Subject: CAISO NOTIFICATION - Initiation of 1999 UFE Retro-Active Market A djustments & Final UFE Project Report
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Date: Thu, 15 Jun 2000 05:49:00 -0700 (PDT)

ISO FALL 1999 UFE PROJECT
RETROACTIVE MARKET ADJUSTMENT ANNOUNCEMENT

June 15, 2000

MARKET PARTICIPANTS & SC SETTLEMENT CONTACTS;

NOTIFICATION OF RETRO-ACTIVE 1999 UFE MARKET CORRECTION

On July 3, 2000, the ISO, consistent with its commitment to the Market
Participants, will initiate Unaccounted for Energy (UFE) market adjustments,
for Market Settlements from August 21, 1999 through December 31, 1999.

These adjustments result from the correction of  meter data errors,
identified and corrected by the ISO UFE Project. The Market Participants
have been very cooperative in working with the ISO.  The mutual objectives
were to assure accurate settlement of Imbalance Energy, to rectify start-up
meter data management problems and to minimize UFE.

The overall magnitude of erroneous UFE identified by the ISO UFE Project is
approximately 1,100,000 MWhs or $ 70,000,000.  The ISO Settlements and
Metering Department staffs are in the process of recalculating the specific
market charges impacted, for this period.

Actual retro-active UFE adjustments will commence on July 3, 2000, and be
applied initially to the May 9th Preliminary Settlement Statement (PSS). The
ISO's intention is to correct 15 settlement days per week over the next 10
weeks until the entire 1999 August 21-December 31 period settlements are
corrected.  The ISO Settlements system time required to rerun settlements
constrains our ability to proceed more expeditiously.  However, we do plan
completion by the end of Summer.

The ISO will apply retroactive adjustments to ALL UFE related Market
charges. The erroneous UFE identified by the ISO UFE Project will be charged
to the responsible Scheduling Coordinators (SCs), to help assure that no
adverse market impact occurs from cost shifting.  Other SCs will receive the
associated charge type credits.

FINAL REPORT TO MARKET PARTICIPANTS - Fall 1999 ISO UFE PROJECT

On August 21, 1999, UFE in the PG&E Service Area increased substantially,
ranging from 4-15 %.   This inordinately high UFE continued in excess of
typical amounts of UFE for this UDC Service Area (-1 to +1%), for four
months.

The ISO actively investigated potential systemic causes for this order of
magnitude increase in UFE.

ISO efforts consisted of a concerted review of SQMD submitted by SC's during
this period, a review of the ISO MDAS polled meter data for ISO metered
entities, a review of interchange data (exports), a review of the
Transmission Loss calculations used by ISO Settlements to calculate UFE by
UDC, an investigation of the Market Redesign Settlements software changes
associated with the drop of new Settlements software in mid- August and the
retention of a data consultant to help identify and isolate any causal
factor, attributable for the high UFE .

The effort to identify UFE related settlement issues for the period of
August 21, 1999 through December 31, 1999 is complete.  The ISO UFE Project
team, working in conjunction with Market Participants, identified over 1.1
million MWH of erroneous UFE. This UFE is now accounted for, and will be
reassigned to the responsible SCs. The ISO Project identified over 14 casual
sources of UFE during this period.  Many of the issues identified were
interrelated.

The last major source of UFE for the period was identified in April. This
UFE resulted from an erroneous Validation, Editing and Estimating (VEE)
factor, applied to firm load within the PG&E Service Area.  This error,
associated with late or missed meter data adjustment, commenced October 1,
1999 and resulted in understated SC load of approximately 100 - 267 MW/hour,
through December.

The balance of the SC meter data management errors previously identified
were attributable to the complexity of using Pseudo Resources and Logical
Metering to model, schedule and settle Municipal UDC existing contracts
(ETCs).

The four primary SCs which experienced meter data problems, within the PG&E
UDC Service Area, have resubmitted corrected Settlement Quality Meter Data
(SQMD).

The ISO will initiate retroactive UFE Market adjustments for the Settlement
period of August 21,1999 through December 31, 1999.  The magnitude of the
Market UFE adjustment is approximately $70 million. These retro-active
Market adjustments will complete the Project Team's work on the Fall 1999
UFE issue.

Present UFE Status:

March 2000 UFE, based upon Final Settlement Statements (FSS), is as follows:

System UFE         +
0.22 %
PG&E UDC Service Area UFE   + 0.17 %
SCE UDC Service Area UFE    + 0.44 %
SDG&E UDC Service Area UFE   -  0.45%

ISO UFE Project Team

Sarah Ten Broeck
Kevin Graves
Bill Hayes
Kyle Hoffman
Tri Huynh
Glen Perez
Jeanette Plumley
Chris Sibley

June 15, 2000

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