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Date: Fri, 20 Jul 2001 17:52:53 -0700 (PDT)
From: tim.belden@enron.com
To: mike.swerzbin@enron.com, diana.scholtes@enron.com, sean.crandall@enron.com
Subject: FW: Portland General Electric: Order Rejecting Tariff Amendments
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-----Original Message-----
From: Steffes, James D.
Sent: Friday, July 20, 2001 2:47 PM
To: Kitchen, Louise; Yoho, Lisa; Belden, Tim; Forster, David
Subject: FW: Portland General Electric: Order Rejecting Tariff Amendments
FERC rejected the request by PGE to modify the Code of Conduct so that they could buy on EnronOnline. Basically, FERC did not believe that buying thru EnronOnline was a guarantee that consumers in Oregon would not be harmed.
FERC found that There is, for
example, no assurance that the posted prices on EnronOnline
represent prevailing market prices.
Applicants contend that, since PGE can transact with EPMI
via EnronOnline only at the posted price, there can be no
affiliate abuse. We are not certain, however, that the posted
price necessarily represents the market price. While, on the
surface, Enron Online may bear some resemblance to an index or an
auction, the posted prices for any product may not be the result
of a competitive market of multiple buyers and sellers; in fact,
for sales the posted prices represent what EPMI is willing to
sell at, and for purchases the posted prices represent what EPMI
is willing to buy at.
FERC left open the idea that PGE could re-file to fix the affiliate abuse.
As soon as we hear anything else, I'll let you know.
Jim
-----Original Message-----
From: Shapiro, Richard
Sent: Friday, July 20, 2001 4:14 PM
To: Steffes, James D.
Subject: FW: Portland General Electric: Order Rejecting Tariff Amendments
-----Original Message-----
From: Novosel, Sarah
Sent: Friday, July 20, 2001 10:42 AM
To: Robertson, Linda; Shapiro, Richard; Steffes, James D.
Subject: Portland General Electric: Order Rejecting Tariff Amendments
----- Forwarded by Sarah Novosel/Corp/Enron on 07/20/2001 11:39 AM -----
"EMILY HARRIS" <eharris@bracepatt.com> 07/20/2001 11:14 AM To: <alan.comnes@enron.com>, <Christi.L.Nicolay@enron.com>, <donna.fulton@enron.com>, <ray.alvarez@enron.com>, <smara@enron.com>, <snovose@enron.com>, <sscott3@enron.com>, <thane.twiggs@enron.com> cc: "Andrea Settanni" <asettanni@bracepatt.com> Subject: Portland General Electric: Order Rejecting Tariff Amendments
96 FERC 61, 093
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
Before Commissioners: Curt H*bert, Jr., Chairman;
William L. Massey, Linda Breathitt,
Pat Wood, III and Nora Mead Brownell.
Portland General Electric Company Docket No. ER01-2097-000
Enron Power Marketing, Inc. Docket No. ER01-2103-000
ORDER REJECTING TARIFF AMENDMENTS WITHOUT PREJUDICE
(Issued July 20, 2001)
In this order we reject, without prejudice, proposed
amendments of Enron Power Marketing, Inc. (EPMI) and Portland
General Electric (PGE) to their respective market-based rate
tariffs that would allow them to make inter-affiliate sales using
the EnronOnline trading platform.
I. Background
On May 22, 2001, in separate filings, affiliates PGE in
Docket No. ER01-2097-000 and EPMI in Docket No. ER01-2103-000
(collectively Applicants) filed to amend their respective market-
based rate schedules to allow for inter-affiliate sales through
the EnronOnline trading platform, and to prohibit communication
among affiliates regarding the contents of prices posted on
EnronOnline or the times that PGE will be making trades on
1
EnronOnline. This amendment does not supplant the existing
provisions of PGE's and EPMI's currently effective tariffs which
allow for inter-affiliate sales subject to conditions that the
Commission generally imposes on inter-affiliate sales where there
are captive customers, e.g., allowing a public utility to sell to
its affiliated power marketer only at a rate that is no lower
than the rate it charges non-affiliates, requiring simultaneous
offers to non-affiliates, or requiring use of a relevant,
established index. Rather, PGE and EPMI propose to amend their
respective tariffs to add a provision by which they will make
1
The EnronOnline system is administered by Enron Networks,
an Enron Corp. subsidiary. EnronOnline is a free, Internet-
based, transaction system which allows EPMI's customers to view
real time prices from EPMI's traders and transact instantly
online. EnronOnline is not an EPMI application, but rather
EnronOnline is a trading platform used as a tool by EPMI in
buying from and selling power to third parties.
