Message-ID: <19820097.1075846336835.JavaMail.evans@thyme> Date: Mon, 2 Oct 2000 01:07:00 -0700 (PDT) From: robert.hemstock@enron.com To: steven.j.kean@enron.com Subject: Re: examples of auction processes that worked Cc: aleck.dadson@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: aleck.dadson@enron.com X-From: Robert.Hemstock@enron.com X-To: Steven.J.Kean@enron.com X-cc: Aleck.Dadson@enron.com X-bcc: X-Folder: \Steven_Kean_Dec2000_1\Notes Folders\California X-Origin: KEAN-S X-FileName: skean.nsf Steve, The auction in Alberta involved the bidders bidding a lump sum price for the right to dispatch the formerly regulated generation plants and receive the revenue from the sale of energy and capacity. The successful bidders assumed the obligation to pay the plant owner its fixed and variable costs of the plant for the term of the PPA. These generator fixed and variable costs were determined by an independent consultant retained by the Alberta Government and the auction was run by another independent consultant with auction expertise. In contrast to the Alberta auction, I understand Jeff Skilling is envisioning an auction that would result in the selection of suppliers of 5 - 10 year power to California utilities. The participants in the California auction would presumably be generators and traders who would offer to supply firm physical power - that would be used by the utilities as a physical hedge. Presumably those with the lowest offers would win the 5-10 year supply contracts. This is quite different from the Alberta auction which involved the sale (rather than the purchase) of supply. Having said this, the Alberta auction process was considered to be fair, equitable and transparent. The on-line simultaneous ascending auction model used in Alberta has apparently been used successfully in more than 30 previous auctions of various products by the auctioneer, including the awarding of spectrum licences in the U.S.. The independent consultant/auctioneer in the Alberta process was Charles River Associates, based in Boston. The key person at CRA was Brad Miller (bam@crai.com 617-425-3384). Brad is a world class expert on auction design and if there is an auction design model that could be applied in California I'm confident he would be able to quickly scope it out for us. Regards, Rob From: Steven J Kean@ENRON on 09/29/2000 03:47 PM CDT Sent by: Steven J Kean@ENRON To: Mark Schroeder/LON/ECT@ECT, Tom Briggs/NA/Enron@Enron, Robert Hemstock/CAL/ECT@ECT, Peter Styles/LON/ECT@ECT, Daniel Allegretti/HOU/EES@EES, Steve Montovano/DUB/EES@EES, Janine Migden/DUB/EES@EES, Aleck Dadson/TOR/ECT@ECT, Paul Dawson/Govt. Affairs/LON/ECT@ECT cc: Subject: examples of auction processes that worked Jeff Skilling proposed a solution to Gov Davis to solve the supply and pricing problems in the California market. In summary, the proposal would have a neutral party conduct an auction wherein the utilities would seek bids for 5-10 year packages of power from suppliers. The gov asked if anyone had successfully conducted such an auction in the industry already. I need your help to identify and describe any such examples (European or North American) by mid day Monday. Jeff and I will have a follow up call with the governor on Monday. Thanks