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Enron Mail |
-----Original Message----- From: =09Woertz, Byron [mailto:BWoertz@caiso.com]=20 Sent:=09Tuesday, July 24, 2001 6:25 PM To:=09ISO Market Participants Subject:=09CAISO Notice - Cash Allocation Policies ISO Market Participants: Since Trade Month November 2000 (which settled beginning in January 2001), = payment defaults in the ISO markets have caused the ISO to pay less than th= e full amount due Scheduling Coordinators (SCs) in the monthly cash clearin= g process. The purpose of this message is to describe the ISO's policies a= nd procedures in settling the market when defaults occur. As set forth in = Section SABP 6.7.4 of the ISO Tariff, when payment defaults occur from SCs = that have obligations to the ISO's markets (Debtor SCs), the shortfall is t= o be prorated to SCs with net amounts due them (Creditor SCs) based on thei= r outstanding balances. The principles that drive how amounts are settled a= nd defaults are allocated to Creditor SCs are summarized below: Proportionate allocation of defaults - The total amount of market defaults = is allocated to the Creditor SCs on a proportionate basis such that each Cr= editor SC receives the same percentage of their total net amount receivable= for the month. SCs are allowed to net the credits and debits on a monthly= basis as described below. The intent of the Tariff is to equitably distri= bute market shortfalls only to those SCs that have net market receivables f= or the period. =20 Each month is treated as a whole period - Final and preliminary invoices ar= e combined when possible (see exception conditions below) in allocating mar= ket defaults. Cash payments from the market are received in two stages (pr= eliminary and final). At preliminary, market payments are distributed base= d on the preliminary amounts due to the Creditor SCs as set forth in the pr= eliminary invoices. Final invoices serve essentially as true-ups to the pre= liminary invoices, and accordingly, payments received at final are redistri= buted to the extent possible to achieve true-up allocations for the whole m= onth considering the combined amounts due the Creditor SCs from both the pr= eliminary and final invoices. Each month is treated as a discrete period - Market defaults are generally = allocated to the Creditor SCs that have amounts due for the month being set= tled. The exceptions to this rule involve (1) SCs that are Creditor SCs in= the current month but have default obligations relating to prior periods o= r (2) Debtor SCs that pay in the current month but have unpaid balances for= prior months. In the first instance, the Creditor SC would not be paid to= the extent of default obligations from prior months. Amounts due to the C= reditor SC would be allocated back to the default period and such proceeds = would be allocated based on remaining amounts still owed for that period. I= n the second instance the current month's payment is carried back and appli= ed first to the oldest outstanding balance. The proceeds would be distribut= ed to the Creditor SCs for that earlier period based on the Creditor SCs un= paid balances in that month. With respect to the carry back of payments to= the earliest period, Pre and Post bankruptcy debts are deemed to be from d= ifferent SCs. GMC defaults are remedied as a first priority on market payments - GMC is = billed separately from market billings on both preliminary and final invoic= es each month. In the event of payment default on any GMC invoices (at eit= her preliminary or final), market funds are transferred to satisfy GMC obli= gations before any market distributions are made. This first priority posi= tion for GMC revenues is set forth in Section SABP 6.3.1.3 of the ISO Tarif= f. Therefore, when both GMC and market defaults occur (as has occurred in = each of the past few months), the Creditor SCs have two reductions to the m= arket clearing amounts ultimately paid - an allocated portion of the GMC de= fault, and an allocated portion of the market default. RMR invoices and pa= yments are not affected by market or GMC defaults - The RMR invoicing proce= ss involves amounts due from the PTO's to the RMR Owners as set forth in mo= nthly invoices processed through the ISO's systems. However, such amounts = are invoiced independent of the ISO's market and GMC billing processes, and= accordingly, market and/or GMC defaults do not impact RMR related payments= .=20 There are a number of factors that complicate the monthly process of alloca= ting cash to Creditor SCs when defaults occur. Some of these factors inclu= de: * amounts received after payment date deadlines - such amounts are typicall= y included in the next distribution * market payments due to Creditor SCs that default on GMC in the current mo= nth - such market allocations are reduced by the specific amount of the GMC= default by the Creditor SC * allocations to prior months - not made unless the amount exceeds 0.5% of that months billed amounts * small invoices under $5,000 are paid in full rather than the allocated pe= rcentage. For more information about these allocation issues or any other related mat= ters, please contact Melodie Iverson (916) 351-2174 (e-mail mkiverson@caiso= .com <mailto:miverson@caiso.com< ) or Mike Epstein (916) 351-2314 (e-mail m= epstein@caiso.com <mailto:mepstein@caiso.com< ) at the ISO. =20 Byron B. Woertz, Jr. Director, Client Relations Phone: (916) 608-7066 Pager: (800) 481-7037
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