Message-ID: <4401122.1075851974101.JavaMail.evans@thyme> Date: Tue, 10 Jul 2001 11:50:00 -0700 (PDT) From: ray.alvarez@enron.com To: james.steffes@enron.com, jeffrey.hodge@enron.com, robert.williams@enron.com, steven.kean@enron.com, richard.shapiro@enron.com, linda.robertson@enron.com, alan.comnes@enron.com, jeff.dasovich@enron.com, susan.mara@enron.com, robert.frank@enron.com, sarah.novosel@enron.com, dwatkiss@bracepatt.com Subject: Preliminary Comments on Judge's Recommendation Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Ray Alvarez X-To: James D Steffes, Jeffrey T Hodge, Robert C Williams, Steven J Kean, Richard Shapiro, Linda Robertson, Alan Comnes, Jeff Dasovich, Susan J Mara, Robert Frank, Sarah Novosel, dwatkiss@bracepatt.com X-cc: X-bcc: X-Folder: \Richard_Shapiro_Nov2001\Notes Folders\All documents X-Origin: SHAPIRO-R X-FileName: rshapiro.nsf The attached preliminary comments were finalized and filed with the Commission this afternoon, in order to provide FERC staffers a concise, effective statement of our position while they drafted the Judge's recommendation. I was able to schedule a meeting with Judge Wagner, at which Dan Watkiss and I stepped the Judge through the comments and hit the following high points: 1. The methodology of the June 19 order does not work and is totally inappropriate for marketers. If price mitigation is inevitable, the Judge should formulate or make allowances for a workable methodology. 2. The Judge should recommend that the end result of any Commission order must be a just and reasonable finding for all periods, both prior to and after October 2. 3. All buyers, including Enron, should be entitled to refunds; not just the State of California and its IOU's. Enron is a net purchaser in these markets. 4. Only the state administered spot markets should be subject to the methodology, not bilateral contracts, OOM sales or sales to the DWR. The details of these points appear in the attached document. The Judge was receptive to most points. He understood the problems that the June 19 methodology presents for marketers and was agreeable to the notion that this should be addressed, perhaps in the context of the hearings that will form part of his recommendation. He agreed that the actual buyers should receive refunds, and it was his understanding that only spot transactions should be subject to the refund methodology. Although he agreed that the refund methodology, once implemented, should yield just and reasonable rates, he felt that this was outside the scope of his recommendation and that the matter was up to the Commission. The Judge spoke generally and no promises were made as to the content of his recommendations, but hopefully this insight will shed some light as to the outcome. I urged the Judge to recommend placing conditions to refunds, as the Commission did in its June 19 order with its RTO filing requirement. The judge was noncommittal on this, although he did indicate that he felt refunds should be subject to offset. Next steps include filing our detailed comments by Thursday. The Judge told us he would certify his recommendation to the Commission on Friday, and that the comments would accompany the recommendation. Thereafter, it is likely that the Commission would defer to the Judge's recommendation to hold a fast track evidentiary hearing of 60 days duration, to determine "unresolved issues of material fact". The scope of the hearing has not been determined, but will probably include cost issues and might serve as a vehicle for marketers to recommend an alternative methodology.