On the US Energy Crisis

[Garo]

posted September 02, 2001 12:05 AM by Azat

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Consumers hurt by deregulated power markets-report

Reuters ( August 30, 2001 )

 

WASHINGTON (Reuters) - Consumers in states that have restructured their electricity markets are paying higher rates for power and getting worse service than those living in states that have not deregulated, according to a report released Thursday.

 

``Consumers have been subjected to rate hikes and lack of competition not just in California but also in New York, Pennsylvania and other states that have restructured,'' said Mark Cooper, director of research for the Consumer Federation of America.

 

The group's report said individual electricity markets need at least twice as many power suppliers -- possibly up to 10 firms -- as currently deemed sufficient to support competition.

 

``Firms raise prices to increase their profits because they do not lose enough sales to competitors, or because consumers lack alternatives. This is the reality of the electric industry,'' the report said.

 

The group also said utilities should be required to set aside more power reserves in case of supply emergencies. This would help keep the price for power from being bid up, because more supplies could quickly be brought on line.

 

``Reserve margins need to be well above traditional levels of 15 to 20 percent, perhaps as high as 30 to 40 percent to prevent the abuse of market power,'' the report said.

 

In addition, the report said transmission power lines should be independent of all electricity generators' control and operated by entities whose sole purpose is to promote the public interest.

 

``Only a dramatic change in approach by federal and state policy-makers can offer consumers the possibility of lower prices and better service,'' said Cooper.

 

Until policy-makers address the underlying problems in electricity markets, the group recommended any state that has not deregulated or is in the process of doing so should slow those efforts or stop them altogether.

 

The group also said federal authorities should declare a moratorium on utility mergers until market competition is firmly established.

 

The report listed several problems the group said it found in key deregulated states:

 

+ In California, wholesale power prices quadrupled and blackouts were a threat this summer after energy suppliers allegedly withheld electricity and manipulated prices.

 

+ In New York, summer rate hikes of 40 percent for Consolidated Edison's residential customers combined with threatened blackouts forced federal price caps, distribution of emergency diesel generators and conservation programs.

 

+ In Pennsylvania, the end of temporary rate cuts and a rise in natural gas prices pushed up power prices and pushed out competitors.

 

+ Twenty-two states are currently restructuring their electricity markets and consumers in early starters like Massachusetts and Montana have seen prices increase dramatically.

 

Power blackouts this summer have been avoid in many states not by relying on market forces, but by highly publicized energy conservation programs and a ``lucky break'' with cooler-than-normal weather, the report said. ^ REUTERS@

 

Copyright © 2001 Reuters Limited. All rights reserved. Republication or redistribution of Reuters Limited content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters Limited. Reuters Limited shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

[MJ]

White House report calls US energy picture dimmest in 30 years

 

Inside Energy/with Federal Lands--21May2001

 

The Bush administration's energy policy task force presents a stern view of the United States' energy situation, calling the imbalance in supply and demand the worst it has been in 30 years and warning that remedies will take years to fully implement. "America in the year 2001 faces the most serious energy shortage since the oil embargoes of the 1970s,'' says the report, which President Bush unveiled Thursday in St. Paul, Minn.

 

"The effects are already being felt nationwide. Many families face energy bills two to three times higher than they were a year ago,'' the report says. "Millions of Americans find themselves dealing with rolling blackouts or brownouts; some employers must lay off workers or curtail production to absorb the rising cost of energy. Drivers across America are paying higher and higher gasoline prices.''

 

The report depicts the US energy situation as "a fundamental imbalance" between supply and demand. One chart shows the difference between US consumption and production, now about 25 quadrillion BTUs, increasing to about 50 quads in 2020.

 

"This imbalance, if allowed to continue, will inevitably undermine our economy, our standard of living, and our national security,'' the report says. "But it is not beyond our power to correct. America leads the world in scientific achievement, technical skill, and entrepreneurial drive. Within our country are abundant natural resources, unrivaled technology, and unlimited human creativity.''

 

"With forward-looking leadership and sensible policies, we can meet our future energy demands and promote energy conservation, and do so in environmentally responsible ways that set a standard for the world,'' the report says.

 

The report lists as principal challenges "using energy more wisely,'' repairing and expanding the US energy infrastructure, and increasing energy supplies in ways that improve the environment. It says meeting each of the challenges is critical to expanding the US economy, meeting demands of a growing population and raising the nation's standard of living.

