Message-ID: <29778924.1075846358960.JavaMail.evans@thyme> Date: Tue, 21 Nov 2000 13:24:00 -0800 (PST) From: robert.hemstock@enron.com To: seabron.adamson@frontier-economics.com, sabine.schnittger@frontier-economics.com Subject: Re: Outline memo for paper on rules changes in other markets Cc: aleck.dadson@enron.com, steven.kean@enron.com, richard.shapiro@enron.com, jeff.dasovich@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit Bcc: aleck.dadson@enron.com, steven.kean@enron.com, richard.shapiro@enron.com, jeff.dasovich@enron.com X-From: Robert Hemstock X-To: "Seabron Adamson" , sabine.schnittger@frontier-economics.com X-cc: Aleck Dadson, Steven J Kean, Richard Shapiro, Jeff Dasovich X-bcc: X-Folder: \Steven_Kean_Dec2000_1\Notes Folders\Notes inbox X-Origin: KEAN-S X-FileName: skean.nsf Seab/Sabine, Sorry for the delay in getting back to you on this important issue. The three rule changes or designs in other markets you describe look very good and are right on point. I would like to add two more to your list, namely: 1) Price caps in California Attached is a one page memo from my colleague in California, Jeff Dasovich. Consistent with Jeff's first two points, Steve Kean has told me that in addition to chasing existing power supplies out of the state, price caps, and the uncertainty surrounding them, chase new generation away. The turbine market is a worldwide market. Firms will have difficulty committing their own capital (and borrowing from others) if they propose to put facilities in jurisdisctions where rates are capped or pricing is based on something other than the operation of the market. Several generators, including Dynegy and Calpine, have said they will look for other homes for the turbines they have ordered. I have a Nov 10, 2000 Megawatt Daily article that quotes Enron and Calpine as saying that price caps in California drove both companies to withdraw proposed plants. I recognize there is presently no price cap proposal in Alberta but I think we can draw the connection between interference through caps and interference through other forms of administrative intervention that are being considered in Alberta such as: 1) price discrimination on imports, or 2) the latest proposal I heard today from the Power Pool which is capping import offers into the Power Pool at Mid-C prices plus tranmission costs. 2) FERC Staff Report on Midwest that apparently states on pages 2-15 that some market participants believe that developers sited new generation in the Midwest because there were no price caps (see attached FERC Report). As we discussed, I will be using this information in upcoming meetings (this Friday is the next one) with the Power Pool and the Alberta Gov't in support of Enron's arguments that policy makers in Alberta must "stay the course" through the higher priced periods, failing which they will make things much worse. In view of the fact it is U.S. Thanksgiving could you please give me a sense of Sabine's timing on this. Regards, Rob "Seabron Adamson" on 11/20/2000 10:39:39 AM To: cc: "Sabine Schnittger" , "Kevin. Wellenius" Subject: Outline memo for paper on rules changes in other markets Rob: Please see attached. Can we discuss later today? Seab This e-mail, and any attachments thereto, is intended only for use by the addressee(s) named herein and may contain legally privileged and/or confidential information. If you are not the intended recipient of this e-mail, you are hereby notified that any dissemination, distribution or copying of this e-mail, and any attachments thereto, is strictly prohibited. If you have received this e-mail in error, please immediately notify me at (617) 354-0060 and permanently delete the original and any copy of any e-mail and any printout thereof. Seabron Adamson Frontier Economics Inc Two Brattle Square Cambridge, MA 02138 USA Ph: (617) 354-0060 Fax: (617) 354-0640 seabron.adamson@frontier-economics.com - 00-11-20 SA Memo on paper with rule change example paper outline.doc