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Enron Mail |
Chris, the simple fact, which we know from past experience and which OPG is
missing, is that there is a large segment of counterparties who for various reasons (logistics/scheduling fixed-priced physical requirements for term with a with a marketer; corporate authorizations for physical transacting only; industrial culture; commercial sophistication; etc) will only want to transact physically. To ignore this is to ignore a large segment of the market. If OPG wants out of the process I nonetheless urge you to continue as I am confident that once the market opens, or gets closer to opening, they will realize this. If they want to compete fully in the trading business they will come back to what the industry is using for physical settlement, which is the EEI form you will have developed. I also think that OPG is missing the point on physical settlement. As we discussed the IMO is merely the pool settlement mechanism. That does not mean that the underlying transaction cannot be a physical bilateral which allocates physical settlement risk as between the parties for physical delivery obligations (such as for failure to deliver; increased costs and prudential support for failure to deliver even where the IMO mechanism makes up the deficiency volume; force majeure; volume management; etc). I think it can be said in all markets that in many cases the distinctions between physical and financial trading can be distinctions without a difference, but nonetheless there are some real distinctions and more importantly, even if there are no differences, certain counterparties will only want to deal in what they believe to be a physically settled product. So it seems you are close with the other counterparties, and I suggest you just march on with them if OPG does not want to participate further. Peter.
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