Sue Mara
Enron Corp.
Tel: (415) 782-7802
Fax:(415) 782-7854
----- Forwarded by Susan J Mara/NA/Enron on 03/21/2001 10:25 AM -----

	Jean Munoz <jmunoz@mcnallytemple.com>
	03/21/2001 09:27 AM
		 
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		 cc: 
		 Subject: Great Sacramento Bee Editorial Today

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Our first Gray-outs: These power outages are purely a failure of leadership


(Published March 21, 2001) 
Add a new term to the electricity nomenclature -- the Gray-out. This is a 
power outage caused by politics in Sacramento under Gov. Gray Davis, rather 
than some unavoidable mismatch between supply and demand.

This is March. Peak demand is thousands upon thousands of megawatts lower 
than it will be this summer. And yet the lights are going out.

These rolling Gray-outs trace squarely back to state government's failure to 
figure out a way to pay for all the power that California needs. The 
generators who aren't getting paid are beginning to go temporarily out of 
business. Day by day, less and less power is available for the grid, to the 
point that a little bit of spring sun is enough to overtax supply and turn 
out the lights. Unbelievable.

It's true that the governor is bleeding the state's coffers to the tune of 
about $50 million every day to pay the big for-profit generators for their 
supply. This is his short-term solution, until the longer-term solution -- 
whatever that is -- kicks in. But no, even that huge payment isn't all the 
money needed to pay all the generators.

Neglected by the government plan are about 600 little guys that produce 20 
percent of the electricity supply. These are generators dotted throughout the 
state known as Qualifying Facilities. A creation of the alternative energy 
movement of the 1970s, these are plants powered by natural gas, the sun and 
the wind. Unlike the big for-profit generating companies, these QFs are 
contractually tied to the giant utilities, Southern California Edison and 
PG&E. And the utilities haven't been paying them for weeks and weeks -- at 
this point the QFs are owed $1.48 billion.

Not surprisingly, some of these generators can't afford to keep producing 
power for free. Grid operators say that these QFs could be producing about 
6,000 megawatts if they were being paid. Instead, they are producing about 
3,100, and the amount is decreasing. Outages were triggered on Monday because 
the grid was short about 1,000 megawatts of load. This math clearly reveals 
how avoidable this disruption was. Call it a rolling Gray-out.

Bipartisan legislation has languished in Sacramento for weeks that would cut 
in half what these QFs have been billing the utilities. The savings are 
possible by moving these contracts into long-term deals and out of the 
higher-priced spot market. This piece of the overall solution has been 
stalled while the governor has been at work on the others, such as returning 
the big utilities to solvency and locking in power purchases long-term with 
the big for-profit generators. Disregarding the little guys, however, is a 
mistake that the governor and Legislature should correct immediately.