Subject: Transmission Language
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked]
Date: Fri, 9 Jun 2000 09:46:00 -0700 (PDT)

Steve -- I received your note that you had received Dan's comments.  I
thought it made sense, in any case, to pass on a few comments; Dan probably
had the same thoughts, but just in case here they are:

Section 2(a):  the parenthetical "including the transmission of electric
energy in interstate commerce that is sold at retail", while technically a
correct fix, is still a little troubling.   Just as everyone is someone's
native load customer, all electricity is ultimately sold "at retail."
Nonetheless, this hasn't stopped FERC from concluding that it lacks
jurisdiction over the transmission component of bundled retail service.  The
possibility that this ambiguity could be exploited would be avoided by using
the "transmission component of bundled retail service" language, and
including separate definitions of bundled and unbundled retail service
(rather than "quick and dirty" approach in new section 205(g).

This approach would also get rid of the possible ambiguity in new section
205(g)(1)(A), which requires the filing of a schedule for the "transmission
of electric energy... that is separate from the rates...applicable to the
sale of electric energy and to local distribution."  It is not abundantly
clear that the filed rate schedule must be for the transmission component of
unbundled retail service, although that seems to be the intent of the
drafters.

Section 205(g) uses the "not unduly discriminatory or preferential basis"
standard.  That language, as with the existing Federal Power Act language,
can be interpreted as permitting native load service to maintain its
priority status in all situations, on the basis that it is not "undue"
discrimination to favor those who paid for the system or the other usual
defenses of this approach.  Language similar to that we have worked on
previously, which makes it absolutely clear that no native load preference
is permitted, would eliminate this possible result.

Similarly, it would be useful, in section 205(g)(5), to make it clear that
the transmission of bundled service must be reserved and scheduled on
exactly the same basis as unbundled service; as written, this provision
might be interpreted as not so requiring.

If Enron accepts the preference for "firm wholesale and retail customers" in
Section 205(g)(6), it should revise the language to make it clear that this
is a "one-time" preference, and that, with respect to future service,
transmission customers are to be placed on equal footing.  This might be
done be including a specific cut-off, such as "Any such rule shall cease to
be applicable no later than one year after the date such rule takes effect."

Section 2(f) permits transmission rates to be capped at the rate set by the
State commission.  This approach leaves open the option for States which
have, or which, as part of the establishment of retail competition, to set
transmission rates at a higher than cost-justified level, and to subsidize
the sale price of their owned generation or purchased power from that
subsidy.  Such an approach would put marketers at a severe disadvantage.  I
suggest including a prohibition against such subsidization.

Adam Wenner
Vinson & Elkins L.L.P.
1455 Pennsylvania Ave., N.W.
Washington, D.C. 20004-1008
(202) 639-6533
(202) 639-6604 (fax)
[email-masked]