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I skimmed the attached NOPR looking for the approach FERC was proposing to =
take to the key issue we fought over here in CA a couple of years ago. Alt= hough I did not see the word "congestion", the implication of what I read i= s that the generator would pay for his extension cord plus any congestion i= mpacts that it makes on the grid. The implication of the last statement is= that the generator would put the grid back into the condition it was in "b= ut for" the new generator. That is great, assuming I did not skim from too= high an altitude. Did I? I also read the thing from the point of view of an issue that I had forgott= en about until recently. That is, if the generator pays for all of this up= grade and "but for" stuff, and then "gives" it to the utility, are there ta= xes due on the "gift"? When we developed our project in Pittsburg, CA, PG&= E's initial position was that we owed them for the upgrades AND for the tax= es on the upgrades (about 35 - 40% additional charge), which they turned ov= er to the state and fed. (This is potentially A LOT of money to "waste" on= an interconnect, if it is an expensive one.) Working with Enron's tax dep= t (I do not remember specifically with whom), we convinced PG&E that taxes = were probably not due for various reasons, and we mutually agreed to get a = private letter ruling from the IRS confirming. (We also agreed that IF the= taxes were ever due, that we would pay them.) I understand that that IRS = ruling was put in abeyance, pending some sort of law congress was consideri= ng. (I may be making this up here as I go along because Calpine bought the= project from us and I lost track of the various machinations.) The point = of all of this. Is it reasonable in this NOPR process on interconnection t= o address the tax issue? Is it too late? Is it irrelevant to the FERC pro= cess? Does anyone know the status of the law making process? =20 I am concerned about taxes for two reasons. First, many of the opponents t= o the proposed NOPR approach thought that all grid upgrades should be paid = for by the utility and included in rate base. (In other words, "all gener= ators are good and benefit the ratepayers.") On fundamental grounds they w= ill resist paying for upgrades. If they believe that they will get the ins= ult after injury treatment (pay for upgrades AND for taxes on the upgrades)= , they will resist the NOPR more strenously. (FYI to everyone, Calpine str= ongly resisted paying for upgrades at Pittsburg and somehow got out of it. = And guess what? Now with all of the new plants - ~1200MW added by Calpine= within a 5 mile area of 2500 MW of existing - there are congestion problem= s around all of the projects, just as we forecasted. ISO is now considerin= g adding a new zone and/or charging PG&E and/or the projects for congestion= . Because PG&E did not, and probably never will in our lifetime, add the g= rid upgrades so as to include in ratebase, the projects will be hurt. Beca= use all of this is not forecastable in the context of developing a project = in a timely manner, this outcome, exactly as we had forecasted, is why we s= upported the approach in the proposed NOPR.) Second, perhaps naively, I am= assuming that the tax issue is no different for gas pipeline upgrades than= for electric transmission system upgrades. On a project we are now develo= ping in Roseville, CA, we are faced with significant gas pipeline system up= grades in PG&E's system. Significant grossups for tax impacts of the "gift= " are are being discussed as I remember for Pittsburg's electric transmissi= on system upgrades. Since it sounds like the same issue, sure would be nic= e if we could get some appropriate precedence going. Any possibliity of de= aling with the tax issues in this NOPR? -----Original Message----- From: Lindberg, Susan=20 Sent: Friday, October 26, 2001 7:29 AM To: Parquet, David; Hueter, Barbara A.; Rasmussen, Dale; Dieball, Scott; Tweed, Sheila; Booth, Chris; Carnahan, Kathleen; Churbock, Scott; Comeaux, Keith; Gimble, Mathew; Grube, Raimund; Hausinger, Sharon; Inman, Zachary; Jacoby, Ben; Keenan, Jeffrey; Kellermeyer, Dave; Krause, Greg; Krimsky, Steven; Kroll, Heather; Mitro, Fred; Moore, John; Tapscott, Ron; Whitaker, Rick; Baughman, Edward D.; Coulter, Kayne; Day, Smith L.; Gilbert, Gerald; Kinser, John; May, Tom; Miller, Jeffrey; Will, Lloyd Cc: Comnes, Alan; Fulton, Donna; Nicolay, Christi L.; Novosel, Sarah; Steffes, James D. Subject: FW: FERC rulemaking on Generator Interconnection Please see the attached. FERC has asked for preliminary comments on its pr= oposal to adopt a standard generator interconnection agreement and procedur= es; the deadline for comments is December 21. After it has considered the = comments, FERC will issue a NOPR. EPMI will participate in the Nov. 1 meeting at FERC; an update will be sent= to you. I will be taking the lead on drafting our comments. =20 Please contact me if you need further information. Susan Lindberg 713.853.0596 -----Original Message----- From: Jackie Gallagher [mailto:JGallagher@epsa.org] Sent: Friday, October 26, 2001 8:57 AM To: acomnes@enron.com; Hawkins, Bernadette; Nersesian, Carin; Nicolay, Christi L.; Fulton, Donna; Scheuer, Janelle; Hartsoe, Joe; Shelk, John; jsteffe@enron.com; Noske, Linda J.; Robertson, Linda; Alvarez, Ray; Shapiro, Richard; Novosel, Sarah; Mara, Susan; Lindberg, Susan; Hoatson, Tom Subject: FERC ANOPR on Generator Interconnection Last night, FERC issued an Advanced Notice of Proposed Rulemaking (ANOPR) o= n Standardizing Generator Interconnection Agreements and Procedures. The A= NOPR incorporates the ERCOT interconnection procedures, modified by various= "best practices" identified by the Commission in an attachment. A public = meeting has been scheduled for November 1st in Washington, although the not= ice of the meeting is not yet available. We will forward it when it become= s available. The ANOPR is attached.
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