Message-ID: <7692528.1075844203368.JavaMail.evans@thyme> Date: Mon, 7 May 2001 03:04:00 -0700 (PDT) From: luiz.maurer@enron.com To: sergio.assad@enron.com, richard.shapiro@enron.com Subject: Intervention in the MAE Cc: jose.bestard@enron.com, fred.sampaio@enron.com, debora.klinger@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: 7bit Bcc: jose.bestard@enron.com, fred.sampaio@enron.com, debora.klinger@enron.com X-From: Luiz Maurer X-To: Sergio Assad, Richard Shapiro X-cc: Jose Bestard, Fred Sampaio, Debora Klinger X-bcc: X-Folder: \Richard_Shapiro_June2001\Notes Folders\All documents X-Origin: SHAPIRO-R X-FileName: rshapiro.nsf As per Sergio's and Rick's request, please find enclosed a quick summary on the ANEEL's "intervention" in the MAE. This note is organized in four main sections: a) What was it? b) Initial reactions c) Enron's view d) Next steps a) WHAT WAS IT? Aneel has recently issued a series of three Resolutions (160/161/162) significantly changing the structure and governance of MAE. It has also amended some of the MAE rules regarding penalties and guarantees on financial settlement. In terms of structure, ANEEL has empowered ASMAE to develop its responsibilities. ASMAE is the organization in charge of developing MAE's basic operational functions, such as metering, contract registering, spot price calculation and financial settlement. It also has a role in developing the MAE rules, an effort which started in November 1998 and has not yet come to fruition. ASMAE formerly reported to COEX, the MAE Board of Directors, According to the recently enacted Resolution ASMAE will have now a solid line relationship with ANEEL and it was empowered to develop it basic organizational functions more independently from the Board of Directors. In terms of governance, ANEEL has terminated COEX, a 26 stakeholder Board in charge or runinng MAE and preparing the MAE rules. The Resolution was effective immediately. In lieu of COEX, ANEEL has created COMAE, a new 6 member professional Board, in charge of overseeing ASMAE and developing MAE rules, on an ongoing basis. COMAE should be operational in two months. ANEEL,Distributors and Generators should appoint two voting members each. Similarly to COEX, COMAE will still report to the MAE General Assembly, where all stakeholdershave a seat (votes are equally split between generators and distributors) In terms of MAE rules, ANEEL has now imposed penalties and guarantees. Those were part of the MAE rules since the very beginning, but they have never been implemented. The original MAE rules encompassed a broader range of penalties. ANEEL has focused solely on the the penalties of financial nature, the ones strictly necessary to have the financial settlement up and running. There is a 60 day period to put the new organization and governance in place. In the meantime, ASMAE will continue its routine functions. If doubts arise, ASMAE will clarify directly with ANEEL b) INITIAL REACTIONS Most companies were shocked with the new Resolutions. The Resolutions were issued on a Friday, late afternoon, to allow agents to dissipate their anger over the weekend. The measures were considered a unilateral "coup-de-etat" kind of intervention. A lot of criticism was raised on the "legality" of the process. Initial reactions challenged ANEEL's ability to intervene in the MAE rules and terminate COEX. Similar reactions were expressed the following week. A COEX meeting (void in legal terms) was held the following week to verbalize people's angers and discuss next steps. An immediate General Assembly was scheduled. Several COEX members got really upset. Reasons vary: some are questioning the necessity of those actions, although most agree that COEX was not a functioning organic body. Some COEX member got very emotional: afterall, their hierarchical positions inside their organizations depend on the status granted by being a COEX member. ANEEL invited CEOs from all affiliated companies to explain the rationale behind those measures and avoid direct confrontation with COEX, whose members are motivated by more parochial views. The meeting was useful and most of the negative reaction was placated. No one is now is now considering any legal action against ANEEL. Most stakeholders agree that something had to be done, despite the fact that the way ANEEL invervened was disastrous and with doubtful legal validity. The issue now is to prepare a new Market Agreement, containing the basic mandates and addressing utility's concerns. c) Enron's view Enron thinks that the proposed changes were badly needed. Enron has publicly and in several occasions expressed its view about COEX role in MAE implementation. In Informativo Regulat?rio # 3, issued back in November 2000, we blamed the stakeholder nature of COEX for most of MAE problems. Nothing was being decided. COEX attempted to get the MAE rules in place for more than two years without success. No one (except a few, including Enron) was interested in getting MAE up and running. Rather, most agents were interested in conforming the MAE rules to meet their ad-hoc individual parochial interests. The COEX attempt to deal with the nuclear issue was a clear na