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Enron Mail |
Here are IEP's comments on caps. It's from a draft circulated last Friday,=
=20 but just spoke with Smutney, and he said that the comments did not change= =20 substantively . Very briefly, "IEP is generally opposed to caps, but if=20 FERC's going to go with a soft cap, 1) there's a lot of clarification neede= d,=20 2) it needs to include "upward ratchet," a la Heber and 3) it must be linke= d=20 with other reforms (i.e., forward contracting, siting, retail markets,=20 etc.)." The comments do not explicitly address the level of the cap. They= =20 also call for a technical conference. Anything to add, Sue? ***************************************************************************= *** *************************************** B. Issues Concerning Implementation of the =01&Soft Cap.=018 =20 IEP has concerns about the implementation of the =01&soft cap=018 proposal.= IEP=20 has not and does not support price caps because it impedes the operation of= =20 the market and distorts price signals. Such mechanisms should have no plac= e=20 in competitive markets in the long-run. The Staff Report notes that caps d= o=20 not work. Citation; Also MSC, IEP is concerned, as are others, that the= =20 soft cap proposal will fail to attract new investments in supply or foster= =20 meaningful demand response. It is particularly problematic in terms of=20 attracting new capacity that will operate as peaker units for a limited=20 number of hours when weather-induced demand cannot be met from less expensi= ve=20 units or imports. Notwithstanding the apparent opinion of SMUD otherwise,= =20 there are demands which materialize only for a fraction of a percentage of= =20 the total hours of a year, and therefore some resources will only be=20 dispatched a short number of hours to meet that need. These resources tend= =20 to be fast ramping, less efficient units that are not designed or intended = to=20 operate as =01&baseload=018 facilities. Hence the suggestion that they =01= &just=20 operate more=018 to recover their costs is misplaced. =20 The soft cap also appears to be especially problematic to power marketers w= ho=20 make wholesale purchases for subsequent resale but who may not own the=20 underlying physical generation assets. These entities have a major role in= =20 the marketplace in terms of bringing demand and supply together and they se= ek=20 return on the risks they undertake. These entities will perceive the =01&s= oft=20 cap=018 as a =01&hard cap=018 which will chill their participation in Calif= ornia,=20 particularly when regional supplies become tight and expensive. This=20 unintended consequence must be avoided or the markets will be hobbled. =20 IEP echoes the concern articulated by the CAISO that the soft cap proposal= =20 may divert or require additional ISO resources. It will clearly compound= =20 the settlement processes at the CAISO as transactions above the soft cap wi= ll=20 require additional tracking and segregation to allow for potential=20 =01&unwinding=018 should the bids be disallowed. It will also require some= form of=20 new software to provide for potential calculation of the weighted averaged= =20 prices suggested in the November Order, presumably in 10-minute increments,= =20 to blend with the market clearing prices established in the various markets= . =20 Moreover, if that averaged price associated with bids above the cap is=20 modified often, then CAISO will be required to =01&re-run=018 settlements o= r=20 undertake subsequent settlement adjustments. It is possible that these=20 efforts=01*which are suggested as temporary measures in the November Order= =01*would=20 take away from CAISO=01,s efforts at developing solutions to longer-run pro= blems=20 in terms of software modifications/development. At first blush the details= =20 regarding implementation of the soft cap proposal are not straightforward a= s=20 currently described, and any further exploration this approach will at leas= t=20 require a =01&technical conference=018 to clarify the mechanics and to ensu= re that=20 it can be done in a reasonable manner. =20 IEP could only support the soft cap proposal if it is part of a negotiated= =20 package of inter-jurisdictional programs, and provided that it is subject t= o=20 an pre-established unidirectional escalation mechanism, or a similar one-wa= y=20 mechanism that is tied to the development of new capacity within the WSCC. = =20 The inter-jurisdictional elements must include: ? establishment of standards applicable to potential refunds based on=20 allegations of market power abuse in FERC jurisdictional markets;=20 ? definition of durable reasonableness review standards applicable