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Enron Mail |
I am forwarding a weekly "gossip column" put out by the Executive Director =
of=20 the Western Power Trading Forum. There are a couple of interesting comment= s=20 relating to the Silver Peak overscheduling event. I think that Ken Lackey'= s=20 comments are at the core of the argument that we are trying to make. ---------------------- Forwarded by Tim Belden/HOU/ECT on 06/25/99 09:13 AM= =20 --------------------------- =20 =09Enron Capital & Trade Resources Corp. =09 =09From: "Gary B. Ackerman" <foothi19@idt.net< = =20 06/24/99 04:56 PM =09 Please respond to gackerman@wptf.org To: Barb Ennis <baennis@ix.netcom.com<, "Becky A. Kilbourne"=20 <bakilbourne@calpx.com<, Bill Metcalfe <w.metcalfe@usa.net<, Bob Anderson= =20 <Robert_Anderson@apses.com<, Bob Hoffman <bhoffman@newenergy.com<, Bob=20 Reilley <rreilley@tejasenergy.com<, Brian Mock <bmock@coral-energy.com<,=20 Curtis Kebler <Curtis_L_Kebler@reliantenergy.com<, David Bobo=20 <david-bobo@hlp.com<, David Parquet/SF/ECT, Dennis Benevides=20 <dbenevid@enron.com<, Dennis Flaherty <dcfl@dynegy.com<, Frank Rierson=20 <fgrierson@aol.com<, George Sladoje <gsladoje@calpx.com<, Greg Blue=20 <gtbl@dynegy.com<, Gregg Cordell <gcordell@enron.com<, John Flory=20 <jeflory@calpx.com<, Ken Czarnecki <Ken_J_Czarnecki@calpx.com<, Ken Lackey= =20 <Kenneth_Lackey@EdisonMission.com<, "Lisa G. Urick" <lgurick@calpx.com<, Mo= na=20 Petrochko <mpetroch@enron.com<, Nancy Day <nday@newenergy.com<, Paul=20 Mead/PDX/ECT, Peter Bray <peter.bray@pgees.com<, Roger Pelote=20 <rpelote@energy.twc.com<, Romula Barreno <rfbarreno@calpx.com<, "Ross\"Moth= er=20 Pie\"Clark" <rclark@coral-energy.com<, Sheryl Lambertson <slamb@mtpower.com= <,=20 Sue Mara <smara@enron.com<, Tim Belden/HOU/ECT, Tom Delaney=20 <tom_delaney@enron.com<, Vicki Sandler <Vicki_Sandler@apses.com<, Al Parson= s=20 <alp@ncpa.com<, Anne Bertolet <abbertol@newwestenergy.com<, Barry Bell=20 <barry.bell@pacificorp.com<, Brian Jobson <bjobson@smud.org<, Chris Hawkins= =20 <chris.hawkins@lgeenergy.com<, Daniel Kirshner <dank@edf.org<, Dave Nuttall= =20 <dn@ui.com<, Denice Cazalet <dcazalet@apx.com<, Edmond Chang=20 <echang@wapa.gov<, Edward Cazalet <ed@cazalet.com<, Jack Ellis=20 <jack@apx.com<, Jeanne Higgins <jeanneh@citizenspower.com<, Jerry Toenyes= =20 <toenyes@wapa.gov<, Jim Kritikson <jgkritikson@calpx.com<, John Stremel=20 <jstremel@energy-exchange.com<, julie blunden <blunden@greenmountain.com<,= =20 Ken Nichols <ken@hetrading.com<, Kendra Heinicke <klheinicke@calpx.com<,=20 Linda Hamilton <lhamilton@avistaenergy.com<, Marcie Milner=20 <marcie_milner@enron.com<, Mark Tallman <mark.tallman@pacificorp.com<,=20 "Nichols, Lauren - PGS" <lnichols@bpa.gov<, Paul Kroger=20 <paul.kroger@pacificorp.com<, Peggy Olds <paolds@bpa.gov<, Randy Young=20 <RYoung05@apsc.com<, "Richard H. Counihan" <counihan@greenmountain.com<, Ro= b=20 Nichol <rsnichol@newwestenergy.com<, Steve Fisher=20 <svfisher@avistaenergy.com<, Tom Breckon <tom@ncpa.com<, webmaster=20 <charlotte@wptf.org< cc: =20 Subject: WPTF Friday Thin Quality Burrito Hey Burrito Heads! It=0F's just another fascinating week in Burrito land. I spent the better part of this week learning something new, which at my age is not easy. In fact, just about everything at my age is getting more difficult. But I wont bore you with the details. The new thing I learned was how to be an Examiner on the Board of Examiners for this year=0F's California Governor=0F's Quality Education and Development Award (CalQED). Its an annual shindig for companies, health care institutions, and schools to compete for the honor of shaking the Gov=0F's hand, and hearing that your (pick one: company, non-profit, school, health care institution) are world class. Being an examiner of the written applications, and working with a team of peer examiners is all pro bono on my part. I am wondering what the hell I got myself into. I=0F'll tell you more about it some other time. Speaking of world class, I got two top notch letters this week that I want to share with you. One from Ken Lackey of Edison Mission Marketing and Trading, regarding the May 25 overscheduling on the Silver Peak intertie by 2900 MW (see Lori Eckman=0F's note to me in last week=0F's Burrito), and a reply to Ken=0F's letter from George Sladoje, CEO of the PX. Ken, who I have known for several years, is a person who doesn=0F't speak out unless something really bothers him. Ken wrote: =0F"Since Day 1, I've always wondered what mechanism was in place to protect against this scenario [overscheduling on an intertie], or if this scenario would be regarded as a market implementation flaw or "feature". I always figured it was a feature, simply because I didn't think that a hole this large would be unintentionally overlooked. I also figured that this feature was available for use by market participants and that if it became overused, that it would eventually come under scrutiny by the market compliance police. I also wondered if people could use this to change spreads in such a way as to improve their overall positions. I also figured that for the most part there is no such thing as "artificially" high prices since in my opinion the market design itself is somewhat artificial. But now I know the truth..it's a flaw, it was overlooked and there is no protection...amazing. =0F"I certainly do not agree with [George] Sladoje's interpretation of the PX tariff (that overscheduling across a path constitutes improper