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-----Original Message----- From: Rodriquez, Andy=20 Sent: Thursday, October 18, 2001 4:46 PM To: Black, Tamara Jae; '/o=3DENRON/ou=3DNA/cn=3DRecipients/cn=3Dnotesaddr/c= n=3Da478079f-55e1f3b0-862566fa-612229'; Abler, William; Aggarwal, Anubhav; = Allen, Diana; Arora, Harry; Bailey, Debra; Ballato, Russell; Ballinger, Ted= ; Baughman Jr., Don; Benchluch, Moises; Benjelloun, Hicham; Benson, Robert;= Bentley, Corry; Blaine, Jay; Bolt, Laurel; Broderick, Paul J.; Broussard, = Richard; Burnett, Lisa; Campbell, Larry F.; Capasso, Joe; Carson, Mike; Che= n, Alan; Choate, Jason; Cline, Kevin; Collins, Dustin; Comeaux, Keith; Coul= ter, Kayne; Davis, Mark Dana; Day, Smith L.; Dean, Clint; Decook, Todd; Eme= sih, Gerald; Errigo, Joe; Forney, John M.; Freije, William; Garcia, Miguel = L.; Gilbert, Gerald; Gilbert-smith, Doug; Giron, Gustavo; Greer, Andrew; Gu= aly, Jaime; Guerra, Claudia; Gulmeden, Utku; Gupta, Gautam; Ha, Amie; Hanse= , Patrick; Hernandez, Juan; Imai, Rika; Ingram, David; Jenkins IV, Daniel; = Kaniss, Jason; King, Jeff; Kinser, John; Larkworthy, Carrie; Laurent, Dean;= Laverell, Justin; Lenartowicz, Chris; Lorenz, Matt; Lotz, Gretchen; Lowell= , Thomas; Mack, Iris; Mahajan, Ashish; Makkai, Peter; Marquez, Mauricio; Ma= skell, David; May, Tom; McElreath, Alexander; Miller, Jeffrey; Oh, Seung-Ta= ek; Olinde Jr., Steve; Pace, Andy; Padron, Juan; Pan, Steve; Philip, Willis= ; Podurgiel, Laura; Poppa, John D.; Presto, Kevin M.; Quenet, Joe; Rawal, P= unit; Rogers, Benjamin; Rust, Bill; Ryan, David; Saibi, Eric; Schiavone, Pa= ul; Schneider, Bryce; Seely, Michael; Serio, Erik; Shoemake, Lisa; Simpson,= Erik; Stalford, Robert; Stepenovitch, Joe; Sturm, Fletcher J.; Symms, Mark= ; Tamma, Ramanarao; Thomas, Paul D.; Trejo, Reese; Valdes, Maria; Vernon, C= layton; Wang, Steve; Williams, Ryan; Willis, Cory; Zipperer, Mike; Baughman= , Edward D.; Clynes, Terri; Dalton III, Oscar; Kelly, Mike E.; Sewell, Doug= ; Valderrama, Larry; Walton, Steve; Roan, Michael; Perrino, Dave; Maurer, L= uiz; Hueter, Barbara A.; Landwehr, Susan M.; Hoatson, Tom; Novosel, Sarah; = Nicolay, Christi L.; Yeung, Charles Subject: RE: RTO Week -- Summary of Standards and Practices Panel RTO Week <?xml:namespace prefix =3D o ns =3D "urn:schemas-microsoft-com:office:offi= ce" /< Day 4 - October 18, 2001 Afternoon Session =20 Standardizing Markets, Business, and Other Practices=20 Panelists for this discussion were: Sarah Barpoulis, PG&E National Energy = Group; William P. Boswell, GISB; Bill Burkes (substituting for David J. Chr= istiano), City Utilities of Springfield, Missouri; David N. Cook, NERC Gene= ral Counsel; Michael Kormos PJM Interconnection; LeRoy Koppendrayer, Minnes= ota Public Utilities Commission; and Marty Mennes, Florida Power & Light Co= mpany. =20 General Observations =20 The Commissioners were all present the majority of the time (Massey left la= te in the afternoon). FERC Staff was active in the discussion; however, t= he commissioners were very active as well, asking perhaps as much as 70% of= all questions. There was a general consensus that standards were needed; = much discussion focused simply on how much and by who. The Commission seeme= d very interested in leaning what they needed to do to move the industry fo= rward and how far they needed to go. Panelists urged the need to mover for= ward as quickly as possible, but both they and FERC seemed to recognize tha= t some of the issues regarding standardized market design and such needed t= o be addressed before RTOs could really begin to move forward. There was d= iscussion on identifying which industry group (NERC or GISB) would take the= reins in the future. On an interesting tangential note, there was noticea= ble conflict between NERC and GISB, with veiled insults between the two org= anizations somewhat common during the discussions.=20 =20 FERC Deliverables A great deal of the discussions focused on identifying what the industry ne= eded from the Commission. Staffers probed all panelists to find what they = felt was critical. =20 The first major topic was "How many RTOs? What is their scope?" All panel= ists seemed to agree that this question needed to be answered immediately b= y FERC, in strong definitive language. N o one offered any specific langua= ge, but seemed to be urging FERC to issue a formal statement. The next topic was, "What will be standard market design?" Panelists varie= d on this, but most felt strong guidance from FERC is urgent. Some urged f= or one mandatory design for North America, one supported a set of rigid sta= ndard designs, one supported a single design with requests for exceptions (= followed by an in-depth review process), and one seemed to prefer the curre= nt situation. The commission in general seemed to be very interested in understanding wha= t the industry needed to move forward. They continually visited this topic= throughout their discussions, asking questions like, "Do we need to issue = a Mega-Order that addresses all these issues?" and, "How much detail do you= need us to provide?" General feel from the panelsists seemed to be they = wanted strong leadership in this areas. Kormos and Burkes went so far as t= o say FERC should "Mandate as much as they felt comfortable - and then go a= little further." Others seemed to be a little worried about this idea, bu= t in general did not oppose the concept, citing only general warnings and t= he need for cautious investigation. =20 One item of interest: Wood referred to the filing made by the Electronic Sc= heduling Collaborative and specifically asked if