FERC Presentation on California/West Wholesale Market

FYI.
---------------------- Forwarded by Jeff Dasovich/SFO/EES on 08/30/2000 06:51
PM ---------------------------

"Mary Hain" <Mary.Hain@enron.com< on 08/29/2000 08:11:22 PM

To: James D Steffes/HOU/EES@EES, "David W Delainey"
<David.W.Delainey@enron.com<, "John J Lavorato" <John.J.Lavorato@enron.com<,
"Christopher F Calger" <Christopher.F.Calger@enron.com<, "Tim Belden"
<Tim.Belden@enron.com<, "Joe Hartsoe" <Joe.Hartsoe@enron.com<, "Paul Kaufman"
<Paul.Kaufman@enron.com<, "Sarah Novosel" <Sarah.Novosel@enron.com<, "David
Parquet" <David.Parquet@enron.com<, Jeff Dasovich/SFO/EES@EES, Mona L
Petrochko/SFO/EES@EES, "Kevin M Presto" <Kevin.M.Presto@enron.com<, Richard
Shapiro/HOU/EES@EES, "Steve Kean" <Steve.Kean@enron.com<, "Chris H Foster"
<Chris.H.Foster@enron.com<, "Robert Badeer" <Robert.Badeer@enron.com<, "Jeff
Richter" <Jeff.Richter@enron.com<, Susan J Mara/SFO/EES@EES
cc: "Christi Nicolay" <Christi.Nicolay@enron.com<

Subject: FERC Presentation on California/West Wholesale Market

Last Thursday, I made the first attached presentation to the FERC Staff at the
power marketer's meeting on the FERC's investigation of the wholesale market
in
the West (and in particular California). Ellen Wolf (of Tabors Caramanis)
and I
created this presentation building on previous presentations by Tim Belden and
Dave Parquet. In the presentation and the meeting we made the following
points:
There isn't much FERC can do because the cause of the price spikes is not
in
the wholesale market. We discouraged FERC from taking any action that
would
hurt the vibrant wholesale market in the California and the rest of the
West
as well.
High prices logically resulted from scarcity and if the Commission does
anything it should (1) investigate whether market power was being exercised
by any party and, (2) if necessary to protect the market (while still
incenting needed generation) establish a price cap at a scarcity rent level
equal to the price at which loads were willing to interrupt.
The IOUs have not properly prepared for the risk of high prices caused by
scarcity. They have failed to hedge and have underscheduled their load,
therefore having to fill a large percentage of their load at ISO real time
prices. My analogy was that this was like day trading your retirement fund
as an asset allocation scheme.
The market would function better if more information was provided to the
market.
The Commission should do whatever it can to incent participation by load.
To see the presentation, detach, save, and view in Powerpoint. When you do,
you
will find there are many "hidden" slides that were not part of the oral
presentation but were provided to Staff in hard copy for additional
information.

According to the head of the investigation (Scott Miller), the staff got alot
more out of this meeting than Staff's previous meetings with the IOUs and the
generators. Based on the numerous phone calls I've been getting, the Staff is
looking into the data we provided.

I have also attached a revised version of the presentation that Tim sent to
Scott Miller on Friday. Tim's version conveys the same message but takes a
different approach to conveying the message. On Friday, Tim talked to Scott
and
answered some additional questions. Tim said that Enron is in favor of
eliminating the mandatory PX buying requirement and would like the IOUs to be
able to buy from Enron Online. He also explained more fully the existence of
scarcity .
(See attached file: August 24 presentation to FERC1.ppt)(See attached file:
FERC Presentation.ppt)

- August 24 presentation to FERC1.ppt
- FERC Presentation.ppt