Message-ID: <905432.1075860372043.JavaMail.evans@thyme> Date: Fri, 2 Mar 2001 01:46:00 -0800 (PST) From: christi.nicolay@enron.com To: jeff.brown@enron.com, ron.mcnamara@enron.com, james.steffes@enron.com, sarah.novosel@enron.com, aleck.dadson@enron.com, daniel.allegretti@enron.com, howard.fromer@enron.com, joe.hartsoe@enron.com, donna.fulton@enron.com, tom.hoatson@enron.com, steve.montovano@enron.com, jean.ryall@enron.com, tom.chapman@enron.com, janine.migden@enron.com, dave.mangskau@enron.com, dan.staines@enron.com, mike.roan@enron.com, joe.connor@enron.com, kerry.stroup@enron.com, steve.walton@enron.com, mary.hain@enron.com, alan.comnes@enron.com, susan.mara@enron.com, thane.twiggs@enron.com, jader@enron.com, michael.brown@enron.com, mark.bernstein@enron.com, scott.healy@enron.com, john.llodra@enron.com, janelle.scheuer@enron.com, george.wood@enron.com, david.guillaume@enron.com, joe.gordon@enron.com, splauch@enron.com, jennifer.n.stewart@enron.com, tom.dutta@enron.com, posey.martinez@enron.com, jim.meyn@enron.com, berney.aucoin@enron.com, pearce.hammond@enron.com, ozzie.pagan@enron.com, heather.kroll@enron.com, david.fairley@enron.com, george.mccormick@enron.com, wjennin@enron.com, joseph.wagner@enron.com, elizabeth.johnston@enron.com, bill.rust@enron.com, reagan.rorschach@enron.com, edith.cross@enron.com, berney.aucoin@enron.com, steve.wang@enron.com, ebaughm@enron.com, terri.clynes@enron.com, oscar.dalton@enron.com, doug.sewell@enron.com, kcompea@enron.com, mike.e.kelly@enron.com, gary.justice@enron.com, patrick.hanse@enron.com, brad.morse@enron.com, berney.aucoin@enron.com, bill.rust@enron.com, bruce.sukaly@enron.com, mike.curry@enron.com, jducote@enron.com, drew.tingleaf@enron.com, cahn@enron.com, russ.porter@enron.com, jason.wiesepape@enron.com, berney.aucoin@enron.com, ben.jacoby@enron.com, dave.kellermeyer@enron.com, jeffrey.keenan@enron.com, rusty.stevens@enron.com, rebecca.walker@enron.com, john.moore@enron.com, fred.mitro@enron.com, raimund.grube@enron.com, chris.booth@enron.com, greg.krause@enron.com, mathew.gimble@enron.com, steven.krimsky@enron.com, michelle.zhang@enron.com, ron.tapscott@enron.com, jeff.williams@enron.com, w.duran@enron.com, steven.kean@enron.com, richard.shapiro@enron.com, dennis.benevides@enron.com, suneet.sharma@enron.com, john.zurita@enron.com, kevin.presto@enron.com, tim.belden@enron.com, w.duran@enron.com, mitch.robinson@enron.com, lloyd.will@enron.com Subject: Kevin's RTO Ideas for East Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Christi L Nicolay X-To: Jeff Brown, Ron McNamara, James D Steffes, Sarah Novosel, Aleck Dadson, Daniel Allegretti, Howard Fromer, Joe Hartsoe, Donna Fulton, Tom Hoatson, Steve Montovano, Jean Ryall, Tom Chapman, Janine Migden, Dave Mangskau, Dan Staines, Mike Roan, Joe Connor, Kerry Stroup, Steve Walton, Mary Hain, Alan Comnes, Susan J Mara, Thane Twiggs, jader@enron.com, Michael Brown, mark.bernstein@enron.com, scott.healy@enron.com, john.llodra@enron.com, janelle.scheuer@enron.com, George Wood, David Guillaume, joe.gordon@enron.com, splauch@enron.com, jennifer.n.stewart@enron.com, tom.dutta@enron.com, Posey Martinez, Jim Meyn, Berney C Aucoin, Pearce W Hammond, ozzie.pagan@enron.com, heather.kroll@enron.com, david.fairley@enron.com, george.mccormick@enron.com, wjennin@enron.com, joseph.wagner@enron.com, elizabeth.johnston@enron.com, bill.rust@enron.com, Reagan Rorschach, Edith Cross, Berney C Aucoin, steve.wang@enron.com, ebaughm@enron.com, terri.clynes@enron.com, oscar.dalton@enron.com, doug.sewell@enron.com, kcompea@enron.com, mike.e.kelly@enron.com, gary.justice@enron.com, patrick.hanse@enron.com, Brad Morse, Berney C Aucoin, Bill Rust, bruce.sukaly@enron.com, mike.curry@enron.com, jducote@enron.com, drew.tingleaf@enron.com, cahn@enron.com, Russ Porter, Jason R