|
|
Enron Mail |
Mime-Version: 1.0
Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Robert Hemstock X-To: Steven J Kean X-cc: X-bcc: X-Folder: \Steven_Kean_June2001_4\Notes Folders\Discussion threads X-Origin: KEAN-S X-FileName: skean.nsf ---------------------- Forwarded by Robert Hemstock/CAL/ECT on 09/01/2000 10:22 AM --------------------------- From: Robert Hemstock 09/01/2000 10:22 AM To: Richard B Sanders/HOU/ECT@ECT, Jeffrey T Hodge/HOU/ECT@ECT, Mark E Haedicke/HOU/ECT@ECT, Steven J Kean/HOU/EES@EES, Richard Shapiro/HOU/EES@EES, Aleck Dadson/TOR/ECT@ECT, Mark Palmer/Corp/Enron@ENRON, awm@blakes.com, glenn.leslie@blakes.com, dwm@blakes.com, Eric.Thode@enron.com, Robert Hemstock/CAL/ECT@ECT cc: Rob Milnthorp/CAL/ECT@ECT, Peter Keohane/CAL/ECT@ECT Subject: Re: Project Stanley - Recent Meetings with Alberta Government and TransAlta Rick Shapiro asked me to forward his response to me to the rest of the Project Stanley team. ---------------------- Forwarded by Robert Hemstock/CAL/ECT on 09/01/2000 10:20 AM --------------------------- Richard Shapiro@EES 09/01/2000 06:50 AM To: Robert Hemstock/CAL/ECT@ECT cc: Subject: Re: Project Stanley - Recent Meetings with Alberta Government and TransAlta Absent Milnthorp's concern, I believe we should participate in coalitions and issues that make business sense as this one appears to- While we need to be cognizant of Stanley, it should be business as usual... so I would participate if that were the decision we would make absent Stanley..... We did nothing wrong in Stanley and this is an issue, i.e; B.C. Hydro/powerex transmission market power that needs to be remedied. I would also ask Milnthorp to reconsider his objection to participating while we're in litigation - I think on issues like this where we have common ground that are unrelated to the litigation, we need to rise above it and work to achieve the common objective. Thanks. To: Richard B Sanders/HOU/ECT@ECT, Jeffrey T Hodge/HOU/ECT@ECT, Mark E Haedicke/HOU/ECT@ECT, Steven J Kean/HOU/EES@EES, Richard Shapiro/HOU/EES@EES, Aleck Dadson/TOR/ECT@ECT, Mark Palmer/Corp/Enron@ENRON, awm@blakes.com, glenn.leslie@blakes.com, dwm@blakes.com, Eric.Thode@enron.com cc: Rob Milnthorp/CAL/ECT@ECT, Peter Keohane/CAL/ECT@ECT Subject: Project Stanley - Recent Meetings with Alberta Government and TransAlta "Privileged and Confidential" Please note: I have not sent this memo to GPC. 1. Meeting with Alberta Department of Resource Development Rick Shapiro, Aleck Dadson, and I met with two senior officials from the Alberta Department of Resource Development last week (Larry Charach, Executive Director, Electricity and Stan Wenger, Assistant Deputy Minister, Gas & Alberta Markets) and it is our view that the ADRD is not aware of Project Stanley based on some rather awkward questions we were asked by Larry Charach relating to our views on whether Powerex has complied with the spirit of the rules in Alberta. 2. Meeting with TransAlta and Other Alberta Marketers I attended a meeting of Alberta marketers last week hosted and organized by TransAlta's trading group. TransAlta proposed the companies in attendance form a coalition whose mandate and objective would be to retain counsel (U.S. and Canadian) along with possibly other experts to assist the coalition in formulating a strategy designed to address concerns of the invited market participants with B.C. Hydro Power Supply, B.C.Hydro Grid Operations and Powerex's alleged improper use of the Network Economy Tariff provisions in the B.C. Hydro Wholesale Transmission Tariff. The attendees at the meeting included representatives from 4 of the 5 Alberta PPA Buyers, namely Enron, TransCanada Power, Engage Energy, and Enmax along with Atco Power, PanCanadian, Duke Energy, and Aquila. In addition, although Bonneville Power Administration was not in attendance it was interesting that TransAlta advised that BPA shared TransAlta's concerns and was interested in working with this group to address these concerns. At the meeting TransAlta walked the group through a specific example of a situation that occurred in May 2000 where TransAlta alleges that both it and TransCanada Power were blocked from using scheduled interruptible transmission capacity out of Alberta by B.C. Hydro Power Supply through its use of the Network Economy provisions in the B.C. Hydro Wholesale Transmission Tariff (which has a higher priority than interruptible transmission) during a period when prices were considerably higher in the Pacific Northwest than in Alberta. As a result of the interruption of TransAlta's and TransCanada's interruptible transmission reservation, transmission capacity between Alberta/BC border and BC/US border became available and was immediately acquired by B.C. Hydro Power Supply and used to support Powerex exports during these periods into the U.S. TransAlta estimates the opportunity cost of this curtailment to TransAlta was $2 million. TransAlta's frustration is no surprise to Enron Canada. I can advise that I wrote a memo to John Lavorato dated March 17, 2000 in which I reviewed Enron's concerns regarding the behavior of B.C. Hydro Power Supply and