Message-ID: <22778615.1075846342185.JavaMail.evans@thyme> Date: Tue, 15 Aug 2000 11:15:00 -0700 (PDT) From: mark.schroeder@enron.com To: steven.kean@enron.com Subject: New import capacity rules in Italy Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Mark Schroeder X-To: Steven J Kean X-cc: X-bcc: X-Folder: \Steven_Kean_Dec2000_1\Notes Folders\Europe X-Origin: KEAN-S X-FileName: skean.nsf I will assume that you can retrieve e-mail by now. Below is a recent development, as you have asked to be kept apprised. It is the draft, still subject to comment, on how to allocate transmission import capacity into Italy for 2001. Important, as it is our main (nearly only) source of physical power to satisfy deals we have originated. What appears below is Alfredo's summary. Recognise that English is not his first language (probably his fourth), so it is a bit difficult to follow first time through. mcs ---------------------- Forwarded by Mark Schroeder/LON/ECT on 15/08/2000 18:07 --------------------------- Alfredo Huertas 15/08/2000 16:58 To: Riccardo Bortolotti/LON/ECT@ECT, Marco Lantieri/LON/ECT@ECT, Paul Mead/LON/ECT@ECT, Marco De Angeli/LON/ECT@ECT, Peter Heydecker/LON/ECT@ECT, Paul Mead/LON/ECT@ECT cc: Mark Schroeder/LON/ECT@ECT, Joe Gold/LON/ECT@ECT Subject: New import capacity rules in Italy The new delibera by the Authority outlines the methodology for the allocation of import capacity in 2001. Full details should be necessarily developed in full by the TSO by 30 Sept 2000. Find below, an apetizer for tomorrow's conference call. Main features 1. The Delibera asks the TSO to reach a compromise with neighbouring TSOs in order to render the allocation "firm" and "deep", that is, to ensure that agents who obtain import capacity into Italy receive a transparent and non-discriminatory treatment by these foreign TSOs. In case of disagreement, the Italian TSO will proceed autonomously with its own allocation (which is the current status). 3. Allocation procedure: iterative auction. Clearing price "seems" to be Pay-As-You-Bid, but the drafting is not conclusive. 4. No Letter of Credit or Declaration of Neighbouring TSOs, or Supply Contract with end-customer required to agents participating in the auction. This has been replaced by a Letter of Intention per consumption point (which expresses interest for the capacity requested). 5. 80 (20) percent of ATC for 2001 to be allocated annually (monthly). Bids before 30 Sept 2000 (90 days before the start of each month). Bidding block is 10 MW, at non-decreasing prices. 6. Antitrust thresholds: 20 percent of ATC per border and per agent, 10 percent of total ATC per agent. The thresholds are applicable both to the amount requested, and/or the amount allocated. Main concerns 1. Any substantial progress with respect to the 2000 situation depends on the ability of the Italian TSOs to fulfill its mandate of reaching a co-ordinated allocation with neighbouring TSOs. The Delibera does not provide any idea on how the Italian TSO may exercise its leverage to find a successful solution (eg, making co-ordination more profitable for foreign TSOs? Curtailing the level of import capacity in case of disagreement such that foreign TSOs wheel less volumes/possibly make less money? Is money the issue or perhaps, leaving us outside the game?) 2. The alternative in case of disagreement (that is, unilateral allocation of 50 percent of the ATC) makes no sense. If there is not an agreement (as it happened in 2000), allocating only 50 percent unilaterally does not solve anything. Actually, it could make things worse by removing some pressure by agents who got allocated 100 percent of the capacity on the Italian side, over foreign TSOs (as happened this year). As drafted, the Delibera makes the Italian TSO to accept whatever allocation the foreign TSOs decide for their 50 percent, without requesting a reciprocal treatment for the 50 percent capacity allocated by the Italian TSO!!! This could have been an interesting "carrot" for the Swiss if properly articulated. 3. The details of the auction procedure contain several loopholes and inconsistencies. Some clarification will be needed by the Autorita, and we will need to send asap a list of all unclear definitions. 4. Only one letter of intention as in 4 above per consumption point. This means the consumer gets tied up with a single supplier before the allocation takes place. 5. Spot purchases by TSO still opaque. In some circumstances, this is being favourable to us, so let's consider if we want to say anything here. 6. Lack of any reference to secondary trading of capacity. Not prohibited, but not proposed or explicitly outlined. 7. The "Pay-as-you-Bid" criteria makes less attractive Paul/Marco's proposed deal structure with ELES for sales into Italy. More tomorrow, a.