 

On conservation, the report says new technologies have enabled significant improvements in energy efficiency in farming, manufacturing and homes, as well as in development of better materials. "While such advances cannot alone solve America's energy problems, they can and will continue to play an important role in our energy future,'' the report says.

 

To match supply and demand, the US will require 38,000 miles of new natural gas pipelines and 255,000 miles of gas distribution lines, the report says. Similarly, it notes that an antiquated transmission grid makes it difficult to deliver electricity over long distances to avert regional blackouts, such as those occurring in California. "Renewable and alternative fuels offer hope for America's energy future,'' the report says. "But they supply only a small fraction of present energy needs. The day they fulfill the bulk of our needs is still years away. Until that day comes, we must continue meeting the nation's energy requirements by the means available to us.''

 

The report cites estimates that over the next 20 years, the US will consume 33% more oil, 50% more natural gas and 45% more electricity. "Increases on this scale will require preparation and action today,'' it says. "Yet America has not been bringing on-line the necessary supplies and infrastructure.''

 

The US produces 39% less oil today than it did in 1970, despite new technologies that have transformed exploration and production, the report says. If current production trends hold, the US will import nearly two-thirds of the oil it consumes.

 

The US has similar opportunities to increase electricity supplies, the report says. Based on projected demand over the next 20 years, the nation will need between 1,300 and 1,900 new power plants, many of them fueled with natural gas, it says.

 

The report offers more than 100 recommendations to improve energy efficiency, modernize energy infrastructure and increase energy supplies.

 

Among the energy-efficiency options are recommendations to direct federal agencies to take actions to conserve energy use at their facilities, especially during periods of peak demand in regions where electricity shortages are possible; increase funding for renewable energy and energy efficiency research programs that are performance-based and cost-shared; create an income-tax credit for purchases of hybrid and fuel-cell vehicles; extend DOE's "Energy Star'' program to include schools, retail buildings, healthcare facilities and homes; provide tax credit and streamline permitting to accelerate development of combined-heat-and-power technology; and direct the Transportation Dept. to review Corporate Average Fuel Economy standards once the National Academy of Sciences completes a study on the topic.

 

Recommendations to modernize US energy infrastructure include options to direct agencies to expedite pipeline permitting; issue an executive order directing agencies to coordinate federal, state and local actions necessary for energy projects; grant the government authority to obtain rights-of-way for electricity transmission lines, similar to authority available already for natural gas pipelines and highways; enact comprehensive electricity legislation that promotes competition, encourages new generation and protects consumers; enact legislation to provide for enforcement of electricity-reliability standards; and expand DOE's R&D on transmission reliability and superconductivity.

 

To increase energy supplies, the task force proposes to issue an executive order requiring agencies to consider the energy impact of their regulatory actions; open the Arctic National Wildlife Refuge's coastal plain to oil exploration and production; earmark $1.2-bil of bid bonuses from ANWR development to fund alternative and renewable energy research; enact legislation to expand existing alternative fuels tax incentives to include landfills that capture methane gas for electricity production and to electricity generated from wind and biomass; provide $2-bil over 10 years to fund clean-coal technology as well as a new credit for electricity produced from biomass co-fired with coal; streamline hydropower relicensing; and promote nuclear power by establishing a national repository for high-level waste and by streamlining licensing of nuclear plants.

 

Among the environment-related recommendations are ones that would enact "multi-pollutant'' legislation to establish a flexible, market-based program to "significantly reduce and cap'' emissions of sulfur dioxide, nitrogen oxides and mercury from power plants; increase exports of US technologies that produce energy cleanly; and establish a "Royalties Conservation Fund,'' with royalties from ANWR production, to fund land conservation efforts.

 

The report also calls for steps to help low-income people cope with high energy prices, including recommendations to dedicate new funds to the Low Income Home Energy Assistance Program by funneling a portion of oil and gas royalty payments to LIHEAP when prices exceed a certain level; double funding for the Department of Energy's Weatherization Assistance Program, increasing it by $1.4-bil over 10 years; and support a "North American Energy Framework'' to expand and accelerate cross-border energy projects.

 

"Present trends are not encouraging, but they are not immutable," the report says. "They are among today's most urgent challenges, and well within our power to overcome."

