Message-ID: <27305908.1075848115114.JavaMail.evans@thyme> Date: Wed, 15 Nov 2000 22:15:00 -0800 (PST) From: steven.kean@enron.com To: mary.hain@enron.com, susan.mara@enron.com, jeff.dasovich@enron.com Subject: Re: Comments on FERC November 1 order Cc: joe.hartsoe@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: joe.hartsoe@enron.com X-From: Steven J Kean X-To: Mary Hain, Susan J Mara, Jeff Dasovich X-cc: Joe Hartsoe X-bcc: X-Folder: \Steven_Kean_June2001_4\Notes Folders\Discussion threads X-Origin: KEAN-S X-FileName: skean.nsf Has anyone talked with Tim B about what Larcamp said -- ie the soft cap only applies to PX and ISO bids and not to any bilateral contracts including bilateral fwd contracts? ----- Forwarded by Steven J Kean/NA/Enron on 11/16/2000 06:12 AM ----- Donna Fulton 11/14/2000 09:33 AM To: Steven J Kean/NA/Enron@Enron cc: Jeff Dasovich/NA/Enron@ENRON, Joe Hartsoe/Corp/Enron@ENRON, Mary Hain/HOU/ECT@ECT, Paul Kaufman/PDX/ECT@ECT, Richard Shapiro/NA/Enron@ENRON, Sarah Novosel/Corp/Enron@ENRON, Susan J Mara/SFO/EES@EES Subject: Re: Comments on FERC November 1 order Just to pile on with the issues, I will add a few thoughts of my own for issues that we might want to consider in our November 20 comments. Re: the application of the price cap to only PX and ISO, Commissioner Massey is not totally on board. He specifically asked about capping the forward market. He raised the idea that he had gotten from the San Diego hearing that there be an accepted forward contract for a specified timeframe (18-24 months) and specified rate, and that all loads must buy a minimum percentage of their needs from this contract. A staffer (Don Gelinas) asked whether the forward/bilateral market (presumably uncapped) could take care of investment recovery so that generation not be cancelled in California. Dynegy and other marketers raised the issue of the test to be used by the Commission in reviewing transactions above the soft cap. Specifically, what is opportunity cost? As long as the test is not known until after the fact, there will be lack of secuity selling into the California and greater incentive to sell elsewhere. Hobbs from Williams raised the possibility that if the Commission does not eliminate the soft cap (his preferred approach), that the cap should be temporary and escalating and there should be limited time for raising issues and retaining the refund liability (he suggested that the refund liability be only for one month). Many, especially the utilities, raised their position that the Commission should not institute penalties only on the load. They claimed this was one-sided and suggested if penalties were required, they needed to be applied to the supply side as well. They also argued that the load could not meet the 5% test. Massey had a concern at the end of the day that the Commission's encouragement of forward contracts will be stymied by the CPUC by their authority in reviewing prudence of the utilities' purchases. Larcamp asked at the end of the day for information on the cost of generation before deregulation - normalized for gas prices and emmission prices of today. The marketer on the panel added that we would need to include stranded costs. There was almost no support for the single price auction in California. The California politicians argued that the ISO Board structure needed to be changed, but that California had jurisdiction to change it, not FERC. A Court battle was threatened. Steven J Kean 11/13/2000 08:51 AM To: Mary Hain/HOU/ECT@ECT cc: Richard Shapiro/NA/Enron@Enron, Jeff Dasovich/NA/Enron@Enron, Susan J Mara/SFO/EES@EES, Joe Hartsoe/Corp/Enron@ENRON, Sarah Novosel/Corp/Enron@ENRON, Donna Fulton/Corp/Enron@ENRON, Paul Kaufman/PDX/ECT@ECT Subject: Re: Comments on FERC November 1 order There are a few other issues we need to look into: Larcamp told Hartsoe and I after the meeting that FERC may clarify that the price caps and reporting obligations apply only to bids into the PX and ISO -- ie no bilateral transaction will be subject to the requirements. He asked if knowing this would change any of our views (esp peaking plants, though I suspect it's already too late for that). My gut reaction is that so long as the market continues to clear through the centralized exchanges this "exemption" for bilateral transactions won't matter much, but let's think it through. Is EOL or APX an alternative? Massey specifically asked us to address forward markets in our comments. Specifically, "has FERC done everything it can to encourage forward market development?" In addition to any other points we might make, I think we should argue that "PJMing" the market won't facilitate and may even hinder forward market development. Also, we should advocate actions by FERC that take away second-guessing by the CPUC in order to reduce utility fears about contracting forward. We have to give the Commission a way out on price caps. We need to think through whether there is something we can live with here, or we should take the approach I took in my testimony: FERC should encourage the state to provide rate protection for selected customer classes by putting those requirements up for bid (ie get the utility out of the commodity business as much as possible). Finally, on governence issues we should argue for a narrowe role for the ISO as a way of diffusing the emotional governence debate. Analogy: if the ISO is simply the air traffic controller all parties will simply be interested in retaining the most technically competent people (not hiring or appointing their lackies or friends). So long as the ISO has a role in setting prices, acquiring supplies or running the market, it is destined to be controversial and highly politicized. Those functions should be left to the market. Mary Hain@ECT 11/10/2000 11:13 AM To: Steven J Kean/NA/Enron@Enron, Harry Kingerski/NA/Enron@Enron cc: Subject: Comments on FERC November 1 order ---------------------- Forwarded by Mary Hain/HOU/ECT on 11/10/2000 09:20 AM --------------------------- ________________________ To: Christian Yoder/HOU/ECT@ECT, steve.c.hall@enron.com, Richard Sanders, Susan J Mara/SFO/EES@EES, Mona L Petrochko/NA/Enron@Enron, jdasovic@ees.enron.com, Paul Kaufman/PDX/ECT@ECT, James D Steffes/NA/Enron@Enron, Joe Hartsoe@Enron, Sarah Novosel/Corp/Enron@ENRON, James E Keller/HOU/EES@EES, Mike D Smith/HOU/EES@EES, Harry Kingerski/HOU/EES@EES, Dennis Benevides, Tim Belden/HOU/ECT@ECT, Robert Badeer/HOU/ECT@ECT, Jeff Richter/HOU/ECT@ECT, Alan Comnes/PDX/ECT@ECT, Steve Kean, Richard Shapiro, Tim Heizenrader/PDX/ECT@ECT cc: carrrn@bracepatt.com, dwatkiss@bracepatt.com From: Mary Hain/HOU/ECT Date: 11/09/2000 05:19:03 PM Subject: Comments on FERC November 1 order For purposes of our discussions, Alan and I have put together an outline of issues raised in the FERC meeting today that we might consider putting in our comments to FERC. Our written comments would also include the issues we have already raised in our white paper and our oral comments at FERC. Of course to the extent we have discussed things in our white paper we could simply cite the paper. Given the potentially long list of issues to be addressed, I haved left a voice mail asking Seabron if he is available to help Alan.