it was divested as a going concern to "
more appropriate owner.
We recognize our employees bring the most value to the gas marketing business, so we will
negotiate with prospective buyers to maximize opportunities for these employees." Kvisle said.
We will work with all affected employees to ease their transition through the process," SGS
Low storage levels to keep gas prices high
e to the low level of underground 2as stora2e and stron2 demand for natural gas ttll,!elelectriciteneration, the Energy Information Administration expects 2as prices to remain
high until at least next year,
For this spring and summer, gas prices arc projected to decline modestly. In 2001, anl11,!~l~
E..ric:.e~~!!1 avt':l1,Ige l1!.~re than $5,ElAstated in its SItQrt-T~rm E~
~y_
Ql!tlp9_. If the sprini an
summer are hot in regions that consume large quantities of gas, th~ inj~~tions inIQunderg~!!.nd
storage would again be strained, resulting in a rise in prices again next winter,
The outlook "reaffinn(s) the need~o ~~...el~p ~~~tional sources of enef2Y .while building and
maintaining the necessary infrastructure to more those supplier to the market." said Energy Secre-
tary Spencer Abraham. Until we take steps to address these problems ~c;~i!Lcontinue to experi-
ence volatility in enef2Y markets and higher prices passed on to consumers at the gas pump.
Domestic gas production for 2001 and 2002 is expected to rise as production responds to
the high rates of drilling over the past year, EIA said. The growth rates are projected to be 2.
in 2001 and 2.5% in 2002, compared to 3.7% in 2000.
Very large storage injections are still expected for this summer. The storage situation, said
EIA, is expected to improve next year, however, driving prices down.
A slowing economy and less rapid demand groWth in the industrial and commercial sectors
would decrease the gas demand in 2001 to about 1.9%, as compared to the high growth rote of
9% seen in 2000. Growth in 2002 is expected to be about 3.4% as the economy picks up again.
Net imports for gas are projected to rise about 13% in 2001 and another 4% in 2002. For
the coming summer season, EIA projected that gas imports will be 17% above last summer s asdemand for storage refill is likely to be high,
BP chooses Tampa as site for LNG terminal
he city of Tampa, Fla" has the potential to become one of the great energy hubs in North
America as the result of Gulfstream Natural Gas System coming onshore in the area as well
as BP's plans 10 build a $200 million import tenninal in the Port of Tampa, BP North
America Gas and Power President Tony Fountain said yesterday at GasMartlPower in Tampa.
Crude oil and coal already have a strong presence in Tampa because of its major port. "
for us, we re very keen that this is going to become one of the great (liquefied natural gas) hubs.
Gas DailV-Volume IB, N'umber 90
(ISSN:08B5-5935)
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Director, news division Randy Rischard
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Report",s Gene Lockard, Sandra SIr,.;I, Alan
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Exh, 7 / Schedule 29
R. Lafferty
Avista Corporation
Page 11 of 11
CLEARING UP. February 18. 2002. No. 1019. Page 6
Supply & Demand
(13) Snohomish Public Utility District
Contemplates Rate Relief. from (5)
The POD with the highest riltes in Washington is
considering ways to bring electric prices down, At its
meeting last week, the Snohomish County POD board
of directors discussed options to lower the utility s aver-
age 8.3 cents/KWh price,
It's absolutely the first priurity of this district." said
Commissioner Cynthia First. ller own two-month elec-
tric;: bill was $800 "and I don t live in an electrically
heated house " she said. The l,ill equals "another house
payment. "
Snohomish is BP A's largest customer. It takes
75 percent of its power from the agency, First said,
BPA's 46-percent wholesale price inc.rease last October
was mostly passed on to ratepayers,
We are going to be very ag&ressive, looking at BPA
and asking them to cut the cost. ' she said, "Our cus-
tomers are biting the bullet and I don t see BP A biting
the bullet. "
First said she wants the PUD to consider adding gen-
eration. possibly a. gas-fired plant. It
'We are ~ng to very already has one hy-
aggressive, looking dro project and has
at BPA and asking them made some headway
to cut the cost.' on renewables. "
need something that
gives us control." she said, "Gas is a perfect balance for
hydro. "
First said aluminum workers have gotten a lot of at-
tention and money from BPA that her ratepayers are
subsidizing. but it's harder to identify the economic
damage in the north Puget Sound area.
Boeing laid off 5,000 people in our service area
she said, noting it is not clear how significant the price
of electricity was as a factor in the company s decision
to make those staff reductions,
Besides BPA's prices, Snohomish thinks it got
screwed on three long-term 25-MW contracts signed last
winter, one each with Enron, AEP and Morgan Stanley.