[Azat]

Project to Boost Flow of Energy

 

Power: Firms, agencies would build new line to ease clog that helped cause rolling blackouts.

 

By NANCY RIVERA BROOKS, TIMES STAFF WRITER

 

 

A group of major energy companies will play a key role in building a new power transmission line to ease a notorious bottleneck that limits the flow of electricity from Southern to Northern California, Energy Secretary Spencer Abraham announced Thursday.

 

The deal would potentially give the private companies the ability to influence the price and flow of electricity on a pivotal segment of California's transmission grid. State officials have previously expressed dismay about such a possibility, which could make less transmission available for other parties and increase the price of electricity transmission.

 

The chronic electron traffic jam on the so-called Path 15, near Los Banos in the Central Valley, was partly responsible for California's rolling blackouts in January. Capacity limitations along the link limited the flow of electricity from Southern California, which had a surplus, to power-starved Northern California. The new pathway, a $300-million project, will be built by the private companies in a consortium with public agencies named Thursday by the U.S. Department of Energy.

 

"We are taking a major step toward a solution that will relieve the pressure of this choke point in the transmission grid," Abraham said during an afternoon news conference at Stanford University. "This proposal will benefit California ratepayers without burdening taxpayers."

 

But key details remain to be negotiated on how much each partner would own and how electricity would be moved along the new line, which is expected to be operating as early as summer 2004.

 

President Bush directed the Energy Department to find a way to pay for the expansion of Path 15 without federal funds. The pathway is an 84-mile stretch of high-voltage transmission wires that are capable of moving nearly 3,800 megawatts between Northern and Southern California.

 

The corporations that are financing and helping to build the project would be allowed to charge tariffs on power transmitted over the new 500,000-volt transmission line, Abraham said. The line would boost capacity by about 1,500 megawatts, or enough to serve 1.1 million typical homes.

 

Most of the winning bidders were energy companies, including Pacific Gas & Electric Co., which owns the six existing Path 15 transmission lines, and PG&E's unregulated sister company, National Energy Group, which builds power plants and buys and sells wholesale electricity. PG&E is operating under bankruptcy-law protection, but National Energy is not.

 

Other companies participating in the project are Williams Energy of Tulsa, Okla., a major electricity seller in California; Kinder Morgan Power, a subsidiary of the Kinder Morgan natural gas pipeline company of Houston; and Trans-Elect Inc., a Washington, D.C., company that earlier this year offered to buy the electricity transmission grid for California's troubled utilities.

 

The project manager will be the Western Area Power Administration, a federal agency that markets power from federal dams in the West. A key participant will be the Transmission Agency of Northern California, a municipal utility group that owns a major transmission line between California and Oregon.

 

Path 15 has been slated for expansion for more than a decade but has become a growing problem in the last few years as electricity demand has increased.

 

PG&E has resisted creation of more capacity. State regulators, in a proceeding separate from the federal plan, have ordered PG&E to expand Path 15.

 

PG&E President Gordon Smith applauded the proposal, which would require less investment by the insolvent utility than the competing state plan.

 

"The project posed by the [Energy Department] envisions an innovative public-private partnership where the parties will not only share the benefits but each will share an appropriate level of project costs," Smith said.

 

Federal law mandates fair fees and open access for electricity sellers to transmission lines. But owners of transmission rights can sell the ability to move power in a secondary market operated by the California Independent System Operator that critics contend is subject to manipulation.

 

San Francisco-based PG&E and Trans-Elect committed Thursday to cede their transmission rights to Cal-ISO, but such a commitment is not required in the preliminary agreement to build the transmission line, said Robert L. Mitchell, executive vice president of Trans-Elect. At least two of the companies participating, National Energy and Williams, routinely move electricity on the state's grid.

 

Mitchell said revenue from the new transmission line would be regulated by the Federal Energy Regulatory Commission and would provide investors with a "modest return."

 

Consumer activist Harvey Rosenfield criticized the deal, telling Associated Press that California would have been better off if the state had bought the transmission lines. Gov. Gray Davis proposed a transmission grid purchase but was unable to get support from PG&E or the Legislature.

 

"I don't think it's in California's interest to have the federal government and a bunch of out-of-state energy companies on the spigot that controls the flow of electricity in California," said Rosenfield, founder of the Santa Monica-based Foundation for Taxpayer and Consumer Rights.

http://www.latimes.com/news/local/la-00008...3333oct19.story

[Azat]

I also just heard that Davis now wants to renegotiate the long term contracts that California signed over the summer when everyone was predicting major energy shortages here.

