Message-ID: <11482539.1075852518489.JavaMail.evans@thyme> Date: Mon, 20 Aug 2001 17:38:11 -0700 (PDT) From: d..steffes@enron.com To: jeff.dasovich@enron.com Subject: FW: One Other Note on Stranded Costs Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: quoted-printable X-From: Steffes, James D. X-To: Dasovich, Jeff X-cc: X-bcc: X-Folder: \JSTEFFE (Non-Privileged)\Steffes, James D.\Sent Items X-Origin: Steffes-J X-FileName: JSTEFFE (Non-Privileged).pst FYI. -----Original Message----- From: Swain, Steve=20 Sent: Tuesday, August 14, 2001 8:16 AM To: Steffes, James D.; Mara, Susan Subject: RE: One Other Note on Stranded Costs Let me make sure I understand this. Prior to April 2002, the UDCs want the= ir QF costs to be as low as possible, since this will cause the PX credit t= o be lower and thus the positive CTC higher. However, beginning April 2002= , they pray for just the opposite -- the greater their QF costs, the more t= hey can collect from DA customers to help pay for the QFs. =20 I truly hope I have misunderstood you, else my brain may explode. =20 =20 -----Original Message-----=20 From: Steffes, James D.=20 Sent: Mon 8/13/2001 5:08 PM=20 To: Swain, Steve; Mara, Susan=20 Cc:=20 Subject: One Other Note on Stranded Costs Steve --=20 As Sue highlights below, when people talk about stranded costs ending no la= ter than 3/31/02, they are only speaking about generation-related stranded = costs. Above market costs for QFs will be "collected" from DA customers fo= r some time into the future. Wanted to make sure that this was clear. Jim=20 -----Original Message-----=20 From: Mara, Susan =20 Sent: Monday, August 13, 2001 12:27 PM=20 To: Curry, Wanda; Swain, Steve; Mellencamp, Lisa; Steffes, James D.; Ru= ffer, Mary Lynne; Tribolet, Michael; Huddleson, Diann Cc: Gorny, Vladimir; Bradford, William S.; Kingerski, Harry; Savage, Go= rdon; Tribolet, Michael=20 Subject: RE: Summary or PX Credit Proposals=20 An update from the meeting we had with SCE on August 9: SCE said that it h= as TEMPORARILY stopped charging CTC because it doesn't know what to charge = for DWR. Meanwhile, it continues to keep track of the dollar flows through = the TCBA and the new account set up for DWR. Once the CPUC decides on the = DWR's revenue requirement, SCE expects that it will charge generation-relat= ed CTC again. There is also continuing CTC related to QF contracts that wi= ll return (and goes beyond 3/31/02) once QF contracts are above the "market= ". SCE is also considering filing a petition with the CPUC to get guidance= on all these matters. Once the CPUC rules on SCE"s advice letter approache= s, SCE plans to go back and re-bill begining with Jan 18 (it used some diff= erent PX credit approaches early on and switched to this approach for bills= going out June 4). I didn't ask the question about calculating CTC back to= Jan 18. I guess if the DWR rev req is retroactive and leaves room for CTC= , they will bill it. The other twist I had forgotten about is that they ha= ve a one-half cent charge added to the embedded gen rate of 10.27 cents (ma= king it about 10.77 cents) that collects the $400 million that was uncollec= ted while the CPUC played around with a rate design for the three cent surc= harge. The half cent addition is for 12 months. -----Original Message-----=20 From: Curry, Wanda =20 Sent: Friday, August 10, 2001 8:51 AM=20 To: Swain, Steve; Mellencamp, Lisa; Steffes, James D.; Ruffer, Mary Lyn= ne; Tribolet, Michael; Huddleson, Diann; Mara, Susan Cc: Gorny, Vladimir; Bradford, William S.