Powerex that is very similar to the allegations presented by TransAlta. The purpose of my memo to John L was to outline my initial thoughts on what Enron Canada may wish to do to attempt to stop this abuse and was focused on the idea of proceeding with a complaint to FERC that B.C. Hydro Power Supply and Powerex were exercising transmission market power. Enron Canada did not pursue this any further at the time. Among the ideas reviewed by TransAlta with the group to address and rectify the abuse it alleges exist on the transmission path between Alberta and the U.S. Pacific Northwest included: i) a complaint to ADRD and a request they become involved; ii) a complaint to the Alberta Market Surveillance Administrator; iii) a complaint to FERC; iv) a complaint to the BCUC; v) a complaint to the B.C. Government; vi) a complaint to the NEB; vii) a complaint to the Competition Bureau; and/or viii) a NAFTA complaint. With respect to TransAlta's comments relating to the Competition Bureau, they advised the group that they have spoken to the Competition Bureau about their concerns and were told by the Competition Bureau that it is monitoring the Alberta electricity market. Based on the description provided by TransAlta of its discussions with the Competition Bureau and other comments made by TransAlta at the meeting I do not believe TransAlta is aware of Project Stanley. I believe the comments made by the TransAlta trader Enron's trader last month about the Competition Bureau were not about Project Stanley but were in the context of TransAlta complaining to the Competition Bureau about B.C. Hydro Power Supply and Powerex's alleged abuse of the Network Economy provisions in the Tariff. The next step in the coalition building process is a meeting on September 11, 2000 of those companies that wish to proceed to form a coalition. The idea is that the coalition members would work out the terms of confidentiality documentation prior to any member sharing historical information that it may wish to provide relating to potential abuses by B.C. Hydro Power Supply or Powerex. In addition they intend to begin to consider which of the possible courses of action described above would be most effective. It appears from the discussion at the initial meeting that the option that involves a complaint to FERC is the most favored by TransAlta at this time. Finally, they intend to discuss a preliminary budget which TransAlta suggested may be in the range of $500,000 Cdn if the group elects to proceed with a complaint to FERC. There are without question a number of reasons why a decision that Enron Canada should not even consider having any part of this coalition in view of the Project Stanley matter is the safest strategy. Having said this, Enron Canada has a significant commercial interest in seeing this coalition (with or without Enron) achieve its objective to reduce or eliminate B.C. Hydro Power Supply's and Powerex's ability to use the Network Economy Service to block its competitors from access to import capacity into Alberta and export capacity into the U.S. Enron Canada's recent acquisition of the Alberta Sundance B PPA (700 MW of capacity dispatch rights in Alberta) makes this issue even more commercially significant as the ability to contract for transmission capacity without the risk of a reasonable probability of curtailment as a result of B.C. Hydro Power Supply invoking Network Economy Service would represent a significant risk mitigant for Enron's Sundance B long position. There is also some benefit of participating in the coalition to influence the direction it takes and to stay abreast of what it is doing. I have discussed the matter with Rob Milnthorp and he agrees that the decision to participate in the coalition would obviously have to be considered and approved by those managing the Project Stanley issue. If the decision of the Project Stanley team is that Enron Canada must steer clear of this coalition because of Project Stanley, then Rob M and other commercial guys in ENA who do business with Powerex will not need to give further consideration to additional reasons why Enron Canada may elect not participate such as: i) the implications on Enron Canada's and ENA's commercial relationship with Powerex, ii) whether Enron Canada would be prepared to commit to anything more than attending the first meeting of the coalition with a view to understanding the nature of the confidentiality obligations, the favored course of action, and the budget, iii) whether Enron Canada would explicitly reserve the right to withdraw from the coalition at any time, and iv) whether Enron would want to be in a coalition with BPA who I understand we believe may also be engaged in exercising transmission market power . To complicate this further, Enron Canada is presently being sued by TransAlta over the interpretation of the wording in two swap transactions and Rob Milnthorp has indicated that Enron Canada will not agree to participate in any coalition with TransAlta unless and until TransAlta discontinues this lawsuit. I look forward to your comments and feedback on this issue. Regards, Rob
|