Message-ID: <1911262.1075860378563.JavaMail.evans@thyme> Date: Tue, 19 Dec 2000 00:22:00 -0800 (PST) From: mary.hain@enron.com To: chris.stokley@enron.com, murray.o'neil@enron.com Subject: Re: Summary of FERC's 12- 15 order on California Markets Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: Mary Hain X-To: Chris Stokley, Murray P O'Neil X-cc: X-bcc: X-Folder: \Mary_Hain_Aug2000_Jul2001\Notes Folders\All documents X-Origin: Hain-M X-FileName: mary-hain.nsf ---------------------- Forwarded by Mary Hain/HOU/ECT on 12/19/2000 08:31 A= M=20 --------------------------- Alan Comnes 12/18/2000 04:58 PM To: Mary Hain/HOU/ECT, paul.kaufman@enron.com cc: tbelden@enron.com, smara@enron.com, bob.badeer@enron.com,=20 greg.wolfe@enron.com, steve hall@enron=20 Subject: Re: Summary of FERC's 12- 15 order on California Markets =20 The following are some notes and questions regarding FERC's December 15= =20 Order intended to supplement Mary's notes distributed over the weekend. 1. Penalty on Underscheduled Load=20 a. Penalty threshold The FERC stood by its Nov 1 recommendation to impose a penalty on all SC's= =20 that underschedule by more than 5%. The only change relative to November 1= =20 is that the FERC will allow SC's with loads 200 MW or less to have up to 10= =20 MW imbalance without penalty. EPMI as a power marketer, has a highly=20 variable load, I assume. Do we need to seek clarification from FERC or ISO= =20 on how ISO will measure the load (annual average, annual peak, monthly peak= ?)=20 used to determine whether the applicable penalty threshold is 10 MW or 5%?= =20 Guidance from traders would be appreciated. b. Estimated bills FERC allows the ISO to implement a blended "automated/manual" process to=20 implement the ISO's load imbalance penalty. To simplify the settlement=20 process, the ISO is allowed to institute estimated billing procedures on a= =20 temporary basis. Does EPMI have a serious problem with being billed on an= =20 estimated basis? 2. Documenting Incremental Seller Costs, Including Opportunity Costs The FERC order raises important issues with regard to documenting our costs= ,=20 which will be required on all sales to the ISO or PX effective on 1/1/01. = In=20 its discussion of the $150/MWh breakpoint, FERC states: "In recognition of= =20 the unworkable complexities that the opportunity cost concept introduces in= =20 the ISO real-time imbalance market, we will eliminate it." Enron will=20 undoubtedly raise the impermissibility of opportunity costs in its rehearin= g=20 request. Among other things, EPMI will argue that opportunity costs are a= =20 legitimate economic cost, that such costs are used in transmission pricing,= =20 and that without such costs the FERC is essentially taking=20 generator/marketers back to cost-of-service ratemaking This being said, EPMI must operate without the benefit of using opportunity= =20 costs as a basis for documenting above-$150/MWh accepted bids effective=20 1/1/01. As noted in the list of information that must be reported by Enron (see=20 Mary's summary or p. 59 of the FERC order), sellers that have not generated= =20 their own power can report "purchase price". Is West Trading prepared to= =20 document every above-$150/MWh sale to the ISO or PX with an associated=20 "purchase price?" In addition, other costs that clearly apply to a=20 marketer--such as transmission access costs, transmission losses, expected= =20 replacement power costs, start-up/no-load costs--are not allowed on the=20 list. (We should not the omission of these costs in our petition for=20 rehearing.) In several places in the order, the Commission states that sellers should b= e=20 allowed to earn reasonable profits but little guidance is given. The only= =20 concrete guidance I found was in Massey's concurring opinion which identifi= ed=20 $25/MWh as a "reasonable capacity adder." Accepted bids below $150/MWh do not require documentation. The preliminary= =20 opinion from our discussion today was that such bids are in a =01&safe harb= or=018=20 zone and it appears that refund risk on such transactions is much less.