Wiesepape, Berney C Aucoin, Ben Jacoby, Dave Kellermeyer, Jeffrey Keenan, Rusty Stevens, Rebecca Walker, John Moore, Fred Mitro, Raimund Grube, Chris Booth, Greg Krause, Mathew Gimble, Steven Krimsky, Michelle Zhang, Ron Tapscott, Jeff Williams, W David Duran, Steven J Kean, Richard Shapiro, Dennis Benevides, Suneet Sharma, John Zurita, Kevin M Presto, Tim Belden, W David Duran, Mitch Robinson, Lloyd Will X-cc: X-bcc: X-Folder: \Mary_Hain_Aug2000_Jul2001\Notes Folders\All documents X-Origin: Hain-M X-FileName: mary-hain.nsf The East desk's No. 1 priority for RTOs is The Real Time Energy Market (no day ahead balanced schedule requirement). This means that the RTO should post the supply and demand curve with real time prices (the best example at this time is PJM's real time market). A real time energy market is fundamental for customers to get proper real time price signals upon which to base their decisions to hedge or not on a forward basis. It also provides the proper price signals to the market on where generation and transmission is needed. Getting a real time energy market would advance Enron's ability to provide more financial tools to customers. This market can be nodal (or zonal) in order to send location based price signals (for example, to NY City), with the ability to aggregate from nodal to zone determined "proxy buses." While Kevin prefers the physical flowgate model with an option to collect congestion revenues (rather than an obligation, similar to the PJM FTRs now), the method of determining the congestion management is secondary to the establishment of the real time energy market. Regulatory people should use their judgment (and talk with the desk) when determining how far to push option-type flowgates, rather than obligation-type FTRs. Such a physical market transmission/congestion market can support a financial trading overlay. If you do have an FTR type system, there should be an upfront allocation to load. Ideally, the load should have an "network" right from the generator to their load (or from load to the "hubs") in order to have the ability to manage the congestion risk in the forward market when serving end use customers (EES) or for the ENA full requirements deals. The nodes should be grouped into logical "zones" and congestion within a zone should be uplifted. This allocation to customers (or full blown auction of all rights) becomes critical in Enron's ability to serve load and all requirements customers. Without the proper allocation (not to incumbent utilties), the risk premium to serve these customers becomes too high and can't be priced. Finally, the market should have no price caps and preferably no icap market like NEPOOL (prefer PJM's system where the load has to show the RTO that it has contracted for enough reserves.) We have urged the FERC in Florida to adopt a reserve monitoring system, whereby customers are not penalized for lack of icap unless they actually go under the reserve requirement, then they are required to purchase icap for a certain amount of time until they demonstrate continued compliance. Bottom line -- "Do not let the perfect be the enemy of the good." Congestion does not need to be perfectly allocated to each load if that mechanism is done in a manner that precludes Enron and others from developing efficient real time energy markets that send a locational hourly price signal to the generation (supply) and the load (demand). This type of market will provide greater services to customers and allow Enron to grow its business. Finally, as we work toward this goal, remember that in the absence of a real-time energy market, we need to continue to focus our efforts on non-discriminatory treatment with respect to transmission (no native load exception) and parking and lending, scheduling flexibility, etc.