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<title>Dececmber 2002: 2003 Dirty Dozen Annual Predictions</title>
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<p align="left"><font face="Arial"><strong><small>About The Author:<br>
<br>
</small></strong><span lang="X-NONE" style="color: black"><font size="2">
ROGER FELDMAN, Co-Chair of Andrews Kurth LLP Climate Change and Carbon
Markets Group has practiced law related to the finance of environmental and
energy projects and companies for 40 years. In particular, he has analyzed
and executed a wide variety and substantial value of project financings. He
chairs the American Bar Association’s Committee on Carbon Trading and
Finance, serves on the Board of the American Council for Renewable Energy,
and has been a senior official in the Federal Energy Administration. He is
a graduate of Brown University, Yale Law School and Harvard Business School.</font></span></font></p>
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<img src="../images/feldman.gif" alt="Washington Viewpoint by Roger Feldman" border="0" width="375" height="75"><p><b><u><br>
December 2002</u><br>
</b></p>
<p><font size="6">2003 Dirty Dozen <br>
Annual Predictions</font></p>
<p><strong>by Roger Feldman -- Bingham, Dana L.L.P.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
2002</em>/12/30)<br>
</font><span style="font-size: 10.0pt; font-family: Palatino; color: black">
</span></p>
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<p>As the New Year rolls in, it is time for this column’s Dirty Dozen Annual
Predictions for the Power Industry for 2003. As I am sure many of you have
forgotten, it was this humble column that, at this time last year,
predicted the bankruptcy of Enron, the meltdown of the power trading
market, the power glut, the FERC confession that it failed to adequately
police the California market, the disappearance of Latin American power
projects and the cessation of hostilities in the Middle East. So, show some
respect…</p>
<p>(1) In a compromise move, giving up on the notion of four large RTO
regions, FERC will establish ITPs within each Congressional District and
delegate all authority for their management to the state Public Utility
Commissions. It will, however, stand firm on its cross-border "No Pancaking"
rule, as called for by NAFTA. (But see #12 below.)</p>
<p>(2) Giving up on the possibility that the rating agencies will ever
forgive its members, the private power industry trade association will
announce the formation, in conjunction with Major League Soccer, of an
independent rating agency for electric industry securities. Its official
slogan will be, "They won’t have us to kick around any more."</p>
<p>(3)n The Forward Price Curve Exchange will be established by the Virginia
Lottery, applying its new scratch and sniff technology. Elmore Leonard was
elected honorary Chair, in view of his incisive analytic work on the field,
"Get Shorty." In its first action, the Exchange will denounce "global
warming" of power trading resulting from regulation.</p>
<p>(4) Warren Buffet will purchase the California DWR upon irrevocable State
guarantee of payment of all outstanding contracts, as written, at 100 cents
on the dollar. Governor Davis will explain that it is a State hedging
strategy. Candidate-in-the-wings Schwarzenegger will announce: "That pumps
me up." </p>
<p>(5) An LNG tanker the size of Pittsburgh will be unveiled and begin
shipping needed liquefied natural gas to the U.S., as domestic production
begins to diminish. The U.S. budget deficit for port security will treble.
It will all be good for the Forward Price Curve (see #3 above).</p>
<p>(6) The construction of the first DC Current "Bullet Transmission Line,"
across the continent, will be commemorated by the driving of a golden price
spike at Promontory, Utah. Announcing the imminent demise of the current
transmission system, FERC will announce that all RTOs will be merged into a
single organization that will administer the upcoming national grid. A
certain large, unnamed integrated Southern utility will launch an attack on
the FERC Market Monitoring Unit at Fort Sumter, triggering a FERC
rulemaking. </p>
<p>(7) The FASB will yield to pressure from the last surviving U.S. project
finance lender, J.P. CitiAmerica One Bank, and allow off balance sheet
financing to continue on a footnote basis. However, the footnotes will be
required to be six inches high and in neon. In response, DuPont will unveil
its new, synthetic lease-covering material, "Stealthex." </p>
<p>(8) In a move to hype circulation, the leading utility newsmagazine will
begin publishing a Ms. Reddy Kilowatt-of-the-month hologram feature. The
vast number of hits on its online internet counterpart will stimulate
increased electricity usage, thereby aiding the Forward Price Curve (see #3
above). </p>
<p>(9) The location of the new ERCOT Market Mitigation Unit in downtown
Houston will soak up the real estate glut that had threatened that city’s
market of late. New Mayor Ken Lay will express his appreciation for this
expression of Federal confidence in the city’s future.</p>
<p>(10) FERC and the Justice Department will rapidly approve the
AEP-Exelon-First Energy merger. "It’s just a big RTO," a FERC spokesman
states. "Maybe we can privatize and deregulate faster than we thought." Now
that’s a standard market design! </p>
<p>(11) Responding to the apparent resurgence of the power industry, and the
track record of deregulation in the communications industries, Congress will
repeal PUHCA. To offset any consumer protest, Congress will clarify that the
CFTC has no jurisdiction over any type of electricity or gas derivative
products, and that the FCC will exercise all market power analyses in the
future. </p>
<p>(12) Having wrestled with FERC’s inability to resolve power industry
issues, unable to determine what DOE does, and confronted with the need for
leadership in the War for Energy Independence, jurisdiction over energy
temporarily will be transferred to the Department of Homeland Security for
"the duration of any Governmental inter-ventions domestically or
internationally with national security implications." Action will be
forestalled, however, by a FERC NOPR (Order No. 2003) to protract agency
jurisdiction until the lapse of the aforesaid period. </p>
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<p class="MsoBodyText" align="left" style="margin-bottom:0in;margin-bottom:.0001pt;
text-align:left"><font face="Arial" size="2">
<span lang="X-NONE" style="color: black">ROGER FELDMAN, Co-Chair of Andrews
Kurth LLP Climate Change and Carbon Markets Group has practiced law related
to the finance of environmental and energy projects and companies for 40
years. In particular, he has analyzed and executed a wide variety and
substantial value of project financings. He chairs the American Bar
Association’s Committee on Carbon Trading and Finance, serves on the Board
of the American Council for Renewable Energy, and has been a senior official
in the Federal Energy Administration. He is a graduate of Brown University,
Yale Law School and Harvard Business School.</span></font></p>
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