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Enron Mail |
Return-path: <VKaminski@aol.com< From: VKaminski@aol.com Full-name: VKaminski Message-ID: <122.75b7039.29232af6@aol.com< Date: Tue, 13 Nov 2001 21:03:34 EST Subject: Fwd: FW: To: VKaminski@aol.com MIME-Version: 1.0 Content-Type: multipart/mixed; boundary="part2_9b.1f087330.29232af6_boundary" X-Mailer: AOL 6.0 for Windows US sub 10539 Return-path: <VKaminski@aol.com< From: VKaminski@aol.com Full-name: VKaminski Message-ID: <170.3bfe18a.291f8941@aol.com< Date: Sun, 11 Nov 2001 02:56:49 EST Subject: Fwd: FW: To: VKaminski@aol.com MIME-Version: 1.0 Content-Type: multipart/mixed; boundary="part3_9b.1f087330.291f8941_boundary" X-Mailer: AOL 6.0 for Windows US sub 10539 Content-Transfer-Encoding: quoted-printable Return-Path: <Vince.J.Kaminski@enron.com< Received: from rly-xf05.mx.aol.com (rly-xf05.mail.aol.com [172.20.105.229]) by air-xf01.mail.aol.com (v81.9) with ESMTP id MAILINXF110-1019180521; Fri, 19 Oct 2001 18:05:21 -0400 Received: from postmaster.enron.com (outbound5.enron.com [192.152.140.9]) by rly-xf05.mx.aol.com (v80.21) with ESMTP id MAILRELAYINXF57-1019180459; Fri, 19 Oct 2001 18:04:59 -0400 Received: from corp.enron.com (nahou-msmsw03p.corp.enron.com [192.168.110.110]) by postmaster.enron.com (8.10.1/8.10.1/external_corp-1.08) with ESMTP id f9JM4w304754 for <vkaminski@aol.com<; Fri, 19 Oct 2001 17:04:58 -0500 (CDT) Received: from nahou-mscnx04p.corp.enron.com (unverified) by corp.enron.com (Content Technologies SMTPRS 4.2.1) with SMTP id <T56b254f096c0a86e6e7c0@corp.enron.com< for <vkaminski@aol.com<; Fri, 19 Oct 2001 17:04:58 -0500 Received: from NAHOU-MSMBX03V.corp.enron.com ([192.168.110.40]) by nahou-mscnx04p.corp.enron.com with Microsoft SMTPSVC(5.0.2195.2966); Fri, 19 Oct 2001 17:04:58 -0500 X-MimeOLE: Produced By Microsoft Exchange V6.0.4712.0 content-class: urn:content-classes:message MIME-Version: 1.0 Content-Type: text/plain; charset="iso-8859-1" Subject: FW: Date: Fri, 19 Oct 2001 16:34:52 -0500 Message-ID: <31738B46B7BD864080808A19977D9F757ABD99@NAHOU-MSMBX03V.corp.enron.com< X-MS-Has-Attach: X-MS-TNEF-Correlator: Thread-Topic: Thread-Index: AcFY5W8uV8avQMTXEdWxIgBQi+MJ2QAAEEeg From: "Kaminski, Vince J" <Vince.J.Kaminski@ENRON.com< To: "Lin, Martin" <Martin.Lin@ENRON.com< Cc: <vkaminski@aol.com< X-OriginalArrivalTime: 19 Oct 2001 22:04:58.0864 (UTC) FILETIME=[17D6F700:01C158EA] X-Mailer: Unknown (No Version) Martin, Lance What do you think? Vince < -----Original Message----- < From: "Frank A. Wolak" <wolak@zia.Stanford.EDU<@ENRON < Sent: Friday, October 19, 2001 4:28 PM < To: Kaminski, Vince J < Subject: < < Vince, < < I've been hearing rumors that Enron has decided to endorse < the nodal pricing model as implemented in PJM. < I just wanted to warn you that I'm not sure < this is in Enron's long-term interest at all. Let me explain < why. Feel free to give me a call if you'd like to talk < more about this. < < First, let me say that I firmly believe in locational pricing < and specifically pricing congestion. However, the way that PJM < implements nodal pricing is to eliminate as much price volatility < and reduce the transparency of the market. Specifically, the < PJM tariff gives the ISO the ability to mitigate to cost plus a < %10 adder the bids of any market participant that the ISO deems < is out of merit in one of the three zones in region. (The fact < that a nodal market is talking about zones should give you cause for < alarm.) < Then the ISO takes this mitigated bid and re-runs its price-setting < software to compute new nodal prices. The way I have (somewhat < unfairly) decribed this price-setting process is that the < PJM ISO decides what prices it would like < for a given day and mitigates bids until it gets them. This is not < a transparent market, nor one where it makes any sense to buy < the risk management services that Enron provides. The < only price volatility you have to worry about in the PJM market is < that kind that comes about if they need imports into their control < area < to meet demand. Under these circumstances, you need to pay the < imports whatever is necessary to get them to come to your market. < < However, bear in mind FERC's desire to make a large RTO on the < East Coast. This will effectively mean little imports < to the East Coast RTO, so all bids can be mitigated at < the discretion of the ISO. Paying market-clearing prices to < cost-of-service < mitigated bids is just paying too much to eliminate price volatility. < It effectively kills off the development of risk management at < the wholesale and retail level. Power marketing becomes much less < profitable because retailers know you can always buy at cost-mitigated < prices. < < In short, the PJM model is not market. It is just an alternative < form of regulation that is politically attractive because it reduces < price volatility, but it is not good for consumers or traders because < they just < get a higher cost form of regulation than traditional cost-of-service < regulation. You pay market-clearing prices to cost-of-service < mitigated bids, but under regulation you could just pay < cost-of-service < prices and eliminate the infra-marginal profits to low cost < generators. < < As we discussed during our dinner, I think the two biggest sources < of benefits from re-structuring will come from getting the demand-side < involved in the market and from more efficient risk management. A < necessary condition for both of these to occur is prices that reflect < actual conditions in the market (including the extent of market power < exercised). Masking these signals dulls any incentive for market < participants to make the investment necessary to management. The PJM < model is just way to have a market in name without achieving any < significant benefits to consumers or energy traders. < < Frank ********************************************************************** This e-mail is the property of Enron Corp. and/or its relevant affiliate and may contain confidential and privileged material for the sole use of the intended recipient (s). Any review, use, distribution or disclosure by others is strictly prohibited. If you are not the intended recipient (or authorized to receive for the recipient), please contact the sender or reply to Enron Corp. at enron.messaging.administration@enron.com and delete all copies of the message. This e-mail (and any attachments hereto) are not intended to be an offer (or an acceptance) and do not create or evidence a binding and enforceable contract between Enron Corp. (or any of its affiliates) and the intended recipient or any other party, and may not be relied on by anyone as the basis of a contract by estoppel or otherwise. Thank you. **********************************************************************
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