Docket Nos. ER01-2097-000 -2-
and ER01-2103-000
inter-affiliate sales via EnronOnline, with restrictions
different than those in place but that, they state, will still
prevent affiliate abuse. Applicants state that the Commission's
requirements have become outdated due to recent developments in
electronic commerce and, in particular, the Commission's
requirement that "PGE post on its website notice of a potential
purchase or sale with EPMI prior to PGE entering into the
transaction with EPMI prohibits PGE from using EnronOnline, since
EnronOnline offers only instantaneous transactions that do not
provide for a waiting period before consummating the
2
transaction." According to Applicants, this deprives PGE of the
ability to buy or sell power "from perhaps the largest marketer
3
in its region, to the detriment of PGE and its ratepayers."
II. Notice of Filing and Interventions/Protests
Notices of the filings were published in the Federal
Register, 66 Fed. Reg. 29,939 (2001) (Docket No. ER01-2097-000),
and 66 Fed. Reg. 30,180 (2001) (Docket No. ER01-2103-000), with
motions to intervene and protests for both due on or before
June 12, 2001. None was filed.
III. Discussion
The Commission allows power marketers and their public
utility affiliates to sell to one another at market-based rates
when it can be assured that there is no possibility of affiliate
abuse. As the Commission has explained, affiliate abuse can
occur when a traditional public utility with captive customers
sells power at below-market prices to, or purchases power at
above-market prices from, an affiliate without captive customers
(such as a power marketer affiliate). One way in which the
Commission has sought to prevent this type of cross-subsidization
by captive customers is to require the pricing of inter-affiliate
4
sales at an established, relevant market price or index.
Another way, when there is no assurance that the affiliates are
transacting at the prevailing market price, is to adopt various
conditions previously established by the Commission to prevent
5
affiliate abuse.
2
EPMI Application at 3; PGE Application at 4.
3
EPMI Application at 3; PGE Application at 4.
4
See, e.g., DPL Energy, Inc. 90 FERC 61,200 (2000);
accord, First Energy Trading Services, Inc., 88 FERC 61,067 at
61,156 (1999).
5
E.g., GPU Advanced Resources, Inc., 81 FERC 61,335 at
(continued...)
Docket Nos. ER01-2097-000 -3-
and ER01-2103-000
Here, Applicants request that the Commission permit them to
use EnronOnline to make inter-affiliate sales, subject to the
following restrictions that they contend provide sufficient
protection against affiliate abuse. PGE, when buying from EPMI
using EnronOnline, will be required to "take the transaction
price as posted that is generally applicable at a particular
6
location without attempting to negotiate any adjustment." In
7
addition, PGE will be prohibited from submitting Limit Orders or
engaging in any other type of transaction in which the identity
of the counter-party is revealed to EPMI prior to the transaction
being finalized. Applicants also propose to amend their
respective codes of conduct to preclude any communication
regarding prices posted on EnronOnline.
Applicants contend such restrictions ensure no affiliate
abuse occurs since PGE will only be able to transact with EPMI at
5
(...continued)
62,539 (1997) (GPU); Detroit Edison Company, 80 FERC 61,348 at
62,197-98 (1997) (Detroit Edison). In GPU, the Commission
allowed sales from a power marketer to its affiliated traditional
public utility at a rate that was no higher than the lowest rate
the public utility paid non-affiliates under certain standard
supplier agreements. Accord, First Energy Trading & Power
Marketing, Inc., 84 FERC 61,214 at 62,037-38, reh'g denied, 85
FERC 61,311 (1998). Detroit Edison provided that a traditional
public utility may sell power to its affiliated power marketer
only at a rate that is no lower than the rate it charges non-
affiliates; that the utility simultaneously offer through its
electronic bulletin board to sell to non-affiliates at the same
rate offered to its affiliate; and that all prices charged to the
affiliate be simultaneously posted on its electronic bulletin
board. Accord, Jersey Central Power & Light Co., 82 FERC
61,023 at 61,071 (1998); Commonwealth Edison Co., 85 FERC
61,288 at 62,176-77 (1998).
6
EPMI Application at 4; PGE Application at 5.
7
In the case of a Limit Order on EnronOnline, EPMI would
know the identity of the customer requesting a price higher or
lower than that currently available. Applications at 3. While
Applicants do not define "Limit Order," the common understanding
is that, unlike a market order, which instructs a broker to
transact immediately at whatever price is currently available in
the marketplace, a limit order instructs a broker to fill the
order only if certain conditions are met. Generally, a limit
order may be either a day order, in which case it expires when
the market closes if unfilled, or good-until-canceled, in which
case the limit order lasts until executed or canceled.