=20 Subject: Summary or PX Credit Proposals=20 I wanted to summarize the conclusions from our meeting on Wednesday, August= 8th. Please let me know if I have misrepresented anything. =20 Below is a description of four proposals which may help resolve issues asso= ciated with PX credits or mitigate Enron's exposure to PX credits. Steve S= wain has the responsibility for evaluating each proposal, and his goal is t= o have recommendations for EWS/EES management on August 14th. =20 Current Issues:=20 1) The methodology for calculating PX credits after January 18 is undeterm= ined (SCE and PG&E have implemented different methodologies) 2) Applicability of the 1 cent surcharge to direct access customers (PG&E = is passing thru to DA customers, SCE is not)=20 3) Impact to Enron if FERC implements retroactive changes to the CAL PX = clearing prices from Oct 2, 2000 thru January 18th which result in revised = PX credits=20 4) Recoupment of outstanding PX credits against future payments for T&D=20 5) Uncertainty surrounding future tariffs (CTC or other pass through charg= es), making it difficult to hedge price risk in forward positions 6) Large uncollected receivables from both PG&E and SCE=20 The four proposals are as follows:=20 SCE Recommended Approach=20 This approach assumes no PX (or PE) credit effective from January 1= 8, 2001 forward. Mary Lynne and Diann will work with Steve to quantify the= gross PX receivable (as billed by each utility) which would be reversed= . This approach will ensure that only charges for T&D (no generation/c= ommodity costs, CTC charges, or surcharges for CDWR, including the 1 cent) = will be applicable to Direct Access customers. =20 Enron would request the following:=20 1) Assurances that no surcharges for CDWR will be passed through to= EES or EEMC=20 2) SCE will support our historical PX credit receivable as an "all= owable claim" at a minimum and would provide additional credit support if p= ossible. =20 3) PG&E will support Enron's recoupment argument=20 4) Both utilities will immediately reinstate the Cumulative Credit = Balances on utility bills and agree to a netting arrangement at the utility= parent level.=20 5) Both utilities agree to not adjust the historical PX credits, if= /when an adjustment of historical PX clearing prices is mandated by FERC=20 Other consideration:=20 Ability to hedge price risk in the retail portfolio, without concer= n re CTC or other surcharge amounts. =20 PG&E Recommended Approach=20 This approach assumes the PX calculation methodology effective Janu= ary 18, 2001 would include an "avoided cost" component. This avoided cost= =20 component would include, owned generation, QF purchases, actual CDW= R purchases for the utility, bilateral purchase contracts, and ISO purchase= s. This resulting "avoided cost" would be used in lieu of the PX cle= aring price in the old PX formula through March, 2002. If the actual CDW= R purchase costs are not included, then the surcharge (along with the embe= dded gen costs) should be included in the calculation. =20 =20 Enron would request the following:=20 Same as above=20 Other Consideration:=20 Enron would continue to be exposed to "price" risk attributable to= the actions of the utility at a minimum through March, 2002. This would h= amper Enron's ability to hedge the positions in the retail port= folio.=20 Hybrid Approach=20 This approach assumes that the PG&E approach is applicable from Jan= uary 18, 2001 through September 1, 2001 and that the SCE approach is = applicable from September 1st forward. This approach might be necessary= as a compromise for both utilities to provide their support of the proposa= l.=20 Enron would request the following:=20 Same as SCE and PG&E approach=20 Other considerations:=20 Ability to hedge price risk in the retail portfolio, without concer= n re CTC or other surcharge amounts. =20 Enron Model=20 This approach assumes we continue to support a market based (NP15 a= nd SP15) calculation methodology for the PX credit. =20 Enron would request the following:=20 It is unlikely we would receive any level of cooperation from eithe= r PG&E and SCE. The consensus from legal, regulatory, and EWS commercial = is the probability of getting this approach approved is low. Howev= er, understanding this amount, at a minimum, can be used to help defend the= "value" Enron is foregoing in order to reach agreement with the utiliti= es and CPUC. Other considerations:=20 This approach would give Enron the ability to hedge "price" risk, b= ut this is somewhat offset with incremental credit exposure associated wit= h the actual collection of the PX credit. Again, please let me know if this does not clearly represent what we conclu= ded in Wednesday's meeting.=20 Thanks,=20 Wanda Curry=20