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Enron Mail |
Commenting on his general perception of the settlement conference, the Chie=
f=20 Judge, in his down home manner, did not miss the opportunity to say that = =01&you=20 can take a horse to water but you can't make him drink.=018 Below is a Cli= ff=20 Notes version of the Judge=01,s report and recommendation issued at 4:49 PM= =20 today. Attached is the complete work. =20 The Judge opined that very large refunds would be due- =01&While the amount= of=20 such refunds is not $8.9 billion as claimed by the State of California, the= y=20 do amount to hundreds of millions of dollars, probably more than a billion= =20 dollars in an aggregate sum. =01(At the same time, while there are vast su= ms=20 due for overcharges, there are even larger amounts owed to energy sellers b= y=20 the CAISO, the investor owned utilities, and the State of California. Can = a=20 cash refund be required where a much larger amount is due the seller? The= =20 Chief Judge thinks not.=018 Another notable quote: =01&=01(it is the opin= ion of the=20 Chief Judge that the amount claimed by the State of California has not and= =20 cannot be substantiated.=018 =20 The Judge noted that he submitted a proposal of his own on July 5, which wa= s=20 summarily rejected by the State of California, and that the five separate= =20 offers of the various industry groups to settle with California were also= =20 rejected.=20 =20 Refund Effective Date- Refund effective date of October 2, 2000, for sales = in=20 the spot markets of the CAISO and the Cal PX. The Chief Judge=01,s=20 recommendations do not go beyond that date. "Spot market" sales are "sales= =20 that are 24 hours or less and that are entered into the day of or day prior= =20 to delivery."=20 Evidentiary Hearing- =01&The differences between what the State of Californ= ia=20 believes the buyers in the California markets are owed in refunds and what= =20 the sellers in the California market believe should be refunded raise=20 material issues of fact. The appropriate numbers to calculate potential=20 refunds involve factual disputes. Thus, the Chief Judge recommends that a= =20 trial-type, evidentiary hearing be ordered limited to a factual record to= =20 apply to the methodology set forth below. Because of the urgent need for a= n=20 answer to the refund issues that hearing should be on a 60-day fast track= =20 schedule. It is important that a single methodology be adopted for=20 calculating potential refunds in this proceeding. However, such a=20 methodology may not be appropriate for all sellers in the CAISO's and Cal= =20 PX's spot markets in an after-the-fact refund calculation. In any event,= =20 sellers not using the methodology should bear the burden of demonstrating= =20 that their costs exceeded the results of the methodology recommended herein= =20 over the entire refund period.=018 Methodology- The Chief Judge recommends that the methodology set forth in t= he=20 June 19th Order be used with the modifications discussed below in order to= =20 calculate any potential refunds that may be due to customers in the CAISO's= =20 and Cal PX's spot energy and ancillary service markets for the period Octob= er=20 2, 2000 through May 28, 2001. =20 Heat Rate- The actual heat rates, rather than hypothetical heat rates=20 (associated with recreating the must-bid requirement of the June 19th Order= )=20 provide the first step in calculating the cost of the marginal unit. Gas Cost- The gas costs associated with the marginal unit should be based= =20 upon a daily spot gas price. =01&In the event that the marginal unit is lo= cated=20 in NP15 (North of Path 15), the daily spot gas price for PG&E Citygate and= =20 Malin should be averaged with the resulting gas price multiplied by the=20 marginal unit's heat rate to calculate a clearing price for that hour. If= =20 the marginal unit is located in SP15 (South of Path 15), the daily spot gas= =20 price for Southern California Gas large packages should be multiplied by th= e=20 marginal unit's heat rate to calculate a clearing price for that hour. The= =20 daily spot gas prices should be for the "midpoint" as published in Financia= l=20 Times Energy's "Gas Daily" publication for the aforementioned delivery=20 points. The last published gas prices should be used in calculating the=20 refund price for the days that Gas Daily is not published (weekends and=20 holidays).=018=20 O&M Adder- An adder of $6/MWh for O&M should also be included with the=20 calculated market clearing price. =20 Emissions Costs- Demonstrable emission costs should be excluded from the=20 market clearing price and treated as an additional expense that sellers may= =20 subtract from their respective refund calculation. Credit Adder- The 10 percent adder should be included in the market clearin= g=20 price for all transactions that occurred after January 5, 2001 when PG&E an= d=20 SoCal Edison were deemed no longer creditworthy. Ancillary Services- Consistent with the June 19th Order, ancillary service= =20 prices would be capped at the market clearing price established in the=20 real-time imbalance energy market. Adjustment bids would also be treated t= he=20 same as set forth in the June 19th Order.=20 Maximum Price for Non-Emergency Hours- Somewhat unclear. The Chief Judge= =20 recommends that for purposes of recreating a competitive market for=20 calculating refunds, the refund methodology should deviate from the 85%=20 non-emergency requirement of the June 19th Order. To measure the amount th= at=20 actual prices may have exceeded the refund price, every hour should be=20 recalculated. Offsets- =01&Recalculating the hourly competitive price for purposes of a= =20 refund calculation would also permit the Cal PX and CAISO to resettle all= =20 charges for the refund period. Amounts owed to sellers and outstanding=20 amounts due from buyers would be recalculated. Any refunds could then be= =20 offset against accurate amounts receivable without sellers netting out any = of=20 their purchases from the CAISO and Cal PX during the refund period.=018 Interest- Interest should not be charged against any refund amounts unless= =20 the refund amount exceeds the amounts that are past due to the seller.
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