 

What a joke. Now California thinks it is just like the energy companies and it can get out of contracts. Just further proof that government should not be in the energy business.

 

BTW: All the predictions of energy shortages and blackouts and all that did not come to true in CA this year. There were 2-3 small blackouts and nothing major.

 

I have always held the opinion that there was no powers shortage but mismanagement and money shortage and greed on behalf of energy providers.

 

One more thing. People who claim that they are energy experts and who claimed that gasoline prices in CA would be in the 3-4 dollar price range in CA this past summer were totally wrong. We did not even get up to 2 dollars on average. Just imagine a world where other professionals could be so wrong.

[MJ]

The thing is that in a free country even an idiot is entitled to an opinion, as long as he pays his taxes.

[khodja]

Bottom line: Cheney pulling the strings of his buddies in the energy industry. A concocted plan to sink Davis in CA.

[MJ]

Wake up, Mustafa. This is not the Ottoman Empire.

[Azat]

True, including idiots who are calling themselves "energy experts" and predict 4 dollar gas price in CA in 2001.

[MJ]

Indeed, only idiots predict prices, whether it is gas or stock or any other price. But they are not the only idiots. Idiots are also theose schools who lower their standards so much, that every idiot gets an MBA degrees, and then goes out to screw the ecomnomy, the markets, whole industries, and so on.

[khodja]

Martin,

 

Sorry to bust your bubble. Just read Vincent Bugliosi's latest book "The Betrayal of America." I still do not understand how the FBI and the CIA had no clue as to what Bin Laden's henchman were planning for the 11th of September.

[MJ]

I wish that was the only thing that you don't understand.

[alpha]

MJ I thought we post on this board for serious discussions not name calling. Why do you think you are so omniscient and others should just bow down to your views? Offending people who are trying to make reasonable arguments will not facilitate constructive debates. I have noticed in the last few days that you took the initiative of offending Azat and Anshnork? May I ask why? Can we go back to constructive debates just like we did a few months ago? This kind of cheap name calling is one of the reasons that so many people have quit posting. Please don’t do that. By the way have you ever been wrong? If you have than have you ever admitted that your views might not be so correct?

[Azat]

Hey once in a while MBAs are allowed to make mistakes like those idiot "Energy Experts" make all the time.

[MJ]

Alpha,

 

I can argue about something for very long time without name calling – my arguments would be on the substance of the issue, I will not demagog it, and would not make unsubstantiated declerations. But I can assure you that I will not allow somebody insulting me or name calling go unnoticed. And indeed, lately, I have resorted to some name calling – something that I have denounced in this forum in the past, and have advocated for long time. But the thing is that I don’t have unlimited patience. Sometimes I feel compelled to retaliate.

 

As a matter of fact I am very anxious to hear arguments based on facts, logic and reason. And I do my best to post based on knowledge, substance, logic, verified information, etc. If you have contrary evidence, please let me know.

 

Now, I have not insulted Anshnork, but have given him three “recommendations” for the type of comment he has directed at me – if you have not been able to assess it at the time, I would ask you to go and read the thread again. Pretty much anybody against whom I have used “names” in this forum, has provoked it. For absolute majority of the cases I have “let it go.” But as I have said above, sometimes my patience also runs thin. I would also ask you to check it by reading the evolution of the discussions.

 

I would gladly take your request about name calling under consideration. However, may I ask you also not use name calling against those who are not represented in this forum, especially if you don’t have adequate basis for it?

 

As to me being ever wrong, yes, I have been wrong many times in my life, and as soon as it has been demonstrated, I have admitted it momentarily – you would be surprised to know how easily I can do that. But given that your last question is of rhetorical character, could you be specific, and tell/point me at an argument of mine which is wrong in your view, and than we can discuss it specifically?

[khodja]

What else do you claim that I do not understand? I understand the Genocide better than most. Both my parents and both my grandmothers were survivors. Never knew a grandfather or some of the dead anunts and uncles. Please be explicit. FYI, I once relished the babble that comes out of the mouths of those like Limbaugh until I saw the light.

[Azat]

It looks like Enron Executives went to the same school as all the honest executives from the California Energy companies. And I am sure that Forbes has all incorrect information about wonderful honest company like Enron.

