Re: Comments on Wholesale Issues

Given that the hearing is Friday, we'll need to decide pretty quickly.
Might be useful to discuss on a call first thing tomorrow AM? We'll want to
assure that our message is tracks consistently with message J. Skilling will
be delivering this week and with other messages we'llbe delivering (e.g.,
FERC inquiry). Also, attached are some messages that Jim distributed
following a focus group conducted in Orange County.

Mona L Petrochko
09/05/2000 03:14 PM
To: Mona L Petrochko/SFO/EES@EES
cc: James D Steffes/HOU/EES@EES, Harry Kingerski/HOU/EES@EES, West GA, Mary
Hain@Enron, Richard Shapiro/HOU/EES@EES, Karen Denne@Enron, Peggy
Mahoney/HOU/EES@EES, Mark Palmer/Corp/Enron@ENRON, Sarah Novasel@Enron, Joe
Hartsoe@Enron, Tim Belden@ECT
Subject: Re: Comments on Wholesale Issues

I spoke w/ Bill Julian, Cmmr. Wood's Advisor, about the hearing that is being
held on Friday, September 8 in San Diego. There will be a morning panel and
an afternoon panel. The morning panel will discuss "pricing
behavior/patterns" and the afternoon panel will provide
explanations/refutations of the morning presentations. I'm not sure yet who
will be speaking, but I have inquired from Steve Weisman, who appears to be
heading this effort.

Do we want an Enron representative on the panel? Who would be the best
witness?

While this investigation has the opportunity to turn into a witch hunt, I am
also concerned about the record being developed in such a way as to lead to
the conclusion that Wood, or the legislature, have in mind. This could mean
an attempt by the Commission to assert more regulation in the market, assert
more state (vs. federal) jurisdiction, build a case for collapsing the ISO/PX
into one organization, or hang blame on generators and scheduling
coordinators.

I think Tim and Mary's presentation would be very effective in showing the
other (real) side of the story.

The following is an exerpt from the pre-hearing conference transcript held on
8/28 from Cmmr Wood:

27 I am not going to sit here and say that it's not

28 an appropriate time to assign blame. If there has been

1 wrongdoing, we will assign blame. We will ferret out the

2 wrongdoers, and we will bring them to account to the

3 greatest of our ability.

4 But I think that, as Judge Wetzell pointed out,

5 the scope of this proceeding is quite broad. We are not

6 only addressing the immediate issues, but we are also

7 addressing the underlying problems of this market which

8 clearly is not functioning, which clearly is broken.

9 We have to look at problems with the structure of

10 the market, we have to look at problems with the behavior of

11 market participants; and getting beyond the wholesale

12 market, we have to look at the interaction with the retail

13 market because, after all, that's where the pain actually

14 occurs. That's what consumers themselves face.

15 There are probably implications for the long-term

16 viability of California's utilities that are connected with

17 this proceeding, and we have to get into that. And for that

18 reason, as well as the fact that the other utilities in

19 California are going to be coming out of the rate freeze at

20 some point in the future, we have to consider the statewide

21 implications of what we're doing.

22 So this is not just the San Diego proceeding,

23 although we are focused on events here in the San Diego

24 area.

Mona L Petrochko
08/30/2000 03:51 PM
To: James D Steffes/HOU/EES@EES, Harry Kingerski/HOU/EES@EES, West GA, Mary
Hain@Enron, Richard Shapiro/HOU/EES@EES, Karen Denne@Enron, Peggy
Mahoney/HOU/EES@EES, Mark Palmer/Corp/Enron@ENRON
cc:
Subject: Comments on Wholesale Issues

Wood, the Assigned Commissioner in the investigation of wholesale electric
markets, has asked for comments on the following questions by Friday,
September 8. We are an individual party to the case as well as a member of
ARM and WPTF.

This would be a good opportunity to get our version of what is wrong on the
record. The presentation that Tim and Mary put together for FERC will be
helpful in answering these questions. I will take a first cut at drafting
response to be circulated by Tuesday of next week. We can take liberties in
providing responses that go beyond the question asked.

Market Structure:

Are the market conditions currently being experienced (price spikes and suppy
shortages) inevitable under the current market structure?
Do generators and/or scheduling coordinators have market power?
Is there a need to mitigate such market power?
Which market participants or other entities are responsible for reliability
planning?
Do California regulatory agencies have adequate jurisdiction to ensure
reasonable prices and reliable service?
Do the structures and governance of the Cal ISO and PX adequately support the
goals of providing reasonably priced and reliable service?

Market Rules:

Are there rules which allow or encourage unacceptable market outcomes?
What roles, if any, do underscheduling in forward markets, out of state
transfers, uniform PX auction prices and ISO real-time and out-of-market
purchases play in the outcomes being experienced?

Behavior of Market Participants:

What is working and not working in terms of price, reliability, information
exchange, resource distribution, equity, service quality, and types of
planned generation?