the items identified in th= e "RTO Design and RTO Implementation" section would address many of the que= stions and uncertainty facing the industry with regard to RTO design. Korm= os indicated that clear and specific answers to these questions specifying = a course of action would go a long way toward guiding the industry. The se= ction to which Wood referred was one that I wrote, and asked the following = questions: ? Congestion Management - When Operational Security Violations occu= r, how is the system to be stabilized in a fair and equitable manner that i= s nonetheless efficient? Will LMP based systems be standard, or will there= be others that must be accommodated? ? Transmission Service - Are transmission services required to sch= edule ("covered" schedules only), or are they risk management tools protect= ing from congestion charges (both "covered" and "uncovered" schedules are a= llowed)?=20 ? Loop Flows - Are contract-path based or flow-based transmission = services appropriate? If contract-path based, how are parallel path issues= to be addressed? ? Grandfathered Transmission Service - Should contracts existing pr= ior to RTO development be transferred, or is there an equitable way to reti= re those contracts? Are there other solutions? ? Energy Imbalance Markets - How are imbalance markets to function?= Will they serve as real-time energy markets (support unbalanced schedules)= , be limited to supplying needs of imbalance service (require balanced sche= dules), or will they be required at all? ? Ancillary Services - Will ancillary service markets be developed = in standard ways? Will entities be required to actually schedule ancillary= services (required to schedule), or will they be treated primarily as fina= ncial instruments (protecting against real-time POLR charges)? ? Losses - Can we utilize the imbalance markets to support losses? = Can we create specific loss standards that facilitate the scheduling proce= ss, or must we support methods that are currently in tariffs, but technical= ly unwieldy? ? Non-Jurisdictionals - How are non-jurisdictionals to be integrate= d into the new world? Should systems be designed with the assumption that = non-jurisdictional will be part of an RTO? Or should they be designed to t= reat each NJE as a separate entity? Hopefully, FERC will use this section as a template to answer these critica= l questions in an assertive manner, and give some solid direction in which = to move. Kormos emphasized the need for concrete answers to these questions= , pointing out that vague answers (i.e., "do congestion management") will t= ake a year or two to resolve, but specific answers (i.e., "LMP with financi= al hedging instruments") will take only months. The Commission asked Mike = about moving forward, and he told them that effectively, it was impossible = to move forward with implementation without getting these issues addressed. Now for a funny point - One of the commissioners (I think Breathitt) refer= red to some concerns expressed in the Northwest that their high concentrati= on of hydro power makes LMP inefficient for the Northwest. Kormos flat out= said, "My profession is understanding how power systems work, and I don't = believe that that statement is true." He then backpedaled a bit and said t= hat it would need more study, but he stood by his statement that the assert= ion by the Northwest interests was false. NERC and GISB A great deal of discussion focused around the need for a single standard-se= tting organization. Massey went so far as to ask, "Are we looking at a bea= uty contest between NERC and GISB?" Cook and Boswell then went into severa= l short polite jabs at each other's organizations. Other participants cont= inually reiterated the need for ONE, INDEPENDENT organization. Interesting= ly, Boswell was very emphatic about the established trust and respect in GI= SB, while Cook preferred to only talk about the "new" structure of NERC and= did not focus on its history. Brownell offered some not-too-subtle passive support of GISB by pointedly a= sking both Cook and Boswell if they lobbied political positions (i.e., were= they not only an organization but also a stakeholder?). GISB was easily a= ble to say they were not, but NERC of course had to admit to their romancin= g of Congress and the Bush administration for reliability legislation. Poin= t, Brownell. Mennes acted as somewhat of a supporter for NERC, playing Dave Cook's yes-m= an. He probably did them a little bit of harm by pointing to NERC's suppos= ed "successes," such as TLR and E-Tag. If staffers have tenure, they will = likely remember that these "successes" have not been so successful, resulti= ng in several filings and interventions. We may also wish to file comments= in specific objection to these claims, to refresh their memory and to show= the pretty picture Marty painted was in fact a fiction. There was a little discussion about splitting reliability and market issues= , but general consensus was that I could not be done. There was also some = talk of folding NERC under GISB/EISB. The arguments began winding down after a some time, and Boswell strongly ur= ged the Commission to speak to industry executives and advocacy group leade= rship to see whether NERC or GISB should lead the industry forward. NERC s= omewhat less enthusiastically supported this position. In general, I would= say it was a close fight but GISB came out more on top. Let me know if you have any questions. Andy Rodriquez Regulatory Affairs - Enron Corp. andy.rodriquez@enron.com 713-345-3771=20
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