to=20 wholesale purchases by the load serving utilities such that they will no=20 longer be discouraged from entering bilateral arrangements on a forward bas= is; ? establishment of a =01&road map=018 by the California Commission that del= ineates=20 a firm timeline=01*with milestones=01*for the review and resolution of reta= il=20 market issues including market-based demand responsiveness; ? establishment of a =01&road map=018 by this Commission, in consultation w= ith the=20 CAISO, that delineates a firm timeline=01*with milestones=01*for the review= and=20 resolution of implementation issues associated with the Commission=01,s=20 subsequent order in this docket as well as other outstanding proposals such= =20 as generation interconnection rules and congestion management; ? establishment of firm sunset date, not to exceed 2003, to bound the=20 duration of soft cap, and implement a unidirectional escalation mechanism,= =20 not subject to subsequent lowering, which is based either on a=20 pre-established schedule or tied to increases in installed capacity within= =20 the WSCC. =09Susan J Mara =0911/22/2000 10:21 AM =09=09 =09=09 To: James D Steffes/NA/Enron@Enron =09=09 cc: Alan Comnes/PDX/ECT@ECT, bernadette Hawkins/Corp/Enron@Enron,=20 Christopher F Calger/PDX/ECT@ECT, David Parquet/SF/ECT@ECT, Debra=20 Davidson/PDX/ECT@ECT, Dennis Benevides/HOU/EES@EES, gfergus@brobeck.com,=20 Ginger Dernehl/NA/Enron@Enron, Jeff Dasovich/NA/Enron@Enron, Jeff=20 Richter/HOU/ECT@ECT, Joe Hartsoe/Corp/Enron@Enron, Joseph=20 Alamo/NA/Enron@Enron, Jubran Whalan/HOU/EES@EES, kcurry@bracepatt.com,=20 lanai.wolfe@enron.com, Marcia A Linton/NA/Enron@Enron, Mary Hain/HOU/ECT@EC= T,=20 Maureen McVicker/NA/Enron@Enron, Mona L Petrochko/NA/Enron@Enron, Neil=20 Bresnan/HOU/EES@EES, Paul Kaufman/PDX/ECT@ECT, rcarroll@bracepatt.com,=20 Richard Shapiro/NA/Enron@Enron, Robert Badeer/HOU/ECT@ECT, Sarah=20 Novosel/Corp/Enron@Enron, Steven J Kean/NA/Enron@Enron, Tim Belden/HOU/ECT@= ECT =09=09 Subject: Re: Enron's Response Today - Key Point to Focus On I know that WPTF is supporting Hebert's approach and would suggest starting= =20 with $250 or higher with big increments every six months. WPTF is also=20 asking for clarification on what the cap applies to. I don't recall what t= he=20 comments said on refund and I haven't taken a look at the WPTF final yet. = =20 I'll let you know. I'll check on the others today. =09James D Steffes =0911/22/2000 07:30 AM =09=09 =09=09 To: Alan Comnes/PDX/ECT@ECT, bernadette Hawkins/Corp/Enron@Enron,=20 gfergus@brobeck.com, Christopher F Calger/PDX/ECT@ECT, David=20 Parquet/SF/ECT@ECT, Debra Davidson/PDX/ECT@ECT, Dennis Benevides/HOU/EES@EE= S,=20 Ginger Dernehl/NA/Enron@Enron, Jeff Dasovich/NA/Enron@Enron, Jeff=20 Richter/HOU/ECT@ECT, Joe Hartsoe/Corp/Enron@Enron, Joseph=20 Alamo/NA/Enron@Enron, Jubran Whalan/HOU/EES@EES, kcurry@bracepatt.com,=20 lanai.wolfe@enron.com, Marcia A Linton/NA/Enron@Enron, Mary Hain/HOU/ECT@EC= T,=20 Maureen McVicker/NA/Enron@Enron, Mona L Petrochko/NA/Enron@Enron, Neil=20 Bresnan/HOU/EES@EES, Paul Kaufman/PDX/ECT@ECT, rcarroll@bracepatt.com,=20 Richard Shapiro/NA/Enron@Enron, Robert Badeer/HOU/ECT@ECT, Sarah=20 Novosel/Corp/Enron@Enron, Steven J Kean/NA/Enron@Enron, Susan J=20 Mara/NA/Enron@Enron, Tim Belden/HOU/ECT@ECT, Richard Shapiro/NA/Enron@Enron =09=09 cc:=20 =09=09 Subject: Enron's Response Today - Key Point to Focus On As I've been thinking about our response today, I would like Enron to focus= =20 on making sure that the California (WSCC) markets are as good a possible fo= r=20 business over the next 15 to 24 months. Following that idea, I think that= =20 the key points are (1) clarifying/raising the soft cap and (2) reducing the= =20 burden/risk of the prospective refund period. I know that we had discussed leading off with the debate over market power = /=20 retroactive refunds, but I think that (a) FERC is not inclined to do much= =20 more on this issue, (b) FERC wants to fix the market as much as it can give= n=20 the current political realities, and © if retroactive refunds become an= =20 issue, we still have our full compliment of resources to later fight this= =20 fight. I would recommend that the pleading and Alan's testimony be modified to bri= ng=20 these issues to the top of the ticket. We should still include all of our= =20 other arguments. Finally, I want to make sure that Enron is taking the right position by=20 quietly supporting a $250/Mwh soft cap with safe harbor fixes? Sue Mara, c= an=20 you please try and find out what EPSA, IEPCA, and WPTF are going to file? = I=20 want to make sure that we are in the ball park on this issue but not gettin= g=20 too soft. Jim
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