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Enron Mail |
As a starting point for briefing Mark, I thought I would open the dialogue by
listing the proposed remedies and my thoughts on whether each would impact Enron's existing contracts. Keep in mind that FERC's remedies for the California market are only proposals that may or may not be adopted. Below I have listed all of the proposed remedies, with comments next to or below each proposed remedy. 1. Eliminating requirement that the California IOUs buy/sell into the Cal PX: The IOUs will no longer be required to sell all generation into and buy all of their requirements from the PX. This will allow the IOUs to act as their own scheduling coordinator instead of using the PX as a scheduling coordinator. It is expected that the IOUs will enter into more bilateral contracts. I can't think of how this would affect contacts, but I would suggest that if the IOUs pull out of the PX in a big way, the PX market will be more thinly traded/less liquid, leading to more volatile prices at the PX. 2. Penalty Charge for Load Deviations Greater Than 5% of Actual Load: If actual load deviates from its schedule by more than 5%, the ISO will impose a penalty charge of two times the ISO's real time energy cost for balancing energy (twice the inc price). We should review our contracts to determine if they allocate this penalty to the appropriate party. 3. Removal of the Existing ISO and PX Governing Boards: Probably a good idea, but I can't see how this will affect our contracts. 4. Interconnection Procedures: FERC has directed the ISO to develop standard tariff provisions to facilitate the interconnection of new and existing generators seeking to increase the rated capacity of their facility in California. Will this affect any contracts that the Origination group is working on? Because this proposed ISO's new tariff language has yet to be written, I would suggest that its effect on contracts at this time is remote. 5. Long Term Suggestions: The FERC also made the following suggestions: (1) The ISO and the load serving entities in California should develop market rules to ensure sufficient supply; (2) consider alternatives to the single-price auction; (3) eliminate the balanced schedule requirement by intergrating PX and ISO day-ahead demand and supply bids into one venue; (4) develop less-intrusive market mitigation remedies, i.e., no price caps; (5) redesign the congestion management system; (6) develop demand response programs that would allow loads to bid into the market offers to reduce demand; and, (6) conform the ISO to the requirements of RTOs under Order 888 and Order 2000. Since these are suggestions, and may never materialize, I do not think we need to modify our contracts at this time in response to these proposed changes. 6. Refunds: FERC has said that it will not order refunds for unjust and unreasonable rates for the period before October 2, 2000. Going forward, FERC may order refunds for unjust and unreasonable rates for the period Oct 2, 2000 through October 2, 2002. Should we put a provision in our confirms or contracts that would make counterparties waive their rights to assert that such prices were unjust and unreasonable for that transaction? 7. Price Caps: FERC has proposed a $150 'soft' price cap. The market clearing price would be capped at $150, but parties can submit higher bids. If a higher bid is submitted, that party would be required to submit transaction information to the ISO or PX detailing the generation cost and any legitimate opportunity cost. I would echo the point below about any reviewing any contracts tied to index prices. How will we provide the "incremental generation cost," since we are only the marketer? We may have to contractually require parties to provide us the information. This would also raise confidentiality issues. ***************************************************************** Christian Yoder 11/06/2000 08:02 AM To: Steve C Hall/PDX/ECT@ECT cc: Subject: USA: FACTBOX-FERC details changes for Calif power market. ---------------------- Forwarded by Christian Yoder/HOU/ECT on 11/06/2000 07:51 AM --------------------------- From: Mark E Haedicke on 11/03/2000 04:35 PM CST To: Elizabeth Sager/HOU/ECT@ECT, Christian Yoder/HOU/ECT@ECT cc: Subject: USA: FACTBOX-FERC details changes for Calif power market. Elizabeth and Christian: Please brief me on what impact you believe the FERC proposed order could have on our contracts. Mark ----- Forwarded by Mark E Haedicke/HOU/ECT on 11/03/2000 04:33 PM ----- Steven J Kean@ENRON 11/01/2000 03:43 PM To: Mark E Haedicke/HOU/ECT@ECT cc: Subject: USA: FACTBOX-FERC details changes for Calif power market. Joe Hartsoe, Rick Shapiro, or Jim Steffes can fill you in on the details of what FERC did today. One question you need to think about is how their decision on price caps affects any contracts which we may have indexed to California's spot market. The way it reports the market clearing price will change fundamentally if prices over 150 will be accepted but not used to clear the market for all bids. So, if we are using this as a reference price in our contracts it may trigger the need to look for alternatives. ----- Forwarded by Steven J Kean/NA/Enron on 11/01/2000 03:39 PM ----- Ann M Schmidt 11/01/2000 10:37 AM To: Mark Palmer/Corp/Enron@ENRON, Karen Denne/Corp/Enron@ENRON, Meredith Philipp/Corp/Enron@ENRON, Steven J Kean/NA/Enron@Enron, Elizabeth Linnell/NA/Enron@Enron, Eric Thode/Corp/Enron@ENRON, Laura Schwartz/Corp/Enron@Enron, Jeannie Mandelker/HOU/ECT@ECT, Mary Clark/Corp/Enron@ENRON, Damon Harvey/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Keith Miceli/Corp/Enron@Enron, James D Steffes/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron cc: Subject: USA: FACTBOX-FERC details changes for Calif power market. USA: FACTBOX-FERC details changes for Calif power market. 11/01/2000 Reuters English News Service (C) Reuters Limited 2000. WASHINGTON, Nov 1 (Reuters) - The U.S. Federal Energy Regulatory Commission on Wednesday approved several actions to revamp California's power market over the next two years. Immediate changes include the following: * Eliminate requirement that three utilities - Pacific Gas & Electric, San Diego Power and SoCal Edison - must sell all of their power to and buy all their power from the state Power Exchange (PX). * Require market participants to schedule 95 percent of their transactions in the day-ahead markets to reduce chronic underscheduling of load and generation and over-reliance on the ISO's real-time imbalance market to meet supply. FERC also proposed a penalty charge for scheduling deviations in excess of 5 percent of hourly load requirements. * Temporary modification of the single-price auction so bids above $150 MWh cannot set the market clearing price paid to all bidders. * Establish independent, non-stakeholder governing boards for the California Power Exchange (PX) and Independent System Operator (ISO). * Create congestion management design proposal. * Establish generation inter-connection procedures. * Explore alternatives to the single price auction by the ISO and PX. * Develop market rules to ensure sufficient supply is available to meet load and reserve requirements. FERC also approved changes to protect wholesale customers from unreasonable rates during the time it will take to adopt longer-term market remedies. The following price mitigation measures will remain in effect until Dec. 31, 2002: * Single-price auctions for all sales in the ISO and PX markets at or below $150 MWh. The single price would be used for all load which clears below this amount in the auction. * If an auction does not clear below the $150 MWh level, suppliers who choose to bid above $150 would be paid their price bid. In other words, the highest bid of the day, if above $150 per MWh, would no longer be the clearing price paid by all. * Sellers receiving above $150 per MWh would be required to report their bids to FERC on a weekly basis and provide certain cost information to the agency. * The ISO and PX would be required to report monthly information on such bids, allowing FERC to monitor competitive conditions and assure just and reasonable rates. Sellers would be subject to potential refund liability but no lower than their marginal or opportunity cost if FERC finds non-competitive conditions. The potential refund liability would extend the full 24 months it would take to implement the market reforms. Copyright , 2000 Dow Jones & Company, Inc. All Rights Reserved.
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