implementation of a generator schedule, which therefore constitutes a violation of the tariff). Also I believe that it is completely inappropriate for the burden of proper functioning of the market to rest on the shoulders of the market participants (i.e. if someone types in an incorrect schedule in their PX Trade Application, the market should not blowup) . The responsibility of a properly functioning market lies with the market operator (PX) itself. PX software should validate that the proper mechanics have been used by the market participants. =0F"By the way, it wasn't us who caused this situation, and of course we would prefer to pay low PX energy prices rather than high, but if we review this situation and retroactively recreate prices, then perhaps all other cases in which congestion at tie-points caused high prices should also be reviewed to see if they are "real". =0F"By the way, typically, I would not respond to this sort of thing due to time constraints, however, some of our recent involvement in other ISO/PXs has highlighted the contrasts between California and other ISO/PXs. Each of them, including California, has its strengths and weaknesses, however, it's in California where the unusual is the norm.=0F" I sent Ken=0F's letter to George, and his staff at the PX, and George wrote back the following: =0F"Because the incident of May 25 is the subject of an official investigation by the PX Compliance unit, I cannot comment on the specifics of this matter at this time. It is likely that the CalPX Market Monitoring Committee will be involved in the investigation and the results will likely be presented to the CalPX Board of Governors. As to the issue of a design flow in the overall California marketplace --- we are currently reviewing this issue and have requested that the ISO do the same. =0F"I disagree with the assertion that CalPX Tariff provision 3.3.2 does not apply here. In all major exchange operations the institution not only provides a forum for trading, but also monitors the activities of its members, both currently and after the fact. The participants are expected to follow the rules. At one of my previous employers, as an example, (the Chicago Board of Trade), a suspected abuse or a compliant from another member or customer results in an investigation by the Office of Investigations and Audits (the counterpart of CalPX=0F's Compliance unit). Depending on the nature of the issue, the investigation results are presented to the Floor Governors Committee, Business Conduct Committee or the Financial Compliance Committee. These bodies then determine if additional investigation is warranted and if the issue requires Board of Director action. =0F"Similarly, the CalPX has the obligation to investigate and take actions against participants who violate tariff provisions. Our recently filed sanction=0F's protocol formalizes the process further and describes a series of penalties which can be imposed. Therefore, we believe our tariff does provide adequate protection. =0F"Finally, as to whether a comparable event has occurred in the past --- this will be part of the investigation process and a review of market design. Obviously, impact schedule submissions above ATC limits have happened as a result of free and open markets. Congestion has become an almost regular occurrence. The real issues under investigation in this incident are magnitude, intent and materiality of impact on our marketplace.=0F" Thank you, both Ken and George for those comments. I am sure we will hear from other members on the issue. Lori, don=0F't be silent. You started this thing. =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D Speaking of market design (segues, I am very big on segues this week), old warrior, dear friend, and defender of the just, Carl Imparato had a few things to say about the ISO=0F's proposed utilization of ex post GMMs. Carl wrote: =0F"Yesterday, [the ISO Market Analysis Unit] stated that not implementing after-the-fact GMMs would be a departure from the original vision of the California market structure. =0F"Ex post GMMs were NOT a part of the market structure. When I was at PG&E and we were developing the tariff in early 1997, no one (not at PG&E, SCE or any other market participant, to my knowledge) ever advocated ex post GMMs, and they were NOT included in the tariff. I don't recall the words "state estimator" (for calculation such GMMs) ever being uttered by anyone in a WEPEX stakeholder meeting. =0F"It was only somewhere in mid-1997, when Alex was working on UFE equations, that Alex (I believe) suddenly came up with the proposal for ex post GMMs, and the proposal was taken by ISO very quickly (before it had ANY discussion in SCUG or any other forum), and was adopted by the ISO Board (or whatever group passed for the Board at that time). Immediately thereafter, virtually everyone in SCUG . We were ignored. =0F"But even in early 1998, we informally agreed that, in light of the facts (that after-the-fact GMMs were not part of the original "deal"), after-the-fact GMM implementation would be given low priority and we would be given opportunity to discuss this issue before ISO moved forward.