Subject: RE: Dan Larcamp request
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Date: Wed, 19 Jul 2000 02:25:00 -0700 (PDT)

Richard--Joe has some ideas about this and will get back with you (and submit 
the RCR).

"Tabors, Richard" <[email-masked]> on 07/18/2000 06:05:36 PM
To: Christi L Nicolay <[email-masked]>, James D Steffes 
<[email-masked]>
cc: "Tabors, Richard" <[email-masked]>, Joe Hartsoe 
<[email-masked]>, Richard Shapiro <[email-masked]>, Steven 
J Kean <[email-masked]>, Rob Bradley <[email-masked]> 
Subject: RE: Dan Larcamp request

Christi, Jim, et al

This last exchange has been very helpful.  The question that we need some
guidance on is how detailed he wants these answers and what he will do with
the results.  There are at least two levels that we could look at
effectively.

 1.  Fairly quickly, a repeat of the analysis done in the summer of
'98 when we looked at the price spikes in the midwest.  It would need to
focus on San Diego since that seems to be where the price problem is today
(along with the midwest) and also get a glimmer on (rumor picked up here)
the impact of CA price spikes on Oregon consumers.  The conclusion from '98
was that price spikes are necessary to send investment price signals for
both generation additions and for DSM investments (load response).
Presumably this would carry forward to a 2000 study.

 2.  A more careful look at the same areas described above but more
focused on how the wholesale prices find their way to end use consumers.  WE
covered this only in a cursory fashion in '98.  Here we would need to do two
things.  The first is make certain that Dan and the FERC senior folks
understand the basics that the price spikes in the midwest and in the other
bilateral markets only affect the incremental transactions (the lesson of
'98)not all kWh.  This is different from price spikes in the "pool markets"
where they set the price for all kWh.  The second point is to see that there
is an understanding of the role of a forward market and a hedge, i.e. that
you could "look on EOL" and buy forward a 7x24 for the summer, say, and pay
a market price to protect you against the volatility on an hourly basis by
absorbing it in a 3 month contract. The "price signal for investment"
conclusion would carry forward as above.

What do you think the level of interest / need is and how quickly does he
need some or all of the answers?

This is a good time for TCA to tackle this.  We have (or had) a quiet moment
for both Fagan and Rao who are the two experts on data development and
analysis from published sources.

Christi, let's talk in the morning so I can scope an RCR.

Thank you.

Richard

-----Original Message-----
From: Christi L Nicolay [mailto:[email-masked]]
Sent: Tuesday, July 18, 2000 5:17 PM
To: James D Steffes
Cc: [email-masked]; Joe Hartsoe; Richard Shapiro; Steven J Kean; Rob
Bradley
Subject: Re: Dan Larcamp request

Thanks, Jim--Dan Larcamp seemed to genuinely want to learn what the problems
are
and to educate his staff.  In that regard, we have offered to have some of
his
staff down to use some of Enron's tools.  He was specifically asking for the
data below to counter the bent at FERC for price caps.  I didn't get a
feeling
that he would use the data to say that everything is fine.  In fact, we took
him
through some parking examples and he asked that we hold a "seminar" type
activity for some of his senior staffers.  He is in the process of bringing
on
some staffers that can act agressively on hotline issues, etc.  He was very
familiar with the other problems on the grid.

He also asked Kevin why Enron doesn't want LMP everywhere because with our
staffing we can run over everyone else.  Kevin told him that then there is
no
market liquidity and we can't trade with ourselves.  As it is now, there are
less than 10 big players due to the transmission risk.  We explained in
detail
what happens in the "Into" Markets and why it is so difficult to deal with
transmission/physical risk.  Kevin said that even the big bank players, like
Morgan Stanley, usually flip the product before it goes to liquidation so
they
do not have to take transmission risk.  Dan L., having come from gas,
understood
the liquidity issues and had a good discussion with Kevin.  (He sat down in
Kevin's chair and looked at pricing on EOL.)

Overall, it was a very positive meeting.  Kevin was impressed that Dan L.
really
understood the issues and acted like he wanted to do something, but needed
help
in educating his people.

James D Steffes@EES
07/18/2000 04:00 PM

To:   Christi L Nicolay/HOU/ECT@ECT
cc:   [email-masked]@ECT, Joe Hartsoe/Corp/Enron@Enron@ECT, Richard
      Shapiro/HOU/EES@EES, Steven J Kean/HOU/EES@EES, Rob
      Bradley/Corp/Enron@ENRON
Subject:  Re: Dan Larcamp request  (Document link: Christi L Nicolay)

Christi, etal --

I don't disagree with this analysis, but the drive for competitive
generation is
not simply related to the short term benefits (one year total energy bill
versus
next year total energy bill).  Competitive generation is also about risk
transfer - regulated monopolies assign all new plant risk to customers,
merchant
generation assigns all new plant risk to shareholders.

In addition, I hope that Larcamp won't take our data / analysis and try to
argue
that "everything is fine".  Clearly there are many undone / misdone public
policy problems (e.g., native load exception, hourly transmission, etc.)
left in
the wholesale energy markets.

Jim

To:   [email-masked]
cc:   Joe Hartsoe/Corp/Enron@Enron, James D Steffes/HOU/EES@EES, Richard
      Shapiro/HOU/EES@EES
Subject:  Dan Larcamp request

Richard T. -- Dan Larcamp of FERC was here today and asked for a
comprehensive,
real price study using data from last summer or the last two summers showing
how
much on a $kw basis that retail customers were affected by the price spikes
(including how much they saved as a result of hopefully lower prices for the
remainder of the year.)  He needs this to fight price caps.  How much would
something like that cost (probably using some of the data you gathered last
year.)?  How long would it take to create?  Thanks for your help.