Message-ID: <20705646.1075851607386.JavaMail.evans@thyme>
Date: Tue, 10 Jul 2001 21:50:00 -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
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X-From: Ray Alvarez <Ray Alvarez/NA/Enron@ENRON>
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The attached preliminary comments were finalized and filed with the Commiss=
ion 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=
:=20

1.  The methodology of the June 19 order does not work and is totally inapp=
ropriate for marketers.  If price mitigation is inevitable, the Judge shoul=
d 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 af=
ter October 2.

3.  All buyers, including Enron, should be entitled to refunds; not just th=
e State of California and its IOU's.  Enron is a net purchaser in these mar=
kets.

4.  Only the state administered spot markets should be subject to the metho=
dology, not bilateral contracts, OOM sales or sales to the DWR.=20

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 met=
hodology presents for marketers and was agreeable to the notion that this s=
hould be addressed, perhaps in the context of the hearings that will form p=
art of his recommendation.  He agreed that the actual buyers should receive=
 refunds, and it was his understanding that only spot transactions should b=
e subject to the refund methodology.  Although he agreed that the refund me=
thodology, once implemented, should yield just and reasonable rates, he fel=
t 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 w=
ill shed some light as to the outcome.  I urged the Judge to recommend plac=
ing conditions to refunds, as the Commission did in its June 19 order with =
its RTO filing requirement.  The judge was noncommittal on this, although h=
e did indicate that he felt refunds should be subject to offset.

Next steps include filing our detailed comments by Thursday.  The Judge tol=
d us he would certify his recommendation to the Commission on Friday, and t=
hat the comments would accompany the recommendation.  Thereafter, it is lik=
ely that the Commission would defer to the Judge's recommendation to hold a=
 fast track evidentiary hearing of 60 days duration, to determine "unresolv=
ed issues of material fact".  The scope of the hearing has not been determi=
ned, but  will probably include cost issues and might serve as a vehicle fo=
r marketers to recommend an alternative methodology.