The Everett HeraJd reported tltat if Snohomish can get
out of the contracts, it could h.:ad to a 9 percent rate re-
duction.
The PUD has cancelled an 8-year contract with En-
ron for 25 MW calculated at $1O9/MWh and is waiting
to see i the ruptcy court imposes a penalty. This
week negotiations are scheduled on changing the terms
of a 5-year deal with AEP for 25 MW calculated to cost
$150/MWh. And last week the PUD filed with FERC to
get out o an year contract with Morgan Stanley for
2j MW at $1O5/MWh (CU No. 1018 14/13)). "Our po-
sition with Morgan Stanley is that s just out of the ball-
park " First said,
POD spokesman Neil Neruulsos said Snohomish is
holding off, for now. on renegotiating a 5-year contract
with PacifiCorp for 25 MW,That contract s price was
reported at $78/MWh.
Commissioners ave cautioned the public that rates
may go back up if Bonneville raises its price.
Staff recommendations for reducing rates are on the
discussion list for the commission s Feb. 26 meeling, A
public hearing on the subject is scheduled for Mal Lit 5
(Cindy Simmons).
(14) Kaiser Files for Bankruptcy; CFAC
Resumes Production. from (7J
Kaiser Aluminum Corporation blamed asbestos-
related lawsuits and falling profits for its decision to
seek bankruptcy court protection last week, The com-
pany said plant expansions and falling demand , along
with the lawsuits. left the company with $700 million in
bond debt. It acknowledged that it would not be able to
make debt payments of $200 million this month,
Kaiser shut down all of its potlines at primary smelt-
ers near Spokane and Tacoma in 2000, It announced last
fall that it had no plans to restart either plant.
The bankruptcy filing will have minimal effect on
BPA , according to spokesman Bill Murlin. BPA cur-
rently supplies Kaiser with less than 29 MW and Murlin
said the company "has not told us to stop delivering, "
Bonneville also expects Kaiser s long-term tak(~-or-
pay agreement to remain in effect. Last year BP A
agreed to eliminate the take-or-pay obligation until next
October, in return for interruption rights on a portion
the company's federal load. But Murlin said that once
the interim agreement expires in October. "they are
back on the hook for the amount of power they would
normally have taken, which is about 290 MW,
Murlin said Kaiser has made no attempt to renegoti-
ate its contract since the bankruptcy filing. "We Ilave a
contract through 2006 and there s been no effort lo
change that " he said,
Kaiser president and CEO Jack Hockema said the
Chapter 11 filing "will provide Kaiser with the opportu-
nity to reorganize its financial structure and implement a
strategic plan to return to sustained profitability.
Shortly after the filing, the company received a $300-
million loan from the Bank of America.
Kaiser was circumspect on whether it plans to sell
any of its facilities. but analysts said that companies
such as Alcoa Aluminum might be interested in pur-
chasing the Trentwood rolling mill near Spokane. Kaiser
spokesman Scott Lamb would only say that the company
has "no current plans to sell any of its facilities.
While Kaiser was embroiled in bankruptcy court, an-
other aluminum plant in Washington, Columbia Falls,
was making plants to restart one of its five potlines.
Idled for more than a year, Columbia Falls will rea' ti-
vate the potline next month.
Copyright ~2002. Energy NewsData Corporation
Exh, 7/ Schedule 30
R. Lafferty
A vista Corporation
Pg, 1 of 3
PRICES SPOT ELECTRICITY
WEEK ENDING FEBRUARY 9-DAIL Y 0 FF -PEAK INDEXES
($ per MWh)
February February February February February February February Daily Index Sunday Monday Tuesday Wednesday Thursday Friday Saturday
COB 20.59 20,19.20,20.20.20.Mid-19.19.45 18,19.19.18.18.Palo Verde 19,19.16,16.17.14.14.Four Comers 19,19,17,18.18.18.18.NP15 22,22.51 20,20.22.21.56 21.56SP1522.22.19,20,22.20,20.New England 20.21.25 22,23.21.75
PJM WesternHub N.A.17,18.20.17,16.N.A.V ACAR 16,18,19.18.18,
Southern, into 18.19,23.17,16.N.A.Florida 18.17.17,17,20.N.A.TV A, into N.A.13.50 14.14,14,14.N.A.ECAR, North N.A.15.17,17.16.14.Into Cinergy 13.14.15.14.12.
