Message-ID: <16311419.1075858703838.JavaMail.evans@thyme> Date: Thu, 9 Aug 2001 19:50:50 -0700 (PDT) From: charles.yeung@enron.com To: richard'.'ingersoll@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: andy.rodriquez@enron.com, john.shelk@enron.com, sarah.novosel@enron.com, steve.walton@enron.com, susan.scott@enron.com Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: quoted-printable Bcc: andy.rodriquez@enron.com, john.shelk@enron.com, sarah.novosel@enron.com, steve.walton@enron.com, susan.scott@enron.com X-From: Yeung, Charles X-To: 'Ingersoll, Richard' , Richard Shapiro/ENRON@enronXgate X-cc: Rodriquez, Andy , Christi L Nicolay/ENRON@enronXgate , Dave Perrino/ENRON@enronXgate , James D Steffes/ENRON@enronXgate , Shelk, John , Novosel, Sarah , Walton, Steve , Scott, Susan X-bcc: X-Folder: \RSHAPIRO (Non-Privileged)\Shapiro, Richard\NERC X-Origin: Shapiro-R X-FileName: RSHAPIRO (Non-Privileged).pst Its my turn, sorry I havent jumped in til now, computer problems. At a EPSA sponsored meeting on Aug 9, the GISB Chair and Rae McQuade sat do= wn and we went through what it takes to get EISB rolling and how they would= tackle the tough issues at NERC. I beleive the EPSA folks in the room, Mirant, Dynegy, Ontario Power Gen, En= ron, Exelon, Calpine and ELCON all felt that there shouls be one organizat= ion setting standards because of the inherent risks of assuming reliability= and commercial issues can be sleanly separated. We came away from the mee= ting with a comfort level that the GISB process will provide the right mech= anism to resolve this age old debate - I don't care what kind of standard y= ou call it - if you write it - it must be put through the GISB/EISB wringer= . GISB recommended that perhaps what we know as NERC today could be given = a segment in the energy quadrant. =20 Also to respond to Sarah's note about support for an SRO - no entity in the= room supported that FERC give deference to ANY standards organization - no= t NERC, NAERO, GISB or RTOs. So I think we need to hold tight to this issu= e and we will be able to rally support for it. I will speak at the GISB conference next Wed, Aug 15 at DOE. I am working = with Mark Bennett and other EPSA folks on key principles of what EPSA wants= from the EISB Strawman. I have attached notes I put together that will evolve into the statements I= will make on behalf of EPSA. Please proviede me your thoughts. Also - I agree with Dick, today, NERC is 12.5 million dollars annually, and= mostly utility dollars. If we are going to push for a EISB, we have to pr= ovide some carrot for these utilities to agree to let EISB do this. NERC (= and their supporters) will fall on their sword on funding and the reult wil= l be we have 2 organizations setting standards if NERC cannot agree to beco= me a part of the EISB process. =20 And one more thing, I don't know how much commitment Jeff Skilling feels he= has to the Independent Baord members, many of which he helped get seated. = But pushing for EISB and perhaps wrapping NERC into it as the reliability = piece (GISB's suggestion) - may render the Independents obsolete. I don't = know if are wedded to them. =20 -----Original Message----- From: =09Ingersoll, Richard =20 Sent:=09Wednesday, August 08, 2001 8:47 PM To:=09Shapiro, Richard Cc:=09Rodriquez, Andy; Yeung, Charles; Nicolay, Christi L.; Perrino, Dave; = Steffes, James D.; Shelk, John; Novosel, Sarah; Walton, Steve; Scott, Susan Subject:=09RE: FTC / NERC - Comment of the Staff of the Bureau of Economics= and of Policy Planning of the Federal Trade Commission. When all is said and done money rules and this means that the source of the= funds to run the RTO's must come from an independent source if we are to h= ave independent RTO's. Perhaps directly from the rate payers or as a last = resort federal funding. If the feds fund they will rule the electric busin= ess like they do the schools and highways by using threats to with hold do= llars as a method of geting their proposals accepted. Kind of dammed if we= do and dammed if we don't. If we don't sole the funding we will not reso= lve the other issues to our satisfaction. =20 =09Richard Shapiro/ENRON@enronXgate 08/07/2001 06:53 PM =09 To: Steve Wal= ton/ENRON@enronXgate, Dave Perrino/ENRON@enronXgate, Charles Yeung/ENRON@en= ronXgate, James D Steffes/ENRON@enronXgate cc: John Shelk/NA/Enron@Enron, = Andy Rodriquez/ENRON@enronXgate, Richard Ingersoll/HOU/ECT@ECT, Sarah Novos= el/Corp/Enron@ENRON, Christi L Nicolay/ENRON@enronXgate, Susan Scott/ENRON@= enronXgate Subject: RE: FTC / NERC - Comment of the Staff of the Bureau of= Economics and of Policy Planning of the Federal Trade Commission.