Message-ID: <16838039.1075851614453.JavaMail.evans@thyme> Date: Fri, 21 Sep 2001 15:18:24 -0700 (PDT) From: jeff.dasovich@enron.com To: legal <.hall@enron.com> Subject: RE: FYI -- Dow Jones report on out-of-market purchases; meeting on Monday Cc: susan.mara@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: quoted-printable Bcc: susan.mara@enron.com X-From: Dasovich, Jeff X-To: Hall, Steve C. (Legal) X-cc: Mara, Susan X-bcc: X-Folder: \Dasovich, Jeff (Non-Privileged)\Dasovich, Jeff\Sent Items X-Origin: DASOVICH-J X-FileName: Dasovich, Jeff (Non-Privileged).pst Thanks alot. -----Original Message----- From: Hall, Steve C. (Legal)=20 Sent: Friday, September 21, 2001 5:18 PM To: Dasovich, Jeff Subject: RE: FYI -- Dow Jones report on out-of-market purchases; meeting on= Monday Comnes has a copy; I'll walk over and ask him to send it to you. -----Original Message----- From: Dasovich, Jeff=20 Sent: Friday, September 21, 2001 3:05 PM To: Hall, Steve C. (Legal) Subject: RE: FYI -- Dow Jones report on out-of-market purchases; meeting on= Monday Could we get a copy of the letters referenced in the story? 415.782.7854. -----Original Message----- From: Hall, Steve C. (Legal)=20 Sent: Friday, September 21, 2001 4:50 PM To: Dasovich, Jeff Subject: RE: FYI -- Dow Jones report on out-of-market purchases; meeting on= Monday Ray and Alan. -----Original Message----- From: Dasovich, Jeff=20 Sent: Friday, September 21, 2001 2:42 PM To: Shapiro, Richard; Mara, Susan; Comnes, Alan; Hall, Steve C. (Legal); St= effes, James D. Subject: FW: FYI -- Dow Jones report on out-of-market purchases; meeting on= Monday Anyone from Enron participating in the meeting? =20 Best, Jeff **********************=20 FERC To Examine Alleged Market Manipulation By Calif ISO =09 Dow Jones =09 Updated: Friday, September 21, 2001 04:53 PM ET =09 Email this article to a friend! =20 Printer-f= riendly version =09 =09 By Jason Leopold=20 Of DOW JONES NEWSWIRES=20 LOS ANGELES (Dow Jones)--Federal energy regulators may investigate whether = the operator of California's wholesale electricity market has been manipula= ting its power-purchasing practices to reduce the costs of power the state = purchased under long-term contracts, according to documents obtained Friday= by Dow Jones Newswires Friday.=20 At issue is whether the California Independent System Operator has violated= its own market rules by purchasing expensive power secured by the state un= der contracts rather than cheaper power available in the spot market. The s= tate's need to sell off surplus power secured under those contracts has pro= ven embarrassing for Gov. Gray Davis, who signed $43 billion in deals to he= ad off a summer of spiking prices and blackouts that never materialized.=20 The Federal Energy Regulatory Commission will hold a meeting in California = Monday to address generators' complaints. The energy companies say that the= California ISO's purchasing decisions are difficult to comprehend and out = of line with the market, according to a letter sent by Andrea Wolfman, lead= FERC counsel for market oversight and enforcement.=20 The letter was sent to the ISO, the California Department of Water Resource= s - which has been buying power in lieu of the state's struggling utilities= since mid-January - and several generators, all of which were to attend th= e meeting.=20 "Recently we have become concerned that the scheduling and dispatch procedu= res of the California ISO, as they have had to change in the last nine mont= hs, are not well understood or are not well suited to the current market st= ructure," Wolfman said in her letter. "The purpose of the meeting is to dev= elop agreement between the ISO and those that participate in the scheduling= and dispatch (generators, utilities, CDWR) on appropriate practices and pr= ocedures."=20 ISO Procedures Need Explaining -FERC=20 The ISO's main responsibility is keeping power supply and demand in balance= on the state's electrical grid. As part of that job, the ISO determines wh= ich power plants to call into service and which suppliers to buy power from= .=20 If the ISO can't explain how it makes its decisions, FERC may conduct an au= dit of the organization and investigate the possibility it has manipulated = the market, Wolfman's office said.=20 "As discussed, FERC may schedule a technical conference and operational aud= it of CAISO," a second letter from FERC's market oversight and enforcement = division states. "This unprecedented examination of CAISO operations could = lead to the belief that complaints by generators of market manipulation and= other practices by the ISO should be investigated."=20 The ISO's operating rules generally call for it to purchase the cheapest po= wer first.=20 "The information that (generators) have provided all leads to a theory that= the CAISO is manipulating the market in order to purchase surplus DWR powe= r at high prices and protect Gov. Davis from political embarrassment," the = second letter says.=20 The ISO has said only that the market isn't operating as intended, and decl= ined to answer other questions about the allegations or discuss Monday's me= eting.=20 Generators Confused=20 Generators, including Mirant Corp. ( MIR , news , msgs ), Reliant Energy Inc. ( REI , news , msgs ), Williams Cos. ( WMB , news , msgs = ), Duke Energy ( DUK , news , m= sgs ) and Dyne= gy Inc. ( DYN ,= news , msgs ), have bought app= arently inexpensive power in the ISO's spot market only to find weeks later= that the price was much higher. That's because, according to the allegatio= ns, the ISO is letting DWR supply expensive power into the market as "out-o= f-market" purchases that aren't averaged into the real-time prices that ISO= market participants see.=20 DWR continues to buy out-of-market power regularly at the ISO's request, DW= R operations chief Pete Garris has said, but those purchases are being made= in the spot market and are never being satisfied by power from DWR's long-= term contracts.=20 The out-of-market purchases appear to be expensive, however. According to t= he ISO's August market report, the average out-of-market price for peak hou= rs was $55.90 a megawatt-hour, compared with $26.49/MWh on the ISO computer= ized market. Brokered prices of western electricity have been lower than th= e out-of-market prices for months.=20 None of the companies mentioned was willing to comment on the record.=20 The meeting is scheduled to be held at the ISO's headquarters in Folsom, Ca= lif., and representatives from power producers, utilities and the state are= expected to attend. FERC will serve as facilitator, Wolfman said. The meet= ing isn't open to the public.=20 The meeting will begin with a presentation by the ISO on its practices and = operational procedures, followed by adjustments that may be needed to impro= ve the market.=20 "The objective is to develop a written set of procedures that is agreed to = by all the market participants and that is consistent with good utility pra= ctices," Wolfman said in the letter.=20 -By Jason Leopold, Dow Jones Newswires; 323-658-3874; jason.leopold@dowjone= s.com