Recent Info on QF Pricing-related Issues

----- Forwarded by Jeff Dasovich/NA/Enron on 10/11/2000 05:27 PM -----

Jeff Dasovich
Sent by: Jeff Dasovich
10/10/2000 06:41 PM

To: Michael Etringer/HOU/ECT@ECT
cc:
Subject: Recent Info on QF Pricing-related Issues

As a follow-up to our call. Here is some additional information regarding QF
pricing issues.

QFs who voluntarily switched to PX pricing have been getting paid full (day
ahead) PX prices (and there seem to be a couple of thousand MWs that have
switched). The concern on the part of the QFs is that the Commission's
ultimate decision on PX-based QF prices will force the QFs that have switched
to "refund" some of the payments they've received (e.g., the Commission
adopts a "PX minus" policy).
The majority of QFs are happy with the judge's proposed decision pending
before the PUC. QFs in remote locations are not happy with the decision
since they will take a big GMM hit).
As we discussed, last week the Commission strongly rejected Edison's
emergency motion regarding the gas price piece of the QF pricing formula.
Recall also that a couple of months ago Edison filed a motion with the
Commission to alter the "factors" used in the PX pricing formula, as well as
the gas price indeces. (See previous note from me and Bruno.) That
proceeding continues. The response to Edison's motion is due this Friday.
Recently, the judge issued a ruling telling folks not to address the "factor"
issue (apparently she's heard enough), but to soleley address the gas indeces
issue. Edison is likely to re-argue the points that it made previously in
its emergency motion.
The proceeding is likely to last through the Fall; hard to see a final
decision coming before year end.
In the meantime, the QFs are angling for a resolution at the Legislature as
part of a bigger deal to "resolve" the price spike issue in California.
For their part, the QFs want as part of a legilsatively-produced compromise:
1) maintain SRAC price methodology for 3 years; 2) keep whole those QFs who
voluntarily switched to PX pricing (i.e., "no PX minus" from the PUC); 3)
continue to permit, but limit, QF switching from SRAC to PX; and 4) create a
real retail market in California.
From the QFs perspective, Edison is angling to bifurcate QF pricing, with
gas-fired QFs getting power prices tied to gas prices, and renewables getting
prices that are de-linked from gas prices (they'll likely change their minds
when gas prices fall, however).

That's the latest from this end. If you've got any questions, don't hesitate
to call. 415.782.7822.

Best,
Jeff