Docket Nos. ER01-2097-000 -4-
and ER01-2103-000
the posted price (a price that is offered to all market
participants) and there will be no transactions in which EPMI
knows that PGE is the counter-party before the transaction is
finalized. Thus, Applicants contend that not only will PGE be
unable to negotiate special terms with EPMI through EnronOnline,
but EPMI will have no discretion to take actions which favor PGE.
Applicants further offer that procedures are performed by
computer and are not left to the discretion of any affiliate of
PGE. In addition, because the EnronOnline price is posted
electronically and is available to all market participants,
Applicants state that PGE's customers have the opportunity to
transact with EPMI on EnronOnline on the same terms and
conditions that are available to PGE.
Applicants have failed to demonstrate that their proposed
restrictions provide the same protections afforded under the
Commission's affiliate abuse requirements and conditions (e.g.,
protection against PGE buying too high or selling too low in its
8
transactions with its affiliate EPMI). The thrust of
Applicants' argument is that the Commission's affiliate abuse
concerns are satisfied by using EnronOnline, a public medium, for
selling power between affiliates. We disagree. While perhaps
faster and easier to use than phone calls, faxes, or letters, an
Internet-based platform is just another medium for trade, and
speed and ease of use do not dictate that the Commission's
affiliate abuse concerns have been satisfied. There is, for
example, no assurance that the posted prices on EnronOnline
9
represent prevailing market prices.
Applicants contend that, since PGE can transact with EPMI
via EnronOnline only at the posted price, there can be no
affiliate abuse. We are not certain, however, that the posted
price necessarily represents the market price. While, on the
surface, Enron Online may bear some resemblance to an index or an
auction, the posted prices for any product may not be the result
of a competitive market of multiple buyers and sellers; in fact,
for sales the posted prices represent what EPMI is willing to
sell at, and for purchases the posted prices represent what EPMI
10
is willing to buy at. For other transactions through media
other than EnronOnline, including other exchanges, EPMI might be
8
See supra notes 4-5 and accompanying text (citing cases
that discuss Commission's underlying concerns with affiliate
power sales).
9
See supra note 4 and accompanying text.
10
All transaction on EnronOnline involve EPMI as a
participant. For sales, EPMI is the seller. For purchases, EPMI
is the buyer.
Docket Nos. ER01-2097-000 -5-
and ER01-2103-000
11
willing to sell at lower prices and buy at higher prices.
Moreover, Applicants provide no information about how product
prices posted by EPMI are determined, or whether there would be
any restrictions on what products PGE could trade via
EnronOnline, or even whether there are other similar, but non-
affiliated, Internet-based venues where PGE can electronically
trade those products to attain similar benefits.
Having failed to convince us that these affiliates will be
transacting at a prevailing market price via EnronOnline, we now
turn to whether the Applicants have met other conditions
established by the Commission to prevent affiliate abuse.
Regarding transactions in which EPMI may be purchasing from PGE
through EnronOnline, there is nothing in the Applicants' proposed
restrictions that would require PGE to
simultaneously offer to sell to non-affiliates at the same rate
offered to the affiliate. The Commission requires that, with
respect to any power offered to its affiliate, PGE make the same
offer to unaffiliated entities at the same time through its
electronic bulletin board. But it is unclear whether PGE can or
will make the same offer to non-affiliates.
Applicants also offer as a protection that PGE is prohibited
from submitting Limit Orders, which would prevent EPMI from
knowing that PGE is the counter-party to a transaction. Again,
this would not prevent EPMI from selling power to PGE at above-
market prices.
The Commission is not assured by the Applicants' proposal
that transactions between PGE and EPMI conducted via EnronOnline
will occur in a manner that is consistent with the Commission's
expectations regarding transparent and reasonable prices for
inter-affiliate power sales transactions. There is, for example,
no provision in the proposed amendments regarding how
unaffiliated customers, or other interested parties, would
monitor inter-affiliate transactions.
For the above reasons, we will reject the proposed
amendments, without prejudice to Applicants revising their
proposal to address the Commission's concerns and incorporating
appropriate restrictions to protect against affiliate abuse.
11
Likewise, PGE might be willing to buy at lower prices and
sell at higher prices.
Docket Nos. ER01-2097-000 -6-
and ER01-2103-000
The Commission orders:
Applicants' proposed tariff amendments are hereby rejected,
without prejudice, as discussed in the body of this order.
By the Commission.
( S E A L )
David P. Boergers,
Secretary.
- portlandgeneralrejectingtariffsER012097_TXT.txt