Subject: Market Opening Date 1/1/02 ?
From: [email-masked]
To: [email-masked]
Cc: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], [email-masked], harry.kingersk
Date: Fri, 14 Sep 2001 15:02:15 -0700 (PDT)

Hal,

Per your request today, below is an update on the rumoured delay in market opening:

Last week, legislators grilled the PUC and ERCOT on market readiness for 1/1/02. The major issues of concern included

1. The switching process: The rate of actual customer switching has been very low during the pilot. Most pilot participants have not yet been switched to a provider due to
recurrent problems with the ERCOT computer and switch processing. This and the lack of any control measures on the TDSP's to insure timely switching
has fed the fear that the switching delays experienced in the pilot with only 5% of Texas customers will increase exponentially at market opening.

2. Billing: There is considerable concern regarding the workability of the billing processes. Market participants have had no opportunity so far to bill pilot customers. This translates into lack of opportunity to test the billing systems and the EDI processes currently in place. There is the fear that there will be a billing fiasco at market opening.

3. EDI Testing: Some market participants have not yet conducted EDI testing - for enrollments, and other transactions. The next flight of testing is in October and the fear is that many market participants may not complete testing in time to participate at market opening. Along with this is the decision by Mr Berry, the manager of the ITPTA, the independent resting agent conducting the EDI testings, to leave the job. He is being replaced by Ms Shirley White who is with the same company. Some market participants like New Energy are unhappy with changing guards so late in the day and how this will affect the already fragile responsiveness of ERCOT to market readiness issues.

4. Of much less significance was discussion related to ERCOT management organizational issues. This should not ordinarily affect market opening.

As I already indicated, the good thing is that the PUC appears strongly committed to the Jan 1, 2002 date. However, the chairman of the oversight committee Steve Wollens, stated that if the market is not ready, it may be best to delay the opening date, than to have a blow up. In the light of this, it seems prudent to proceed as if the market will open, but have a contingency plan in case it does not.

The positions of government affairs is to press for the market to open on schedule. This is because we understand the impact a delay will have in increasing customer inertia and the potential exposure on our positions and hedges. However, if at the end of the year, it becomes apparent that ERCOT is not ready to administer its necessary functions, we may err on the side of caution and agree to a delay. This is because after the California experience, Texas deregulation is of strategic importance to the deregulation debate for the whole country, and particuarly for Enron. We need to make Texas work, and work well. We have argued consistently that the failure of CA is a failure of policy, not a failure of deregulation. Texas must prove that point. I will keep you all posted as things develop.

Thanks,
Gloria