MAIN, North N.A.13.14.15.14.13.MAIN, South 13.14.15.14,13.CornEd, into 13.14.43 15.14,13.N.A.MAPP, North 13.13.38 14.14.13,MAPP, South N.A.13.13.14.14,13.N.A.SPP, North N.A.12.13.14.14.13.31Entergy, into 14.14.15.15.14.N.A.ERCOT 14.14.15.14.14.
NOTE: Index prices are for daily prescheduled, off-peak (8 hours) electricity, The off-peak indexes for these markets are based on financially finn or physicallyfiml power, Western Monday off-peak deals includes power for delivery around.the-clock Sunday. Indexes are calculated based on prices of actUal transactions
reported by both buyers and sellers, The chief detenninanl of the index price is the volume-weighled average. However, the straight average, median. andmode are also considered.
The price and the conditions of service from Enron were
ridiculously overpriced and way out of line with what should
have been demanded " said Gianunzio, "The prices we were
paying at the time were the result of a lot of market manipula-
tion. Hopefully, we can get some relief from (the Federal Ener-
gy Regulatory Commission) or renegotiate the contract"
Snohomish is also attempting to renegotiate contracts
with American Electric Power and Morgan Stanley. The av-
erage price of three contracts, which were signed with En-
ron AEP and Morgan Stanley in January 200 I, was $110/
MWh and the tenns were for five to seven years,
FERC deemed that $75/MWh was the ceiling on "just
and reasonable" at that time in the wholesale spot marketGianunzio said,
The Palo Alto-canceled contracts involved one signed
April II , 2001 , for a portion of the city's natural gas sup-
ply and one on May 7, 2001 , for 25 MW through 2004,
The city had signed two contracts July 1 , 200 I , for natural
gas services.
We became increasingly concerned about Enron s abil-
ity to deliver on its contractual obligations to us as reports
about the company s financial instability became more seri-
ous " said John Ulrich, director of the City of Palo Alto
Utilities. "Once Enron s bond rating was downgraded, we
felt it was in the city's best interest to tenninate these
contracts immediately,
The state of California is seeking to renegotiate all its
long-tenn energy contracts and began those efforts prior to
the Enron debacle, state officials said. "re trying to re-
negotiate our long-tenn contracts, but we don t want it to
be construed as directly related to Enron " said a spokes-
man for the California Dept. of Water Resources, which be-
gan buying power last year when the wholesale price
spikes debilitated the state s biggest utilities,
California has 56 short- to long-tenn contracts that
range from one to 10 years, None involve Enron, but the
state is eyeing the ripple effects on their suppliers that do
deal with Enron. The state estimates that Enron might have
800 to 1 200 MW of power in the California market. If the
marketer cannot deliver, the state might be forced to cover
or absorb the load,
But DWR said the state is not worried. While California
was forced to buy 100% of its power on the spot market
last year under the threat of blackouts, the state s con-
tracts and conservation efforts have put it in a much better
position, according to DWR,
In the meantime, the state is looking for "mutually bene-
ficial deals" that can involve delivery points to building new
generation. "It was not done in the light of Enron news, but
done prior to that " the department spokesman said,
Meanwhile, BPA last week said it would honor five-year
contracts to buy 300 MW of power from Enron, The con-
tracts mostly began in January 2002 and extend for five
at an average price of $52/MWh. although prices range from
$30/MWh to $85/MWh,a BPA spokesman said. Enron
amounts to 10% of BPA's total purchase book and the pur-
chases represent 3% of BPA's total load, he said. Most of
the co~tracts were signed in fall 2000 and spring 200 I,
We are very comfortable with our position and that
we made good decisions under the circumstances last
year " said the spokesman, Although power prices are low
now, they could rise and over time the price BPA paid
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POWER MARKETS WEEK-February 11, 2002 ~
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CLEARING UP . February 11. 2002 . No.1 018 . Page 8
significant drop" in the prices that day and that no
other market fundamentals pertained.
