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From:thane.twiggs@enron.com
To:bruce.sukaly@enron.com, mike.curry@enron.com, jducote@enron.com,drew.tingleaf@enron.com, cahn@enron.com, jason.wiesepape@enron.com, berney.aucoin@enron.com, michelle.parks@enron.com, doug.gilbert-smith@enron.com, larry.jester@enron.com, joe.allen@en
Subject:Capacity Auction Agreement Working Group for ERCOT (CAAWG - ERCOT)
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Date:Mon, 9 Apr 2001 08:28:00 -0700 (PDT)

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The Capacity Auction Agreement Working Group for ERCOT (CAAWG - ERCOT) will=
=20
be the forum to work on the implementation of the standard form agreement a=
nd=20
resolution of issues related to using capacity auction products in the=20
ancillary services markets of ERCOT. The CAAWG - ERCOT will hold its meetin=
gs=20
at the Commission where a member of the Commission's Market Oversight=20
Division will be present. This group will be filing its final work product=
=20
in Central Records at 3 pm on Friday, May 4, 2001, for public comment prior=
=20
to consideration at the Commission's June 14, 2001 Open Meeting.=20

The SPP Stakeholders will be filing a standard form agreement and resolutio=
n=20
of issues related to the use of capacity auction products in the SPP=20
ancillary services markets at the Commission at 3 pm on Friday, May 4, 2001=
=20
for public comment prior to consideration at the Commission's June 14, 2001=
=20
Open Meeting. Because the structure of the SPP ancillary services market is=
=20
still under development, the focus will be on ERCOT and input and assistanc=
e=20
from SPP staff will be sought in the coming weeks.

The Working Groups are a direct result of the PUCT Capacity Auction Order. =
=20
The current time line proposes meeting weekly as Stakeholders to work to=20
resolve the issues, schedules and final products to be included in the=20
auction this fall. Under the current proposal the Capacity Auction Product=
s=20
will be Baseline, Gas Intermediate, Gas Cyclic and Gas Peaking. Each of th=
e=20
PGCs must auction 15% of the Texas Jurisdictional Installed Generation=20
Capacity. The capacity will be sold as a "slice of the system" of each of=
=20
the divesting PGCs and will not be for any specific unit. During the month=
s=20
of March, April May, October, and November of each year the available=20
entitlements may be reduced proportionately to the average planned plant=20
outage. With respect to the firmness of the products, the PUCT found that=
=20
the products should be 100% financially firm to provide potential buyers of=
=20
the entitlements certainty in the products that they are buying. Forced=20
outages are limited to 2.0% of the hours of the entitlement.

The Power Generation Companies (PGCs) have recommended using the EEI Maste=
r=20
Power Purchase and Sale Agreement and Schedule CA will describe the product=
s=20
available for auction. A copy of Schedule CA will be attached below for yo=
ur=20
review and comment. Please note that the Schedule CA is not a final docume=
nt=20
and is an initial proposal from the PGCs. Your review and comments will be=
=20
essential. Also, if you have any questions or comments as to the process o=
f=20
the CAAWG or the auction process in general please feel free to call me. T=
he=20
working group will meet each Wednesday for the balance of April after which=
=20
the working group will meet May 1st and May 2nd in anticipation of the=20
proposed May 4th filing date. After the filing, Enron will have the=20
opportunity to file written comments with the PUCT. The Auction process=20
under the rule must be completed prior to September 1, 2001 for the initial=
=20
auction period.

The following is an initial list of issues. =20

1. What is the timing of schedules for each of the products from the buyer =
of=20
the entitlement to the seller of the entitlement.
2. Are ancillary services available from the Baseload product? TXU has=20
stated that they cannot provide A/S from their Baseload units. As such,=
=20
should A/S be removed from all Baseload product offerings from all PGCs so=
=20
that there is a standard product or should the Baseload offerings include=
=20
ancillary services when and where available. The argument distills to if t=
he=20
entitlement is more valuable in the market as a standardized product or a=
=20
differentiated product that may or may not include A/S.
3. What is the delivery point for the entitlement and other operational=20
issues? Should it be a single bus, multiple busses or congestion zones. =
=20
Congestion zones may change each year, under the current auction schedule,=
=20
you would bid for the product before you know the final congestion zone.
4. How (or if possible) can responsibility transfers be used for balancing=
=20
energy?
5. Who will receive OOM payments?
6. What about compensation for other A/S payments?
7. Does released capacity exist, should it exist at all? If so, what happe=
ns=20
when the capacity is released. The PGC would like the offering to look lik=
e =20
a call option. If the option is not exercised by scheduling, then the=20
capacity is deemed released. This is the interpretation of the PGC=01,s an=
d=20
not necessarily that of the PUCT or other Stakeholders.
8. How much of a product or entitlement is available in A/S?

The order adopting the final rule can be found at =20
http://www.puc.state.tx.us/rules/rulemake/21405/121900adt.pdf the actual =
=20
rule starts at page 41 of 65.

Please review and comment.

Thane Thomas Twiggs
Enron Corp
1400 Smith Street
Houston, Texas 77002

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