Message-ID: <1431227.1075851001950.JavaMail.evans@thyme> Date: Tue, 8 May 2001 03:31:00 -0700 (PDT) From: mark.crowther@enron.com To: james.steffes@enron.com Subject: Re: Recommendations for Japanese Electricity Reform Cc: richard.shapiro@enron.com, steven.kean@enron.com, nicholas.o'day@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: richard.shapiro@enron.com, steven.kean@enron.com, nicholas.o'day@enron.com X-From: Mark Crowther X-To: James D Steffes X-cc: Richard Shapiro, Steven J Kean, Nicholas O'Day X-bcc: X-Folder: \Steven_Kean_Oct2001_2\Notes Folders\Attachments X-Origin: KEAN-S X-FileName: skean.nsf Jim, Thanks for taking time to look through the Brattle Group recommendations for Japan. Some of your comments refer to serious issues in the design of a competitive market for electricity here. Brattle's analysis of the Japanese electricity system concludes that market concentration is the main reason for the failure of current reforms. The recommendations then focus on providing practical means of reducing market power in Japan, followed by implementation of a pool with bilateral trading to create non-discriminatory access to network resources and services. Would you be able to take some time to talk to Nick O'Day and myself about your comments on Tuesday evening? Around 5.30 p.m. your time would be ideal for us if you're available. Best regards Mark James D Steffes 05/05/2001 09:30 AM To: Mark Crowther/AP/Enron@Enron cc: Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron Subject: Re: Recommendations for Japanese Electricity Reform Some thoughts -- 1. We argue against the PJM Installed Capacity obligation. Basically it is another rent capture system for generators. 2. Don't really understand your stranded cost recovery scheme. Looks like a transmission level charge. Is it $/mw or $/mwh? 3. Your model for a pool doesn't solve the key problem of market power. Putting a pool in place w/o dealing w/ market power is a recipe for disaster. 4. You don't talk about "Market Based Rate" authority. Would all generators, including incumbent generation be allowed to bid their price or must they bid cost? This is critical. This is the real carrot to get the Utilities off of the stick - mandatory participation with cost-based bidding for Incumbents until under 1,000 (?) HHI. Good luck, Jim Mark Crowther 04/30/2001 11:56 PM To: Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, James D Steffes/NA/Enron@Enron cc: Subject: Recommendations for Japanese Electricity Reform Please find attached the latest draft of the Brattle Group's recommendations for the Japanese power industry and the accompanying appendices. You will find changes in emphasis and structure, which make the paper more convincing, comprehensive and readable. We have tried to include a global view of market objectives in keeping with your approach in Houston, to give better explanations of why our recommendations are right for Japan at this stage and to address potential objections from deregulation's critics in Japan. In addition to its earlier content, the new draft: includes a new section setting up the objectives of a competitive market and defining a workably competitive market, before making specific recommendations to achieve those objectives in Japan; addresses objections by utilities, etc. in Japan to our proposals. Current opinions or issues circulating in Japan include: California crisis, discrediting of a tight pool, success of PJM ensured by lack of requirement to unbundle, nuclear power development; emphasizes the need for a strong, independent regulator given METI's recent inability to provide clear rules to support its recommendations and lack of expertise in the Fair Trade Commission; de-emphasizes final section on public policy issues to emphasize market structure, by merging the public policy issues into one section, placing reliability at the top of the list and providing alternatives to achieve nuclear policy issues; proposes implementation timetable in keeping with Japanese review process; takes a punchier, more urgent approach in the executive summary and the paper as a whole. The paper will be published as a Brattle Group paper commissioned by Enron Japan. Much input has been provided by Enron Japan but the economic arguments and general approach are in keeping with Brattle's written positions and standards. The written style of the paper is, of course, theirs. We would appreciate any comments you might have on the contents of this paper. Since we will release the paper on 15 May and will create completed published versions in both English and Japanese by 11 May, please send us any comments by the end of this week, i.e. Friday, 4 May. Best regards Mark Crowther Public Affairs Enron Japan