Message-ID: <11199951.1075863603111.JavaMail.evans@thyme> Date: Tue, 29 Aug 2000 11:11:00 -0700 (PDT) From: mary.hain@enron.com To: james.steffes@enron.com, david.delainey@enron.com, john.lavorato@enron.com, christopher.calger@enron.com, tim.belden@enron.com, paul.kaufman@enron.com, sarah.novosel@enron.com, david.parquet@enron.com, jdasovic@ees.enron.com, mona.petrochko@enron.com, kevin.presto@enron.com, richard.shapiro@enron.com, steve.kean@enron.com, chris.foster@enron.com, robert.badeer@enron.com, jeff.richter@enron.com, susan.mara@enron.com Subject: FERC Presentation on California/West Wholesale Market Cc: christi.nicolay@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: christi.nicolay@enron.com X-From: Mary Hain X-To: James D Steffes, David W Delainey, John J Lavorato, Christopher F Calger, Tim Belden, Joe Hartsoe@Enron, Paul Kaufman, Sarah Novosel, David Parquet, jdasovic@ees.enron.com, Mona Petrochko, Kevin M Presto, Richard Shapiro, Steve Kean, Chris H Foster, Robert Badeer, Jeff Richter, Susan J Mara X-cc: Christi Nicolay X-bcc: X-Folder: \Robert_Badeer_Aug2000\Notes Folders\Discussion threads X-Origin: Badeer-R X-FileName: rbadeer.nsf Last Thursday, I made the first attached presentation to the FERC Staff at the power marketer's meeting on the FERC's investigation of the wholesale market in the West (and in particular California). Ellen Wolf (of Tabors Caramanis) and I created this presentation building on previous presentations by Tim Belden and Dave Parquet. In the presentation and the meeting we made the following points: There isn't much FERC can do because the cause of the price spikes is not in the wholesale market. We discouraged FERC from taking any action that would hurt the vibrant wholesale market in the California and the rest of the West as well. High prices logically resulted from scarcity and if the Commission does anything it should (1) investigate whether market power was being exercised by any party and, (2) if necessary to protect the market (while still incenting needed generation) establish a price cap at a scarcity rent level equal to the price at which loads were willing to interrupt. The IOUs have not properly prepared for the risk of high prices caused by scarcity. They have failed to hedge and have underscheduled their load, therefore having to fill a large percentage of their load at ISO real time prices. My analogy was that this was like day trading your retirement fund as an asset allocation scheme. The market would function better if more information was provided to the market. The Commission should do whatever it can to incent participation by load. To see the presentation, detach, save, and view in Powerpoint. When you do, you will find there are many "hidden" slides that were not part of the oral presentation but were provided to Staff in hard copy for additional information. According to the head of the investigation (Scott Miller), the staff got alot more out of this meeting than Staff's previous meetings with the IOUs and the generators. Based on the numerous phone calls I've been getting, the Staff is looking into the data we provided. I have also attached a revised version of the presentation that Tim sent to Scott Miller on Friday. Tim's version conveys the same message but takes a different approach to conveying the message. On Friday, Tim talked to Scott and answered some additional questions. Tim said that Enron is in favor of eliminating the mandatory PX buying requirement and would like the IOUs to be able to buy from Enron Online. He also explained more fully the existence of scarcity .