Subject: Status Report
From: [email-masked]
To: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
Cc: [email-masked], [email-masked]
Date: Fri, 15 Dec 2000 09:30:00 -0800 (PST)

Here is a summary  of recent developments:

Natural Gas and Electricity Class Action Complaint Against El Paso
 Two plaintiffs attorneys filed a class action complaint alleging
anti-trust and unfair competition against El Paso and 100 Does for inflating
natural gas prices and the price of electricity.  The complaint alleges that
this was done by withholding capacity on the El Paso and Trans Western
pipelines.
  <<gascomplaint.pdf>>

Ron Carroll's Analysis of Private Cause of Action
 One of the assignments from our Portland meeting was to find out
whether or not there was a private right of action (or prohibition of same)
under the Federal Power Act.  Here is Ron Carroll's response:

 The courts have refused to create a private cause of action for
violations of the FPA, stating that the regulatory scheme created by
Congress vested the regulatory body with the power to pursue enforcement.
See Clark v. Gulf Oil Corp., 570 F.2d 1138, 1149 (1977) (pertaining to the
recovery of losses due to allegedly unlawful rates under the NGA); City of
Gainesville v. Florida Power & Light Co., 488 F. Supp. 1258, 1277-78 (S.D.
Fla. 1980) (noting that the legislative history of the NGA, which was
modeled after the FPA, does not suggest the existence of any private rights
of action).
Dave Noonan's Report on Defense Counsel Teleconference on Monday
 Chris Healy has just advised me that the call will take place on
Monday, December
 18 at 10:30 am (PST) to discuss removal issues in the Hendricks
case.  The
 dial-in number for the call is 1-866-855-6338, password 8315.
 <<QDV#01!.DOC>>  <<QF2Z01!.DOC>>

 Also, Morgan Stanley is rep'd by Jeff Davidson of Kirkland&Ellis
[L.A].
Data Preservation
 Steve Hall and others have been working on making sure that the
California AG's request to preserve evidence has been complied with.  EPMI
will probably be extending the period that it keeps backup tapes, making
copies of hard drives from individual computers etc.
FERC Developments
 Secretary of Energy Richardson issued an emergency order requiring
EPMI to market energy to  the ISO.  In addition, another emergency order was
issued today.  I enclose the order and the press release. The Press release
for today's order is included below. The FERC special meeting on California
was videotaped by Nancy Pickover of Bracewell and is being sent to us.
  <<202corder.pdf>>  <<Califnotice.pdf>>  <<dec15caorder.pdf>>
Dan Watkiss Analysis of FERC Order re Penalties for Refusal to sell Energy
 Last Friday, the ISO filed with FERC Amendment No. 33 to its tariff.
Among other things, the Amendment adds to the section 5 of the  tariff  new
provisions empowering the ISO to assess a penalty against Participating
Generators that refuse to operate in response to an ISO Dispatch instruction
during a System Emergency or when the ISO is acting to avoid an imminent or
threatened System Emergency.   The penalty is stiff:  (1) a charge for each
MWh of the Dispatch instruction with which the Participating Generator does
not comply equal to twice the highest price for Energy, per MWh, paid in
each hour by the ISO to any other entity to produce Energy; and (2) if the
ISO is required t call for the involuntary curtailment of firm Load to
maintain Applicable Reliability Criteria during the System Emergency, then
an additional charge equal to $1,000 for each MWh of the Dispatch
instruction with which the Participating Generator does not comply.  The
only defense to these penalties is to provide proof that the generating unit
in question was physically incapable of running or it would have violated
state or federal law to run it (e.g., air emission allowance limits).  The
ISO asked FERC for an immediate effective date of December 8, which FERC
granted in a December 8 order.

 The ISO Tariff defines "Participating Seller or Generator" to mean
"A generator or other seller of Energy or Ancillary Services through a
Scheduling Coordinator over the ISO Controlled Grid and which has undertaken
to be bound by the terms of the ISO Tariff."  If Enron is a Participating
Generator (Mary Hain informs me that Enron is not one), then it risks
incurring the new penalty if it fails to respond to an ISO order to sell
ancillary services to  the ISO.  I believe Enron might also risk incurring
the penalty in cases where it controls or has rights to all or a portion of
a generating capacity of a Participating Generator's unit.  If that capacity
is called on and the call is not answered because Enron is making some other
use of the capacity, the Enron may incur the penalty .  This seems to be
contemplated by section 4.1.1 of the Participating Generator Agreement which
obliges a Participating Generator to comply with the tariff (section 5.3) by
identifying the Generating Units that it owns, operates or has a contractual
entitlement to in Schedule 1, as required by Section 5.3 of the ISO Tariff.
(emphasis added).   As far as I know, it is that Schedule 1 that the ISO
consults when making decisions as to which Participating Generator to call
on.

Thanks
Gary

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 - gascomplaint.pdf
 - QDV#01!.DOC
 - QF2Z01!.DOC
 - 202corder.pdf
 - Califnotice.pdf
 - dec15caorder.pdf