Subject: Capacity Auction Agreement Working Group for ERCOT (CAAWG - ERCOT) and SPP (CAAWG - SPP)
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Date: Mon, 9 Apr 2001 08:28:00 -0700 (PDT)

The Capacity Auction Agreement Working Group for ERCOT (CAAWG - ERCOT) will 
be the forum to work on the implementation of the standard form agreement and 
resolution of issues related to using capacity auction products in the 
ancillary services markets of ERCOT. The CAAWG - ERCOT will hold its meetings 
at the Commission where a member of the Commission's Market Oversight 
Division will be present.  This group will be filing its final work product 
in Central Records at 3 pm on Friday, May 4, 2001, for public comment prior 
to consideration at the Commission's June 14, 2001 Open Meeting. 

The SPP Stakeholders will be filing a standard form agreement and resolution 
of issues related to the use of capacity auction products in the SPP 
ancillary services markets at the Commission at 3 pm on Friday, May 4, 2001 
for public comment prior to consideration at the Commission's June 14, 2001 
Open Meeting. Because the structure of the SPP ancillary services market is 
still under development, the focus will be on ERCOT and input and assistance 
from SPP staff will be sought in the coming weeks.

The Working Groups are a direct result of the PUCT Capacity Auction Order.  
The current time line proposes meeting weekly as Stakeholders to work to 
resolve the issues, schedules and final products to be included in the 
auction this fall.  Under the current proposal the Capacity Auction Products 
will be Baseline, Gas Intermediate, Gas Cyclic and Gas Peaking.  Each of the 
PGCs must auction 15% of the Texas Jurisdictional Installed Generation 
Capacity.  The capacity will be sold as a "slice of the system" of each of 
the divesting PGCs and will not be for any specific unit.  During the months 
of March, April May, October, and November of each year the available 
entitlements may be reduced proportionately to the average planned plant 
outage.  With respect to the firmness of the products, the PUCT found that 
the products should be 100% financially firm to provide potential buyers of 
the entitlements certainty in the products that they are buying.  Forced 
outages are limited to 2.0% of the hours of the entitlement.

The Power Generation Companies (PGCs)  have recommended using the EEI Master 
Power Purchase and Sale Agreement and Schedule CA will describe the products 
available for auction.  A copy of Schedule CA will be attached below for your 
review and comment.  Please note that the Schedule CA is not a final document 
and is an initial proposal from the PGCs.  Your review and comments will be 
essential.  Also, if you have any questions or comments as to the process of 
the CAAWG or the auction process in general please feel free to call me.  The 
working group will meet each Wednesday for the balance of April after which 
the working group will meet May 1st and May 2nd in anticipation of the 
proposed May 4th filing date.  After the filing, Enron will have the 
opportunity to file written comments with the PUCT.  The Auction process 
under the rule must be completed prior to September 1, 2001 for the initial 
auction period.

The following is an initial list of issues.  

1. What is the timing of schedules for each of the products from the buyer of 
the entitlement to the seller of the entitlement.
2. Are ancillary services available from the Baseload product?  TXU has 
stated that they cannot provide A/S from their Baseload units.  As   such, 
should A/S be removed from all Baseload product offerings from all PGCs so 
that there is a standard product or should the Baseload   offerings include 
ancillary services when and where available.  The argument distills to if the 
entitlement is more valuable in the market as a   standardized product or a 
differentiated product that may or may not include A/S.
3. What is the delivery point for the entitlement and other operational 
issues?  Should it be a single bus, multiple busses or congestion zones.    
Congestion zones may change each year, under the current auction schedule, 
you would bid for the product before you know the final congestion  zone.
4. How (or if possible) can responsibility transfers be used for balancing 
energy?
5. Who will receive OOM payments?
6. What about compensation for other A/S payments?
7. Does released capacity exist, should it exist at all?  If so, what happens 
when the capacity is released.  The PGC would like the offering to look like  
a call option.  If the option is not exercised by scheduling, then the 
capacity is deemed released.  This is the interpretation of the PGC,s and 
not   necessarily that of the PUCT or other Stakeholders.
8. How much of a product or entitlement is available in A/S?

   The order adopting the final rule can be found at    
http://www.puc.state.tx.us/rules/rulemake/21405/121900adt.pdf  the actual     
rule starts at page 41 of 65.

Please review and comment.

Thane Thomas Twiggs
Enron Corp
1400 Smith Street
Houston, Texas 77002

713-853-3199 Voice
713-408-4463 Mobile
713-646-8272 Fax
877-968-8967 Digital Pager or [email-masked]