Summary of Commission Meeting

At the October 24, 2001, FERC Sunshine meeting, the following items were di=
scussed:

Kern River Firm Customers' Rehearing Request Denied (C-6, C-8 on agenda):

Called by Linda Breathitt, these are two Kern River expansion applications =
[CA. Action Project, CP01-69; 2002 Expansion, CP01-106] that have received =
certificates. The draft orders deny rehearing requests by Firm Customers w=
ho charge that additions will cause further pro rata allocations at Wheele=
r Ridge. The draft order states that the benefits of the project outweigh =
"any potential adverse impact to existing customers?" and that "the solutio=
n to the problem of pro rata curtailments at Wheeler Ridge lies not with in=
terstate pipelines, but with resolving the problems of take-away capacity o=
n SoCalGas?." Hence, the orders reason that Kern River has satisfied its o=
bligations to its customers, and the current lack of intrastate capacity "c=
annot be laid at [Kern River's] door."

Breathitt is filing concurrences to these two orders to highlight the impor=
tant issue of FERC's response to intervener allegations of insufficient tak=
e-away capacity related to interstate expansions. Though Breathitt doesn't=
dissent from the rehearing denial, she wants to underscore the importance =
of the Commissions' acknowledgement of the role that possible degradation o=
f existing rights plays in the determination of the public need and necessi=
ty for pipeline expansions. She also states that she is "uneasy" about FER=
C's "strident policies" in favor of adding pipeline facilities despite poss=
ible inefficiencies and constraints, and she reiterates that FERC's mandate=
under the NGA goes beyond making sure pipeline gets into the ground. She =
notes that the Commission will revisit the take-away capacity issue in anot=
her Kern River expansion application, CP01-422 [2003 Expansion Project].

Brownell Calls for Development of Regional State Relations Panels under Aus=
pice of "Electricity Market Design and Structure" NOPR, RM01-12 (E-5 on age=
nda)

Though the issuance of a NOPR is not apparently imminent, under this discu=
ssion item Nora Brownell announced that she has sent a memo to the other th=
ree Commissioners recommending the development of some internal structure t=
o coordinate communications between FERC and state commissions. The need f=
or such coordination emerged from obvious frustration expressed by state co=
mmissioners during RTO Week. To get this process going, Commissioner Brown=
ell asked staff to pursue a structure, perhaps a type of regional panel, wi=
th the mission to strengthen federal/sate relationships. Considering the m=
agnitude of RTO development, FERC likely will need to have dedicated staff =
work on this. Chairman Wood requested that Dan Larcamp, Director of OMTR, =
bring a proposal to the Commission at the next meeting on how to implement =
a structure. While all three other Commissioners supported Brownell's prop=
osal, Commissioner Massey noted that there's already been seven years of "p=
rocess" and input on RTO formation and that any new structure should be dev=
eloped "in a way that gets us to an endgame" concretely and clearly.

Western Infrastructure Reports Lay Baseline for FERC Adequacy Conference in=
Seattle

Staff presented multiple detailed reports on data and background material g=
athered to lay the groundwork for discussions at next month's Western Infra=
structure Adequacy Conference in Seattle on November 2 [similar conferences=
will be held regionally across the country]. The conference is a FERC "=
fact-finding mission" which will seek to answer three primary questions:
(1)=09=09Is the current energy infrastructure in the West adequate?
(2)=09What are the infrastructure needs for the region?
(3)=09What factors inhibit investment in the development of adequate energy=
infrastructure?

While the presentations seem to focus primarily on electric transmission, t=
he conference will cover all energy delivery systems. The overriding quest=
ion on all fronts is what needs to be done, and who needs to do it. The po=
werpoint presentations made by Staff are already available on FERC's websit=
e at <http://www.ferc.gov/calendar/commissionmeetings/discussion_papers.htm=
<
=20
"RTO Week" Update=20

Staff updated the Commissioners and public on the week of RTO panels held a=
t FERC last week. Staff is preparing and organizing a document outlining "=
what Staff heard," which will be posted on FERC's website this week. The d=
ocument is intended to give focus to reply comments from stakeholders. Sta=
ff also suggested that there may be a need to hold smaller, more focused St=
aff sessions to "dig deeper?." According to Staff, while there seemed to b=
e some consensus at the 10.000 mile high level, more specific issues emerge=
d which may require further discussion.

Lengthy Updates and Discussion on Two RTO Mediations (Southeast, Northeast)=
, Midwest RTO Progress

In the Northeast and Southeast RTO mediation cases, Staff and the mediating=
Judges briefed the Commissioners on where the ordered mediations left off,=
what proposals and options are now on the table, and what next steps may b=
e necessary. These mediation reports will be available online (by end of w=
eek). What is not clear is when the Commission is going to vote on RTOs - =
there were no votes at the meeting, only discussion.

In the Midwest, both MISO and ARTO are ready for operations, and MISO and S=
PP are also prepared to merge. While Commissioners discussed specifics of =
all the Midwest proposals, again no vote was taken or any indication given =
as to when a vote may occur.

ETS Draft Orders Issued:

?=09Northern Natural, RP00-223-005: Northern's Limited Firm Transportation=
["LFT"] tariff sheets were approved, including two additional LFT sheets c=
oncerning the Carlton surcharge.
?=09Calypso, CP01-444-000: Letters issued to Secretary of State, Secretary=
of Defense requesting review of draft Presidential Permit for Calypso to c=
onstruct, own and operate pipeline facilities at the boundary of the U.S. E=
xclusive Economic Zone [EEZ] and the Bahamas EEZ.