1999 - 2000 Gas Prices

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1999 - 2000 Gas Prices
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NYMEX STRIP

• 1/99
  8/00

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Meanwhile, in California I

• 2900 MW under construction, inadequate to meet
  demand growth
• 8000 MW under state review
• Some will be rejected and others not built
• Local forces also matter -- the Cisco affair
• Effects of new laws to expedite permit process
  unclear
• The Governors Green Team
• Rising prices of emission permits

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Meanwhile, in California II

• Growth of silicon / digital industries and
  customers increasing demand for power
• This growth unexpected by planners
• Little opportunity for conservation
• Opportunities for user-owned generation being
  blockaded by utilities and others

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Treating the symptoms

• Legislative rollback of San Diego rates without
  provision for recovery of revenue
• Imposition of price controls in ISO markets
  increases reliability problems
• Also leads to 100 million extra emergency
  purchases this summer
• Always convenient to blame producers and
  marketers
• Because they cant move their plants

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How we might have done it

• Large Pennsylvania utilities had big stranded
  costs
• Instead of putting them in headroom, state
  negotiates a fixed recovery schedule
• Instead of a rate freeze, customers get a
  shopping credit if they can beat utility price
• State imposed no price ceilings of consequence

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The Pennsylvania results

• In first year, 17 of residential and 63 of
  industrial customers leave utilities
• Utilities remain financially sound
• Extensive new powerplant construction
• Competitive bidding to be supplier of last
  resort
• W.C. Fields All things considered, Id rather
  be in Philadelphia

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