 

What a bunch of BS.

 

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Enron executives got $55 Million just before bankruptcy hours before giving the pink slips to al least 4500 employees, and sticking it to all their share holders.

 

Here is a story that will be covered in tomorrows NY Times and is also available online at Forbes.com http://www.forbes.com/2001/12/05/1205enron.html

 

 

I can't remember the numbers but I think it was something like 70 million to PG&E execs prior to their bankruptcy.

 

How do I get a job like that where I screw shareholders and employees and get boat load of money for it? (oh wait I work for a dot com)

[Azat]

More info on the "deregulation" king Enron and what went wrong.

http://www.msnbc.com/news/686994.asp?pne=msn

[Azat]

WASHINGTON (AP) — Senate Majority Leader Tom Daschle said Thursday he believes Enron Corp. broke laws while manipulating electricity supply and prices during the California energy crisis.

 

``I don't think there's any doubt that somebody ought to go to jail and that we ought to find a way through public policy to fix a system that needs to be addressed,'' said Daschle, D-S.D.

 

He said the Senate will seek to find ways to protect consumers and address price manipulation by power companies, but doesn't believe a complete overhaul of the electricity industry is needed.

 

``I don't think the system is broken, I think laws were broken,'' Daschle said.

 

Meantime, two Senate panels plan to investigate energy price manipulation in California and other Western states.

 

The Energy and Natural Resources Committee scheduled a hearing Wednesday that will include Pat Wood, Federal Energy Regulatory Commission chairman. The Senate Commerce consumer subcommittee also will hold a hearing Wednesday, said Sen. Barbara Boxer, D-Calif.

 

The hearings were prompted by the release of Enron documents that described how the energy trading company sought to cash in on California's energy crisis in 2000 and 2001. During the crisis, wholesale energy prices shot up tenfold.

 

FERC, which released the documents this week, has asked more than 150 power generators, marketers and utilities to disclose whether they used similar practices. FERC gave the companies until May 22 to comply.

 

At a news conference Thursday, Democrats from California, Washington and Oregon criticized FERC, saying it was slow to act during the California crisis, waiting months to impose price caps.

 

``We told them Enron and others were gaming the system. So my question to FERC is, 'What took you so long?''' Boxer said.

 

Lawmakers and California Gov. Gray Davis also have asked the Justice Department to investigate energy trading practices in California.

[Azat]

My guess would be that in couple of years if power plants collude again and decide to screw the California public again, the public would be blamed once again for not "allowing" them to build more power plants. Never mind that they do not wish to invest money when they are not making 100000000000000 times the return on their investment.

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Power Plants Put on Hold

 

Energy: Lower demand, changing circumstances have companies pulling back from crisis plans.

By E. SCOTT RECKARD, TIMES STAFF WRITER

 

Power companies have delayed or canceled more than half the new plants proposed during California's energy crisis, citing lower demand, falling electricity prices, Wall Street's reluctance to finance projects and stifling regulations.

 

Since 2000, energy producers have pulled the plug on power plants that would have generated nearly 3,000 megawatts of power--enough to light up 2.2 million homes, according to the state Energy Commission. Adding in projects that have been delayed, the total is closer to 20,000 megawatts, federal regulators say.

 

Following the severe shortages of 2000-2001, a burst of construction provided large amounts of needed power to the state. But the slowing economy, conservation and plentiful hydroelectric power have turned the shortage into a glut.

 

The glut, combined with questions over the energy sector's credibility in the wake of the Enron Corp. scandal, has regulators, industry executives and consumer groups fearful that another crisis is a few years away.

 

"We're at a crossroads right now," said Suzanne Garfield, a spokeswoman for the California Energy Commission. "There's been a lot built but a lot more is needed. We need to retire many old plants, and imports are decreasing as nearby states use more of their own power."

 

As a result of the Enron scandal, much of the energy sector has come under a harsh spotlight, and companies now find themselves unable to access the financial markets for capital.

 

The industry's struggles are evident at Redlands, Calif. There, at AES Corp.'s Mountainview facility, a few workers stand watch over a foundation where 500 laborers once toiled over what was to have been an $800-million power-generating plant.

 

AES poured more than $100 million into the project before the firm's own retrenchment and the unwillingness of Wall Street to provide financing forced it to suspend work two months ago on the plant, designed to provide power for 800,000 homes.