=09 I agree with Steve although I've articulated a different point of view at t= imes in the recent past. The CAISO experience is the most compelling argume= nt of all. Let's make sure this is our position...but, if there are still d= issenting points of view, we should hear them out....But,We do need to reso= lve this quickly. A final thought: this perspective puts us in between the = NERC and PJM views..perhaps in an advantageous position to broker a legisla= tive compromise. -----Original Message----- From:=09Walton, Steve Sent:=09Tue 8/7/2001 7:40 PM To:=09Perrino, Dave; Yeung, Charles; Shapiro, Richard; Steffes, James D. Cc:=09Shelk, John; Rodriquez, Andy; Ingersoll, Richard; Novosel, Sarah; Nic= olay, Christi L.; Scott, Susan Subject:=09RE: FTC / NERC - Comment of the Staff of the Bureau of Economics= and of Policy Planning of the Federal Trade Commission. 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 =09 -----Original Message----- =09From: =09Perrino, Dave =20 =09Sent:=09Tuesday, August 07, 2001 6:16 PM =09To:=09Yeung, Charles; Shapiro, Richard; Steffes, James D. =09Cc:=09Shelk, John; Rodriquez, Andy; Ingersoll, Richard; Novosel, Sarah; = Nicolay, Christi L.; Scott, Susan; Walton, Steve =09Subject:=09FTC / NERC - Comment of the Staff of the Bureau of Economics = and of Policy Planning of the Federal Trade Commission. Charles, =09Attached 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 be= lieve this document is significant and should be considered in our ongoing = quest for a truly independent "standards" organization. I would point you = to page 10, the last sentence which states, "To the extent that RTOs are im= plemented in all areas of the country and have large geographic scope (or t= hat FERC causes RTOs to coordinate their policies and rates that affect rel= iability within each of the three transmission Interconnects), the need for= a separate reliability organization with mandatory rules may be greatly e= duced or eliminated.", Interesting..... =09Kind Regards, =09Dave =09 << File: FTC document.pdf >>=20 =09=09 -----Original Message----- =09=09From: =09Yeung, Charles =20 =09=09Sent:=09Tuesday, August 07, 2001 2:57 PM =09=09To:=09Shapiro, Richard; Steffes, James D. =09=09Cc:=09Shelk, John; Rodriquez, Andy; Ingersoll, Richard; Perrino, Dave= ; Novosel, Sarah; Nicolay, Christi L.; Scott, Susan; Walton, Steve =09=09Subject:=09Update - NERC Version of Legislation =09=09Rick =09=09The following discussion is to bring you up to date on the latest NER= C activities on reliability legislation that was a subject on the weekly EN= RON-NERC team conference call. =09=09John Shelk explained that NERC has significantly reduced the length o= f its proposed "Title on Reliability" so as to look more like the PJM appro= ach. Fundamentally, there are still major differences. NERC continues to = push for the embodiment of deference by FERC to the "SRO" in the legislatio= n. =20 =09=09Given the conference call last week with John Q Anderson, Dave Cook a= nd Jeff Skilling, we were concerned how the upcoming meeting on Aug 9 by NE= RC stakeholders to "finalize" the NERC version would impact Jeff's request = to speak with the Independent Board members before accepting any form of de= ference to NERC to become the SRO (or the term we prefer Standards Setting = Organization - SSO). =09=09The meeting on the 9th should not interfere with Jeff's ability to pr= esent issues to the Board. We don't think Jeff needs to contact John Q And= erson or any NERC members about the Aug 9 meeting. However, for the discus= sions with NERC, John Shelk plans to "stay the line" on the Enron position = of keeping authority to defer to any SSO with FERC and to keep any language= that defers to the SSO out of the legislation. =20 =09=09Jeff 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 throug= h legislation, rather through FERC "comfort" that the SSO is doing a good j= ob. By knowing that FERC can "pull the plug" on the SSO if it is not satis= fied, this will provide the correct incentive for the SSO to ensure that no= industry segment dominates the standards setting process. =09=09I am completing a draft of issues that we want the Independents to re= solve/address for Jeff Skilling to take to the Board. =09=09Additionally, Andy Rodriquez and I will develop a summary of examples= of why NERC, in its current form, is not able to develop consensus rules t= hat all its members are willing to comply with. These examples should be p= owerful arguments for John Shelk to leverage in arguments for FERC authorit= y in the legislation. =20 =09=09We also discussed the need to shop our reliability legislation princi= ples with Pat Wood and perhaps DOE. =09=09Charles Yeung =09=09713-853-0348