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Enron Mail |
I apologize for the "glaring".
b -----Original Message----- From: =09Alvarez, Ray =20 Sent:=09Thursday, July 12, 2001 4:27 PM To:=09Steffes, James; Hodge, Jeffrey T.; Williams, Robert C.; Kean, Steven;= Shapiro, Richard; Robertson, Linda; Dasovich, Jeff; Walton, Steve; Mara, S= usan; Comnes, Alan; Lawner, Leslie; Cantrell, Rebecca W.; Fulton, Donna; Ni= colay, Christi; jalexander@gibbs-bruns.com; Allen, Phillip K.; Noske, Linda= ; Perrino, Dave; Black, Don; Frank, Robert; Miller, Stephanie; Tycholiz, Ba= rry; Thome, Jennifer; Belden, Tim; Swerzbin, Mike; Driscoll, Michael M.; Mo= tley, Matt; Badeer, Robert; Scholtes, Diana; Crandall, Sean; Mallory, Chris= ; Richter, Jeff; Alonso, Tom; Fischer, Mark; Platter, Phillip; Carla Hoffma= n/PDX/ECT@ECT; Calger, Christopher F.; Etringer, Michael; Hall, Steve C.; Y= oder, Christian; Heizenrader, Tim; Swain, Steve; Mainzer, Elliot; Williams = III, Bill; Thomas, Jake; Rawson, Lester; Wolfe, Greg; gwolfe@enron.com; All= en, Phillip K.; Kaufman, Paul; sscott3@enron.com; Pharms, Melinda Subject:=09Summary- Judge's Recommendation re Retroactive Refunds Commenting on his general perception of the settlement conference, the Chie= f Judge, in his down home manner, did not miss the opportunity to say that = "you can take a horse to water but you can't make him drink." Below is a C= liff Notes version of the Judge's report and recommendation issued at 4:49 = PM today. Attached is the complete work. =20 The Judge opined that very large refunds would be due- "While the amount of= such refunds is not $8.9 billion as claimed by the State of California, th= ey do amount to hundreds of millions of dollars, probably more than a billi= on dollars in an aggregate sum. ?At the same time, while there are vast su= ms due for overcharges, there are even larger amounts owed to energy seller= s by the CAISO, the investor owned utilities, and the State of California. = Can a cash refund be required where a much larger amount is due the seller= ? The Chief Judge thinks not." Another notable quote: "?it is the opinio= n of the Chief Judge that the amount claimed by the State of California has= not and cannot be substantiated." =20 The Judge noted that he submitted a proposal of his own on July 5, which wa= s summarily rejected by the State of California, and that the five separate= offers of the various industry groups to settle with California were also = rejected.=20 =20 Refund Effective Date- Refund effective date of October 2, 2000, for sales = in the spot markets of the CAISO and the Cal PX. The Chief Judge's recomme= ndations do not go beyond that date. "Spot market" sales are "sales that a= re 24 hours or less and that are entered into the day of or day prior to de= livery."=20 Evidentiary Hearing- "The differences between what the State of California = believes the buyers in the California markets are owed in refunds and what = the sellers in the California market believe should be refunded raise mater= ial issues of fact. The appropriate numbers to calculate potential refunds = involve factual disputes. Thus, the Chief Judge recommends that a trial-ty= pe, evidentiary hearing be ordered limited to a factual record to apply to = the methodology set forth below. Because of the urgent need for an answer = to the refund issues that hearing should be on a 60-day fast track schedule= . It is important that a single methodology be adopted for calculating pot= ential refunds in this proceeding. However, such a methodology may not be = appropriate for all sellers in the CAISO's and Cal PX's spot markets in an = after-the-fact refund calculation. In any event, sellers not using the m= ethodology should bear the burden of demonstrating that their costs exceede= d the results of the methodology recommended herein over the entire refund = period." Methodology- The Chief Judge recommends that the methodology set forth in t= he June 19th Order be used with the modifications discussed below in order = to calculate any potential refunds that may be due to customers in the CAIS= O's and Cal PX's spot energy and ancillary service markets for the period O= ctober 2, 2000 through May 28, 2001. =20 Heat Rate- The actual heat rates, rather than hypothetical heat rates (asso= ciated with recreating the must-bid requirement of the June 19th Order) pro= vide the first step in calculating the cost of the marginal unit. Gas Cost- The gas costs associated with the marginal unit should be based = upon a daily spot gas price. "In the event that the marginal unit is locat= ed in NP15 (North of Path 15), the daily spot gas price for PG&E Citygate a= nd Malin should be averaged with the resulting gas price multiplied by the = marginal unit's heat rate to calculate a clearing price for that hour. If = the marginal unit is located in SP15 (South of Path 15), the daily spot gas= price for Southern California Gas large packages should be multiplied by t= he marginal unit's heat rate to calculate a clearing price for that hour. = The daily spot gas prices should be for the "midpoint" as published in Fina= ncial Times Energy's "Gas Daily" publication for the aforementioned deliver= y points. The last published gas prices should be used in calculating the = refund price for the days that Gas Daily is not published (weekends and hol= idays)."=20 O&M Adder- An adder of $6/MWh for O&M should also be included with the cal= culated market clearing price. =20 Emissions Costs- Demonstrable emission costs should be excluded from the ma= rket clearing price and treated as an additional expense that sellers may s= ubtract from their respective refund calculation. Credit Adder- The 10 percent adder should be included in the market clearin= g price for all transactions that occurred after January 5, 2001 when PG&E = and SoCal Edison were deemed no longer creditworthy. Ancillary Services- Consistent with the June 19th Order, ancillary service= prices would be capped at the market clearing price established in the rea= l-time imbalance energy market. Adjustment bids would also be treated the = same as set forth in the June 19th Order.=20 Maximum Price for Non-Emergency Hours- Somewhat unclear. The Chief Judge r= ecommends that for purposes of recreating a competitive market for calculat= ing refunds, the refund methodology should deviate from the 85% non-emergen= cy requirement of the June 19th Order. To measure the amount that actual p= rices may have exceeded the refund price, every hour should be recalculated= . Offsets- "Recalculating the hourly competitive price for purposes of a ref= und calculation would also permit the Cal PX and CAISO to resettle all char= ges for the refund period. Amounts owed to sellers and outstanding amounts= due from buyers would be recalculated. Any refunds could then be offset a= gainst accurate amounts receivable without sellers netting out any of their= purchases from the CAISO and Cal PX during the refund period." Interest- Interest should not be charged against any refund amounts unless= the refund amount exceeds the amounts that are past due to the seller.
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