According to Reliant Energy, FERC Action on Credit Will Increase Supply and Decrease Costs of Power in California

Business Wire, April 6, 2001

Business Editors

HOUSTON--(BUSINESS WIRE)--April 6, 2001

From the beginning of the power crisis, Reliant Energy has maintained that a crucial step to solving California's energy problem is establishing financial stability and ensuring that the California Independent System Operator (ISO) -- or any buyer -- is creditworthy.

Today, the Federal Energy Regulatory Commission (FERC) validated this by acknowledging that the ISO must supply credit provisions for all energy purchases, or generators cannot be obliged to supply power -- a key factor in the ISO's tariff.

"Our position has always been that enforcement of the tariff's credit provisions is essential to a stable California energy market," said Jack Farley, Reliant Energy Western Region President. "Since the power crisis began, we have remained ready, willing and able to honor dispatch requests from the ISO," said Farley. "We simply want an assurance of payment for the power we provide."

Today's FERC order comes the day after the Ninth Circuit Court of Appeals issued a stay of a preliminary injunction that required Reliant to honor dispatch requests without credit assurances.

"Throughout this litigation, Reliant has maintained that the FERC is the appropriate body to address these issues, not the courts. Today's FERC order confirms this view," said Michael Jines, Vice President and General Counsel of Reliant's Wholesale Group.

"Without question, the lack of creditworthy buyers for energy delivered through the ISO has impaired the ISO's ability to secure energy, especially from suppliers out of state," said Farley. "As a result, the ISO has been overrelying on in-state generators to meet its requirements.

"Today's order should strengthen the ISO's ability to secure new supplies by giving potential sellers assurances of payment for deliveries. The order should also lower consumer prices by increasing supply and reducing credit risk premiums. With summer fast approaching, increasing supply is critical."