Before signing the contracts with Morgan Stanley
and others, Christensen said the PUD sent an RFP to
17 suppliers. Only five replied, and two of those replies
were not responsive. None of the remaining three would
supply more than 25 MW, but the utility had a hole of
75 MW to 100 MW
. "
so we had no choice of suppli-
ers," Nor were any of the three willing to keep their of-
fers open for five days as the RFP requested. "They
insisted on the right to 'refresh' their prices. So we
could either si them si ht unseen at rices cited orrea e contracts and watch the prices go up," During
the five days the PUD took to review the contracts the
prices for all three went up 15 percent, even though the
market rose only 10 percent, he said,
Christensen said the PUD did try to find evidence as
to whether there was collusion among the suppliers, "
looks pretty stinky. There is this question of (whether)
this was a strategy driven by what was going on in the
short-tenn market or if there was some more nefarious
dealings among them." But he said either way. the re-
dress the utility seeks is the same,
Judy Hitchen, a spokesperson for Morgan Stanley,
rejected any suggestion of collusion, "We didn t know
how many other bidders there were" or who they were,
she said. "Needless to say. we didn t have conversations
with any of bidders, and we had no information about
their bids or the tenns." She said the contract M-
signed with Snohomish "was entirely proper, arm
length and fully negotiated" (Ben Tansey).
(14) Power Planning Council's 20-year
Plan Assumes Mixed System from (51
The Northwest Power Planning Council has drafted a
paper outlining the issues to be addressed in its next 20-
year Northwest Power Plan,
By law the council must forecast demand for elec-
tricity and present strategies for meeting that demand.
In the draft , the council noted competitive wholesale
markets require utilities to think in much shorter time
frames. The next five to seven years will be a special
focus of the plan, but the drafters said long-tenn plan-
ning makes sense as well,
The plan assumes the Northwest will continue to
have a mixed system in which there is competition in the
wholesale market, but little at the retail level. It also as-
sumes retail rates will continue to be established by
regulatory agencies.
It is unlikely that there will be any significant re-
versal of national policy encouraging wholesale compe-
tition," the drafters wrote, They said their policy goal is
not to restructure power markets overall, but to seek
improvements within this mixed market structure that
will allow it to function more efficiently and effec-
tively. "
The difference in the market experiences of whole-
sale and retail buyers was one of the first problems ad-
dressed in the draft. "The council and most other
analysts agree that the crisis (of 2000-2001) was
heightened and prolonged by the lack of response of
electricity demand to the growing shortage and increas-
ing price of electricity, In California, this was because
retail rates were frozen while stranded costs were re-
covered. In other parts of the West, it was a result of a
continuing mix of regulated retail markets with little at-
tention to what is needed in order to allow the competi-
tive wholesale market to work effectively, "
The council said the mixed system needs mechanisms
to increase retail demand's responsiveness to wholesale
prices. Real-time pricing was suggested for commercial
customers, as was peE's Demand Exchange, in which a
utility pays customers for load reduction,
The council also suggested alternative rate designs
for all consumers that
would provide pre-
dictable rates for a
base amount of con-
sumption, with market
rates for additional
electricity use,
Direct service in-
dustries could continue
to offer flexibility in
shortage situations.
The drafters noted that
most of the load re-
duction achieved over the last year was from the Direct
Service Industries, primarily aluminum smelters," In
deciding what power DSls get from Bonneville after
2006, the council said the -benefit of having large users
that can be cut off should be considered,
The draft of issues to be addressed in the 20-year
plan also looked at how market signals lead to the de-
velopment of new generation, "Most, although not all
new generation is being developed by independent d
velopers," the draft said, Of 6679 MW added or to be
brought on line between 1994 and 2003. 71 percent
comes from independent generating companies, the draft
said, and 24 percent from utilities,
The council said the Northwest s hydropower system
can vary 4000 aMW plus or minus the mean of
000 aMW, "Thus a period of near-average or better
water conditions could hold down prices and destroy the
profitability of a power plant. Conversely, a low-water
year or two can result in large profits, " The hydro fac-
tor "could adversely affect the amount and timing of in-
vestment and, therefore . the adequacy and reliability of
the power supply.
Overall, the council said
. "
Inadequate investment in
generation and conservation may lead to not just price
volatility. but also actual electricity supply shortages and
interruptions and the attendant economic disruptions.
Some options suggested were providing capacity
payments as incentives for investment in generation;
empowering some entities to build to maintain a par-
ticular capacity margin; or requiring utilities to maintain
a particular capacity margin,
On conservation , the council said in the draft that the
flexible conservation investment of the past has not
Conservation that was
not done in the late
19905 and 2000
would have almost
entirely paid for itself
at the market prices
that existed between
June 2000
and June 2001,
Exh, 7 / Schedule 30
R, Lafferty
Avista Corporation
Pg, 3
Copyright (1;)20020 Energy NewsData Corporation
CONFIDENTIAL
Position Reports - Hedge Transactions
THIS PAGE CONTAINS CONFIDENTIAL MATERIALS AND IS SEP ARA TEL Y FILED
Exhibit No., Schedule 31 Pages 1 - 30
R. Lafferty
A vista Corporation