Subject: Chargeback
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked]
Date: Fri, 19 Jan 2001 08:03:00 -0800 (PST)

I have thoroughly reviewed the sections that Steve Hall referred me to on our 
call, particularly section 5 of Schedule 2 (PX Clearinghouse, Credit 
Policies, Business Practices and Banking) of the Cal PX FERC Electric Service 
Tariff No. 2.  Because of the former mandate that the IOUs (now excluding 
SDG&E) buy power only from the  PX, Edison and PG&E have procured ISO 
real-time services, not directly, but through the PX's Core Services.  To the 
extent that any PX participant defaults on its payment obligation to the PX 
for real-time ISO services and the default exceeds the sum of the (1) 
participant's collateral (5.2.1), (2) the Pool Performance Bond (5.2.2), and 
any set off from liquidating the defaulting participant's positions in the 
DA, DO, and CTS markets, the remaining or residual default amount is 
expressly chargeable to all other non-defaulting participants using the 
proportional chargeback methodology of the tariff (5.3).  This is different 
from my conclusion from yesterday with respect to an Edison or PG&E default 
in the CTS market solely for the reason that the proportional chargeback is 
expressly provided for in the PX tariff for Core Services, while (as 
explained in my 1/18/01 memo) it is not provided for in the CTS tariff or 
rate schedule.

Some of the invoices that I have seen to some of our other clients simply 
provide a lump sum proportional chargeback, without specifying whether it is 
for Core Services, CTS or both.   If you receive such an invoice, try to 
confirm whether any of it is for a participant's default on a CTS obligation 
and, if so, pay that amount (if at all) under protest.