Update from CN and SN

Jim -- Is this what you want for your executive update?

CURRENT FERC INITIATIVES:

RTO Meetings and Comments to NOPR: The RTO meetings will be held in Washington from October 15-19, and Steve Walton from Enron will make a presentation on transmission planning and expansion. Comments will be submitted to FERC in mid-November regarding the appropriate market design for RTOs. In addition, the Commission stated that RTOs would not be required to begin on the Order No. 2000 start date of December 15, 2001; however, all public utilities are now required to commit by December 15, 2001 to join a FERC-approved RTO or lose their market based rate authority.

Standards of Conduct NOPR: Several issues are raised in this proceeding, including a proposal to apply the standards of conduct to a utility's marketing affiliate buying and selling power to serve native load. This is a significant action for FERC and we will strongly encourage the Commission to adopt this bold proposal. Comments are due late November.

ICAP Inquiry: Chairman Wood has indicated that he is not very familiar with capacity and reserve requirements, whether they are needed, and what impact such requirements have on the market. Enron has been a strong opponent of ICAP for many years, and we plan to show FERC that ICAP requirements are not needed. We will submit expert testimony on this issue. Comments are due October 17.
California Audit and West wide Price Cap Mitigation: Commissioner Brownell is leading a FERC audit of the California ISO. Although we do not have details of what the audit is intended to cover or how expansive it will be, we need to carefully monitor this proceeding and have input into the audit process where possible. Furthermore, a request for rehearing is pending before the Commission regarding the current price cap mitigation measures. The Commission implemented these caps in an effort to limit price spikes in California. California's summer peaking season is over, but the Pacific Northwest's winter peaking season will be starting soon, and the mitigation measures currently in effect could discourage power sellers from selling power to the Northwest, where it will be needed this winter.
Transmission Constraint and Energy Infrastructure Issues: FERC staff is studying two significant transmission constraints - California's Path 15 and the Central East Interface in New York -- and plans to have the study completed later this year. The Commission plans to forward the study to DOE. The Commission stated that this is a high priority for it. In a relating proceeding, the Commission has stated that it will hold four open meetings in different regions of the country to identify energy infrastructure issues.
Revised Public Utility Filing Requirements: The Commission has issued a NOPR proposing to require market participants to provide more information than is currently required, including at least seven additional data points per transaction. This will have a significant administrative burden on Enron and will require the disclosure of commercially sensitive information. Enron filed comments on October 5.
California Refund Proceeding: The Commission has ordered power sellers to pay refunds for sales made to the California ISO from October 2, 2000 through June 20, 2001, and has established a hearing proceeding to resolve issues of material fact. Hearing will be held in mid-December.
Pacific Northwest Refund Proceeding: The Judge in this proceeding issued an initial decision recently finding that refunds are not warranted in the Pacific Northwest. We expect a Commission order shortly.
Midwest/Alliance RTO Proceeding: Various filings are pending before the Commission regarding establishment of two RTOs in the Midwest - the Alliance RTO and the Midwest RTO. Enron is advocating, consistent with the Commission's recent pronouncements, one single RTO in the Midwest. The Commission is expected to act on these filings by the end of October.
Northeast RTO Proceeding: Mediation to create a single Northeast RTO has concluded and the Judge's report is pending before the Commission. Enron filed comments advocating a NE RTO based on the PJM congestion management system with a proposed start date of December 15, 2002 (PJM has proposed an implementation date of November 2003). Commission action is expected on or before October 31.
Southeast RTO Proceeding: Mediation to create a single Southeast RTO has concluded and the Judge's report is pending before the Commission (advocating an independent transco structure for the RTO and an LMP/financial transmission rights congestion model). Enron filed comments in support (and advocating a December 2002 start date). Commission action is expected on or before October 31.
West -wide RTO Proceedings: The Commission stated that it wants the proposed Desert Star RTO and RTO West to "marry up" into one RTO. It appears that the Commission will treat California separately. The Desert Star RTO has collapsed and the transmission owners are now proposing a "transco" structure. Commission action is expected later this year.
Interconnection proceeding: The Commission is expected to address interconnection issues (with standardized procedures and agreements likely) at its meeting on October 11. Enron has strongly advocated standardized procedures and will participate in the proceeding.
Market Based Rate Authorization: The Commission is expected to address procedures for qualifying to sell power at market based rates, which may include an assessment of localized generation in a particular region ("supply margin assessment"). The Commission is also considering adding tariff language that could make market based rates subject to refund upon date of a complaint or finding by FERC of market abuse.