=0F" I remember those discussions, Carl. I wonder if deals made in 1998 have any meaning today? =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D The SCE Pilot Forwards Program, a continuing saga for WPTF, popped up again this week. I visited with Commissioner Bilas on Monday to encourage him to stay the course, and support the ALJ=0F's preliminary decision to reject SCE=0F's Application, and cancel the hearings on legal and procedural grounds. Dick said that he supported that notion, but he couldn=0F't guarantee that all his colleagues would. Alas, two days later, Commissioner Joe Neeper, who clearly had too much time on his hands this week, issued a public statement which is long, but here is a taste: =0F"ALJ Hale=0F's Proposed Decision (PD) is structured so that a "Yes" vote will terminate the proceeding and a "No" vote will continue the proceeding to hearings and ultimate resolution.=01;=01; I have concerns wit= h the PD.=01; However, I do not intend to issue an alternate because, should my concerns not be addressed, I have the option to vote "No" which would have the same effect as the alternate I otherwise would have written.... =0F"If we vote to allow this application to move to hearings, we can later determine whether the Application should be approved on overall policy grounds. The PD dismisses the Application on the grounds that does not comply with what is known as the buy/sell requirement for utilities to sell all of their generation into, and purchase all of their energy needs for their bundled customers out of, the PX.=01; I agree with the ALJ and the Assigned Commissioner that the Application also must be compatible with the buy-sell requirement in order to be approved, and that this threshold decision is therefore necessary..... =0F"The PD concludes that the Application makes SCE=0F's customers more vulnerable to market power abuse.=01;In viewing the comments of parties, I find the concern about market power abuse to be expressed best by Western Power Trading Forum (WPTF) in its opening brief.=01; WPTF states on page 7 that, under SCE=0F's proposal, "ESPs will no longer be able to compete with utilities on the basis of short-run incremental costs in an open setting" as envisioned by the PPD.=01;Thus, "ESPs would find it increasingly more difficult to compete with an Edison price which was neither derived from a transparent PX price nor reflective of the retail market in which ESPs must participate." ... The PX price is determined in an open setting, and would continue to be determined in an open setting under SCE=0F's proposal....I cannot find that the proposal would violate the PPD by necessarily leading to abuse of market power. Market power concerns should be considered, and weighed against consumer and other interests.=01; These issues certainly can be explored in greater depth as policy matters in hearings. =0F"I do not believe the Application by SCE is in violation of the Commission=0F's Preferred Policy Decision.=01; The merits of the Applicatio= n should be considered through the hearing process and voted upon by the Commissioners. =0F" Well, Mr Neeper, justice isn=0F't free. A hearing is expensive, and what your are doing is raising the ante of staying in the game,unnecessarily. That supports the incumbents (UDCs), and hurts us. At the time I am writing this Burrito, I do not know if the Commission took action on this matter today, or punted it to the July 8 meeting. I=0F'll keep you posted, next week. =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D I am sure most of you have seen the press releases which came out last week. First, Dynegy and Illinova are merging, and, second, NEV is being purchased by AES. Both Dynegy and NEV are Voting members of WPTF. I was going to send Illinova a solicitation letter to join WPTF, but now I think I=0F'll take that off my =0F"to do=0F"list. In the NEV deal, the AES Corporation announced that it has entered into a definitive agreement to acquire New Energy Ventures in a transaction valued at approximately $90 million. AES will acquire all of the outstanding shares of New Energy Ventures from its current owners, UniSource Energy Corporation. and New Energy Holdings, L.L.C. (which is owned by senior management of New Energy Ventures). This is an incredible coincidence. I was just telling someone, I think it was Dan Douglass, that we ought to give a special award to Nancy Day of NEV, who is a big fan of the Burrito, and quite possibly, although I am not certain, one of the senior managers of that lucky corporation. Well, heck, she has been at NEV from the beginning, so she deserves all the financial success in the world, and we wish her well. I just want to share with all our Burrito readers that WPTF, a tax-exempt, non-profit corporation, Tax ID 94-3296987, right here in the State of California, soon to be a CalQED award winner, is looking for donors for the soon-to-be-announced Executive Director=0F's fund. Some of you might not know about this new [slush] fund. It is intended to provide all the necessary tools and ancillary needs of late night policy pow wows attended by the usual wonks and otherwise homeless lobbyists who invade my private hotel room during the WPTF general meeting, and who want to discuss high level stuff all through the night. What=0F's an executive director to do? So, Nancy, I was just thinking, we could launch this program in your honor, with your name all over the thing, and get this very important and much needed program in place. At least it will pay for a hotel room for Curtis who consistently falls asleep during these meetings on my hotel-room couch while Beth Emery is lecturing him. By the way, if, God forbid, the deal falls through, then forget I wrote all this. Have a great weekend. Think quality. gba
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