Message-ID: <12111663.1075846345664.JavaMail.evans@thyme> Date: Wed, 17 May 2000 09:35:00 -0700 (PDT) From: linda.lawrence@enron.com To: daniel.allegretti@enron.com, roy.boston@enron.com, jeff.brown@enron.com, susan.covino@enron.com, paul.kaufman@enron.com, steven.kean@enron.com, robin.kittel@enron.com, leslie.lawner@enron.com, susan.landwehr@enron.com, richard.shapiro@enron.com, james.steffes@enron.com, lisa.yoho@enron.com, elizabeth.linnell@enron.com, janine.migden@enron.com, christi.nicolay@enron.com, susan.mara@enron.com, joe.hartsoe@enron.com, robert.hemstock@enron.com, mary.hain@enron.com, jeff.dasovich@enron.com, tom.delaney@enron.com, patrick.keene@enron.com, harry.kingerski@enron.com, sarah.novosel@enron.com Subject: May 17, 200 Commission Meeting Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Linda L Lawrence X-To: Daniel Allegretti, Roy Boston, Jeff Brown, Susan T Covino, Paul Kaufman, Steven J Kean, Robin Kittel, Leslie Lawner, Susan M Landwehr, Richard Shapiro, James D Steffes, Lisa Yoho, Elizabeth Linnell, Janine Migden, Christi L Nicolay, Susan J Mara, Joe Hartsoe, Robert Hemstock, Mary Hain, Jeff Dasovich, Tom Delaney, Patrick Keene, Harry Kingerski, Sarah Novosel X-cc: X-bcc: X-Folder: \Steven_Kean_Dec2000_1\Notes Folders\Ferc X-Origin: KEAN-S X-FileName: skean.nsf May 17, 2000 Via Internet MEMORANDUM TO: Interested Clients FROM: John & Hengerer RE: Commission Meeting -- May 17, 2000 At today's meeting, the Commissioners approved the consent agenda and then discussed the following items. ELECTRIC MATTERS Alliance Companies, et al., Docket Nos. ER99-3144 In December 1999, the Commission issued an order conditionally authorizing the formation of the Alliance RTO. At today's meeting, the Commissioners denied (by a margin of 3 to 1, Commissioner Hebert dissenting) rehearing of the December 1999 order. The Commissioners also unanimously rejected (Commissioner Massey concurring) Alliance's compliance filing. In its original filing, Alliance proposed allowing each of its 5 active owners to retain up to a 5 percent ownership interest in the RTO (up to 25 percent total ownership by active owners). The December 1999 order rejected this proposal as contrary to the independence principle outlined in Order No. 2000, which states that active ownership should be limited to a total of 15 percent unless special circumstances are shown. Rejecting requests for rehearing, the majority concluded that Alliance had failed to justify active member ownership in excess of 15 percent. Dissenting, Commissioner Hebert argued that (i) the 15 percent benchmark is arbitrary and should not be viewed as creating a binding legal requirement. and (ii) limiting active ownership will provide a disincentive for other utilities to join the RTO. 3 The Commissioners also rejected Alliance's compliance filing submitted to satisfy the terms of the December 1999 order. In addition to failing to correct the active ownership issue outlined above, the Commissioners faulted Alliance for not eliminating pancaked rates and for not addressing issues associated with the RTO's scope and configuration. Commissioner Massey indicated that he would write a concurrence to stress that Aseams@ agreements do not negate the need to review the RTO's scope and configuration to ensure that it is properly designed and sized. Southwest Power Pool, Docket No. EL00-39 The Commissioners unanimously rejected, as failing to meet the requirements of Order No. 2000, the Southwest Power Pool's (SPP) RTO proposal. Commissioner Massey, who moved the item to the discussion agenda, cited the following shortcomings in SPP's proposal: (i) operational control of transmission facilities was not turned over to the RTO; (ii) the RTO's proposed open-access transmission tariff did not comply with Order No. 2000; (iii) no real-time balancing market had been proposed; (iv) lingering concerns with the RTO's governance structure; and (v) the RTO's proposed scope and configuration are inadequate. Commissioner Massey encouraged the SPP to join other entities seeking to form an RTO, or consider merging with the Midwest ISO. Notice of Interim Procedures to Support Reliability and Request for Comments, Docket No. EL00-75 The Commissioners unanimously approved short-term procedures designed to address Summer 2000 reliability concerns. The approved measures provide for (i) streamlining FERC procedures to promote on-site, distributed generation, (ii) waiving prior-notice requirements for load-reduction agreements, (iii) improving demand-side price signals, (iv) requiring more extensive OASIS posting of available transmission capacity; and (v) making Commission Staff more available to the industry to address reliability concerns. Comments on the proposed short-term measures are due by June 2, 2000. Additionally, agreeing that the short-term procedures are very minimal in nature, the Commissioners requested comments on long-term reliability issues. Comments are due by June 30, 2000. Finally, Commissioner Hebert indicated that he would write a separate concurrence to express his belief that competitive forces are the answer to reliability concerns and to criticize the Commission for not eliminating artificial price caps and promoting competitive rates. Commissioner Hebert's accusation that the Commission was more concerned with politics than good policy touched off a heated debate, with Chairman Hoecker reciting FERC successes and Commissioner Massey scoffing at Commissioner Hebert's suggestion that price caps were to blame for generation shortages. GAS MATTERS Regulation of Short-Term Natural Gas Transportation Services, Regulation of Interstate Natural Gas Transportation Services, Docket Nos. RM98-10, RM98-12 The Commissioners unanimously addressed and generally denied requests for rehearing of Order No. 637. Finding that Order No. 637 strikes a good balance between competing interests, the Commissioners indicated that their order would, with several exceptions, uphold the mandates of the order. The Commissioners expressly noted that requests for rehearing of right-of-first-refusal (ROFR) roll-up issues would be denied. Order No. 637 states that, if a pipeline is fully subscribed, a party wishing to exercise a ROFR will be required to match competing bids, even if a competing bid exceeds the maximum rate for the capacity. Revisions and clarifications of Order No. 637 approved by the Commissioners at today's meeting include: (1) shippers with multi-year contracts at max rates for seasonal service will retain their ROFR; (2) pipelines will be required to post available capacity within one hour of each nomination cycle, rather than within one day as directed by Order 637; (3) short-term capacity release transactions must be posted within one hour of the first nomination under the contract, rather than upon the execution of the contract as stated in Order No. 637; and (4) Order No. 637's OFO penalty and imbalance provisions will be clarified in the Commission order. Although comments at today's meeting were brief, we anticipate a lengthy order addressing the numerous issues raised by parties in their requests for rehearing.