Message-ID: <10385881.1075858703682.JavaMail.evans@thyme> Date: Tue, 7 Aug 2001 17:40:36 -0700 (PDT) From: steve.walton@enron.com To: dave.perrino@enron.com, charles.yeung@enron.com, richard.shapiro@enron.com, d..steffes@enron.com Subject: RE: FTC / NERC - Comment of the Staff of the Bureau of Economics and of Policy Planning of the Federal Trade Commission. Cc: john.shelk@enron.com, andy.rodriquez@enron.com, richard.ingersoll@enron.com, sarah.novosel@enron.com, l..nicolay@enron.com, susan.scott@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: quoted-printable Bcc: john.shelk@enron.com, andy.rodriquez@enron.com, richard.ingersoll@enron.com, sarah.novosel@enron.com, l..nicolay@enron.com, susan.scott@enron.com X-From: Walton, Steve X-To: Perrino, Dave , Yeung, Charles , Shapiro, Richard , Steffes, James D. X-cc: Shelk, John , Rodriquez, Andy , Ingersoll, Richard , Novosel, Sarah , Nicolay, Christi L. , Scott, Susan X-bcc: X-Folder: \RSHAPIRO (Non-Privileged)\Shapiro, Richard\NERC X-Origin: Shapiro-R X-FileName: RSHAPIRO (Non-Privileged).pst After reading the FTC document, I am concerned that we are loosing sight of= the fact that the RTO is first and foremost a provider of transmission ser= vice. It will decide who uses the system, how it will be used, what schedu= les will be accepted, etc. Do we really want it to set the standards by it= s performance is to be judged by others? There are two tendencies to guard= against. (1) Most of these organizations are going to be not-for-profit = ISOs in form. There may be a tendency to use very stringent rules to minim= ize outage risk and criticism of the RTO's management. This could require = the construction of facilities when they are not completly necessary. (2) = The opposite possiblity exists, namely, that they will adjust rules to cove= r their own mistakes. I think the former problem is the most likely. =20 If the RTOs take over the NERC role as suggested, then the reliability rule= s would have to become part of the FERC tariff. In order to judge the vali= dity of the "reliability provisions" of the tariffs the FERC will be requir= ed to develop expertise it does not have. In practice NERC doesn't have th= e expertise either. It really resides in the members of the committees and= is thus derived from the industry. By having a separate Standards Setting= Organization, the rules can still be established using the expertise of th= e industry. The SSO would propose rules which FERC would accept subject to= complaint. The SSO's governance has to be fair, but I am not personally c= oncerned about it being indepenent as long as FERC has oversight. It is the= service provider (the RTO) that needs to be independent. The standards in= most industries are set in this way. The power of the state to enforce th= e rules come from commissions of various types. For instance, the National= Electric Code is developed by the industry, but its enforcement is accompl= ished by adopting it into building codes, state liscensing requirements, et= c. In the same way, the SSO can develop the reliability rules which are in= corporated in FERC's requirement imposed on the RTO. The RTO's tariff woul= d incorporate them by reference. If the RTOs performance violates the rule= s or if a generator doesn't hold up its requirements, then ADR/FERC action = can be taken to enforce. My reason for this long message is to draw attention to the fact that the m= ajor function of the RTO is provision of transmission service. It should n= ot see itself as a regulator. The case of the CAISO is instructive, since = they think they are above compliance with rules since the believe they are = the guardians of the public interest. When the service provider thinks it = regulates to comes to believe it has a right to decide who "should" have tr= ansmission service rather than get on with providing it.=20 Steve -----Original Message----- From: =09Perrino, Dave =20 Sent:=09Tuesday, August 07, 2001 6:16 PM To:=09Yeung, Charles; Shapiro, Richard; Steffes, James D. Cc:=09Shelk, John; Rodriquez, Andy; Ingersoll, Richard; Novosel, Sarah; Nic= olay, Christi L.; Scott, Susan; Walton, Steve Subject:=09FTC / NERC - Comment of the Staff of the Bureau of Economics and= of Policy Planning of the Federal Trade Commission. Charles, Attached to this message is the results of a study completed by the FTC at = DOE's request relating to NERC and open access, dated Jan 4, 2001. I belie= ve this document is significant and should be considered in our ongoing que= st for a truly independent "standards" organization. I would point you to = page 10, the last sentence which states, "To the extent that RTOs are imple= mented in all areas of the country and have large geographic scope (or that= FERC causes RTOs to coordinate their policies and rates that affect reliab= ility within each of the three transmission Interconnects), the need for a = separate reliability organization with mandatory rules may be greatly educ= ed or eliminated.", Interesting..... Kind Regards, Dave << File: FTC document.pdf >>=20 -----Original Message----- From: =09Yeung, Charles =20 Sent:=09Tuesday, August 07, 2001 2:57 PM To:=09Shapiro, Richard; Steffes, James D. Cc:=09Shelk, John; Rodriquez, Andy; Ingersoll, Richard; Perrino, Dave; Novo= sel, Sarah; Nicolay, Christi L.; Scott, Susan; Walton, Steve Subject:=09Update - NERC Version of Legislation Rick The following discussion is to bring you up to date on the latest NERC acti= vities on reliability legislation that was a subject on the weekly ENRON-NE= RC team conference call. John Shelk explained that NERC has significantly reduced the length of its = proposed "Title on Reliability" so as to look more like the PJM approach. = Fundamentally, there are still major differences. NERC continues to push f= or the embodiment of deference by FERC to the "SRO" in the legislation. =20 Given the conference call last week with John Q Anderson, Dave Cook and Jef= f Skilling, we were concerned how the upcoming meeting on Aug 9 by NERC sta= keholders to "finalize" the NERC version would impact Jeff's request to spe= ak with the Independent Board members before accepting any form of deferenc= e to NERC to become the SRO (or the term we prefer Standards Setting Organi= zation - SSO). The meeting on the 9th should not interfere with Jeff's ability to present = issues to the Board. We don't think Jeff needs to contact John Q Anderson = or any NERC members about the Aug 9 meeting. However, for the discussions = with NERC, John Shelk plans to "stay the line" on the Enron position of kee= ping authority to defer to any SSO with FERC and to keep any language that = defers to the SSO out of the legislation. =20 Jeff should still be able to argue for key Board action items, and if Enron= is appeased, deference to NERC could still be given - but not through legi= slation, rather through FERC "comfort" that the SSO is doing a good job. B= y knowing that FERC can "pull the plug" on the SSO if it is not satisfied, = this will provide the correct incentive for the SSO to ensure that no indus= try segment dominates the standards setting process. I am completing a draft of issues that we want the Independents to resolve/= address for Jeff Skilling to take to the Board. Additionally, Andy Rodriquez and I will develop a summary of examples of wh= y NERC, in its current form, is not able to develop consensus rules that al= l its members are willing to comply with. These examples should be powerfu= l arguments for John Shelk to leverage in arguments for FERC authority in t= he legislation. =20 We also discussed the need to shop our reliability legislation principles w= ith Pat Wood and perhaps DOE. Charles Yeung 713-853-0348