Message-ID: <27057540.1075860364243.JavaMail.evans@thyme> Date: Tue, 20 Mar 2001 14:03:00 -0800 (PST) From: alan.comnes@enron.com To: mary.hain@enron.com Subject: FERC Staff market mitigation comments for California--Comments of Enron--DUE WEDNESDAY Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Alan Comnes X-To: Mary Hain X-cc: X-bcc: X-Folder: \Mary_Hain_Aug2000_Jul2001\Notes Folders\All documents X-Origin: Hain-M X-FileName: mary-hain.nsf I forgot to copy you ... ---------------------- Forwarded by Alan Comnes/PDX/ECT on 03/20/2001 10:00 PM --------------------------- Alan Comnes 03/20/2001 09:54 PM To: Tim Belden/HOU/ECT@ECT, Christian Yoder/HOU/ECT@ECT, Jeff Richter/HOU/ECT@ECT, Robert Badeer/HOU/ECT@ECT, Steve C Hall/PDX/ECT@ECT, Bill Williams III/PDX/ECT@ECT cc: Susan J Mara/NA/Enron@ENRON, Joe Hartsoe/Corp/Enron@ENRON Subject: FERC Staff market mitigation comments for California--Comments of Enron--DUE WEDNESDAY To West Desk Traders in Cali: On Thursday 3/22, FERC will accept comments on its staff's plan to provide market mitigation to California ISO markets. A summary of the report is copied below. Enron GA plans to file a motion that will support the comments of EPSA and WPTF and supplement the comments as noted below. EPSA's comments are generally supportive of the staff report but recommends that FERC: clarify that staff's market mitigation measures are being put into place to address structural defects in the California market, not the abuse of market power by any market participants; avoid the use of cost-based rates as a proxy for competitive prices during times of scarcity; ensure that if cost-based proxy rates are used, those rates includes the full value of scarcity, capacity, opportunity costs, and other factors; develop proxy rates, if necessary, using the formula in the March 9th Refund Order RATHER THAN the unit specific marginal costs identified in the order; and forego forced bidding into real-time markets. WPTF will make similar comments (generally with more color and vehemence) and will also raise how lack of creditworthiness will affect price. I also recommend we supplement the EPSA/WPTF comments with some additional comments on energy-limited resources, see attached. Please prove Sue Mara or I with your comments by COB Wednesday. Thank you, Alan Comnes Report Summary (from EPSA) Stressing that the proposal is designed to apply only to approximately five percent of the market that remains in real-time and not to the bilateral and forward markets, the Report immediately notes that "ultimately the real solution to California's problems lies in increased investments in infrastructure." The Report recommends that the California ISO conduct a real-time auction with associated measures to mitigate the impact of physical and economic withholding and significant exercises of market power during periods of scarcity: (1) Coordinating and Controlling Outages - The ISO should coordinate and approve all planned outages by units that have a Participating Generator Agreement (PGA) with the ISO. Coordination and outage control procedures should then be coupled with reporting requirements to FERC and dispute review should be expedited. Similarly, the ISO should closely monitor unplanned outages and report questionable outages to FERC for further investigation. (2) Selling Obligations - All capacity that is available and not scheduled to run under sellers with PGAs should be offered in the real-time market - this obligation would not be imposed on bilateral markets of the ISO day-ahead markets. PGA generators would have to submit to FERC a dependable capacity for each unit in addition to other operating parameters necessary to calculate marginal costs, such as heat rate. FERC Staff would then use this data, in combination with published fuel costs and emission credit data to determine a price that the ISO would use pre-determined to mitigate prices during times of reserve deficiency. Load Serving Entities should also be required to name their curtailment price and to identify which loads will be curtailed. (3) Price Mitigation - When called upon to provide the available and unscheduled capacity as mentioned above, PGA unit prices would be mitigated in hours when there is a reserve deficiency, or Stage 3 emergencies (the Report notes that it is "these hours which are extremely conducive to the exercise of market power by suppliers") and will be obligated to sell capacity in real-time at the marginal cost of the highest-priced PGA until called upon to run. (4) Real-time Price Mitigation for Each Generating Unit - all generating units should have a standing, confidential price based on its marginal costs. This price will be used by the ISO to establish the real-time market clearing price when mitigation is appropriate. Staff believes that a single market clearing price auction design is appropriate, thus reversing the recommendation to use an as bid design in the December Order. (5) Market Clearing Price - All real-time energy offers should be paid the applicable market clearing price. (6) Conditions for Invoking Mitigation - Mitigation measures should only be applied to critical operating periods, such as emergencies. As noted in the Report, Staff recognizes that there are potential difficulties in implementing the proposal, and that "there are no easy answers to the current problems in the California market." Among the purported difficulties, Staff notes implementation problems with bidding obligations on imported power, incentive effects on load scheduling, treatment of purchased power, mitigating prices during emergencies, and setting a price component for scarcity.