 

Mark Woodruff, an AES regional manager, blamed restrictions imposed by Gov. Gray Davis' rescue plan, especially the state's refusal to let AES and other power sellers strike supply deals directly with large business users.

 

The Mountainview plant in Redlands is "pretty much a ghost town now," said David Kehnes, project manager for Arlington, Va.-based AES, which still operates a smaller plant nearby. "And we're a skeleton crew."

 

Similar scenes are apparent throughout the industry, eight months after the collapse of Enron started a landslide loss of faith in U.S. business practices.

 

UC Irvine professor and energy commentator Peter Navarro says the energy companies, having manipulated the energy market, badly overestimated demand, buried themselves in debt to build new plants and were surprised when the economy slowed.

 

"The mind set was that these higher prices would last forever," Navarro said. "But when prices fall to a third of where they'd been, Wall Street figures out pretty quickly you don't have cash to service your debts.

 

"This could turn what looked like a 5-year glut of power into probably a 2-to-3-year glut," he added.

 

Announcing Monday that a big new Monterey County plant had come on line, Gov. Gray Davis boasted that California had added 4,165 megawatts of in-state power since last summer, enough to power more than 3 million homes. But the Federal Energy Regulatory Commission said this month that the net addition will be closer to 3,100 by year end because some existing plants will be decommissioned.

 

At a U.S. Senate energy committee meeting last week, FERC Chairman Pat Wood said projected construction of crucial generating and transmission infrastructure has "dropped off dramatically" as corporate downgrades by bond analysts "dramatically escalate the cost of credit in this industry."

 

Power generators such as AES are "in the throes of a costly boom and bust cycle," testified Larry Makovich, a senior consultant at Cambridge Energy Research Associates. He estimated that since the start of the year power plants capable of producing nearly 82,000 megawatts have been canceled or postponed across the nation.

 

While no one is predicting anything like the shortages and soaring prices seen in 2000 and 2001, California still must depend on having manufacturers voluntarily cut production to get by on the hottest days, as happened July 10.

 

To Mirant Corp. executives, that shows "there's a current supply-demand imbalance" in California, spokesman David Payne said. For that reason, he said, the company fully intends to build a 530-watt Contra Costa plant originally set to open in 2003.

 

But Mirant, whose bonds are categorized as junk by Moody's Investors Service and Standard & Poor's, delayed the plant as part of a $2-billion cut in capital spending this year to shore up its balance sheet. A separate Mirant proposal to build another large plant at its Potrero facility in Northern California has been held up for years by permit disputes, Payne said.

 

Calpine Corp., a San Jose-based power plant builder with a once fast-growing trading arm, was hit early by the credit and liquidity crisis created by the downfall of Enron, the largest of the energy traders. Calpine's money woes appear to have stabilized, but not before it slashed its plant-building budget and significantly slowed many projects.

 

In California, Calpine opened three major power plants and four smaller "peaker" units in the last year. But completion of three more big power plants capable of generating has been pushed back several months into 2004.

 

Company spokesman Bill Highlander said the delays in California are the result of the state's tortuous permitting process as well as Calpine's financial woes.

 

Davis spokesman Steve Maviglio said complaints about regulations and permits in the state are nothing new, adding that the fact that companies are scaling back nationwide shows the problems aren't specific to California. Long-term power contracts with producers, though much criticized, will assure a supply of electricity no matter what happens, and Davis' plan authorized the state itself to build plants if private power proves insufficient, Maviglio said.

 

He said the biggest problem for power generators is the current unwillingness of Wall Street to finance them--a problem that is undeniably fearsome.

 

At a briefing for investors Friday, Fitch analysts noted that debt defaults by corporations, which in the 1990s had been running less than $10 billion a year, zoomed to $28 billion in 2000. Defaults hit $78 billion in 2001 and $50 billion through the first half of 2002.

 

High on the ratings firm's watch list these days is the energy industry, where credit downgrades have outpaced upgrades by 18-1 so far this year.

 

Fitch managing director Richard Hunter said the "heady cocktail" of lower prices, a credit crunch, Enron-style sham deals and potential litigation is exerting "extreme stress" on the industry.

 

One hopeful sign in California is that most of the proposed plants have only been delayed and not canceled outright, according to Bob Aldrich, a state official who keeps a running tab on the power-plant situation.

 

But at the same time, the uncertainty is aggravated by the fact that many power concerns are under investigation for the allegedly phony deals that critics say upset the energy markets and contributed to California's crisis in 2000 and 2001.

 

"My industry's so demonized. I feel like the new tobacco," said Mark Byron, Dynegy Inc.'s California director of retail energy services until he was laid off in June. The energy industry "is an ocean of ex-employees," Byron said.

 

In addition to state probes, investigations are under way by FERC, the Justice Department, the Securities and Exchange Commission and the Commodities Futures Trading Commission--all of which provides fodder for those who contend the industry should never have been deregulated in the first place.

 

"We don't need to rely on these companies [and] after what they did to us in 2001, we should not rely on them," said Douglas Heller of the Foundation for Taxpayer and Consumer Rights in Santa Monica. "We must remember that these companies failed California long before they failed their shareholders."

 

http://www.latimes.com/news/printedition/l...2040.story?null

[Azat]

Here is some more proof.

 

------------------

 

Key Enron Trader Pleads Guilty

The Associated Press, Fri 18 Oct 2002

 

SAN FRANCISCO (AP) — A former Enron trader accused of masterminding a scheme to drive up energy prices during California's power crisis has pleaded guilty to conspiracy in the first public acknowledgment of criminal activity related to the crisis.

 

Timothy Belden, the former head of trading in Enron's Portland, Ore., office, on Thursday admitted to one count of conspiracy to commit wire fraud. Belden's plea is the first prosecution of anyone related to the West's energy crisis. He faces up to five years in prison and must forfeit $2.1 million.

 

``I did it because I was trying to maximize profit for Enron,'' Belden told U.S. District Judge Martin Jenkins.

 

The case represents a remarkable evolution in the Bush administration's attitude about the energy crisis. In May 2001, Vice President Dick Cheney said California was to blame for power shortages and soaring prices. ``They caused it themselves,'' Cheney said in an interview with The Associated Press.

 

On Thursday, Republican appointees in the Justice Department said unequivocally that criminal conduct by an Enron trader helped drive up prices.

 

``These charges answer the question that has long troubled California consumers: whether the energy crisis was spurred in part by criminal activity. The answer is a resounding yes,'' U.S. Attorney Kevin Ryan said.

 

Belden promised to cooperate with state and federal prosecutors as well as any non-criminal effort to investigate the energy industry. He remains free on $500,000 bail pending his sentencing April 17.

 

His knowledge should help the government unravel what happened inside other energy trading companies, including Houston-based Enron, the energy giant whose collapse last year has roiled the energy industry, said Matthew Jacobs, the federal prosecutor handling the case.

 

Belden's attorney, Cristina Arguedas, said he was following Enron's instructions as he handled his trades and will ``make amends for that by cooperating with the government and telling the complete truth about Enron's actions in the California energy trading market.''

 

``Tim Belden is not a high-level executive who was lining his pockets out of greed,'' Arguedas said. ``He did his job.''

 

Investigators for a state Senate committee looking into the energy market have long considered Belden a key player in Enron's activities in California.

 

Belden was ``the mastermind behind the strategies described'' in memos that spelled out how Enron manipulated the California market, said Chris Schreiber, an attorney working with California's Senate Select Committee to Investigate Price Manipulation of the Wholesale Energy Market.

 

``He's been on our radar for a long time,'' Schreiber added.

 

Belden is the third Enron figure to be prosecuted.

 

Andrew Fastow, Enron's former chief financial officer, is accused of devising the company's complex web of off-the-books partnerships used to hide some $1 billion in debt from shareholders and federal regulators and is charged with money laundering, fraud and conspiracy.

 

A once-trusted Fastow aide, Michael Kopper, pleaded guilty in August to money laundering and conspiracy to commit wire fraud.

 

For months, federal investigators have worked with a California Senate panel investigating the state's energy crisis about evidence uncovered in its long-running investigation of market manipulation. A federal grand jury in San Francisco has been weighing criminal charges related to the energy crisis.

 

Internal company memos, first released in May, describe how Belden's trading unit took power out of California at a time of rolling blackouts and shortages and sold it out of state to elude price caps, according to documents obtained by investigators.

 

Enron bought California power at cheap, capped prices, routed it outside the state, and then sold it back into California at vastly inflated prices, authorities said. The sham trades were designed to circumvent the California-only price caps on wholesale energy.