This rehearing order is huge, and I will not attempt to comprehensively summarize it.   However, here are my top 9 findings of interest to EPMI/oldco/newco and marketers in general.  Given that current prices are well below the cap, many of these FERC findings regarding prospective mitigation are irrelevant from a commercial standpoint. (But will become important if the market turns up before 9/30/01.)

There will be many more general summaries in the trade press.  For a starter, I recommend reading Gary Ackerman's (attached). 

1. The underscheduling penalty has been completely eliminated retroactively.  The IOUs and EOB won 100% here.  Thus EPMI's $30 million non-invoiced credit is kaput unless we appeal the FERC decision.

2. FERC affirms mitigation applies only to spot transactions and not to forward contracts.  This comes up in several places in the order (e.g., see p. 52 and 55) and is useful in or defense against SPP/NPC complaints.

3. On the refund side, marketers and hydro owners may show that refunds do not cause net negative revenues (p. 49; see also p. 169)

" ?the Commission will provide an opportunity after the conclusion of the refund hearing for marketers to submit cost evidence on the impact of the refund methodology on their overall revenues over the refund period. For the Commission to consider any adjustments, marketers will have to demonstrate that the refund methodology results in a total revenue shortfall for all jurisdictional transactions during the refund period. The Commission will consider such submissions in light of the regulatory principle that sellers are guaranteed only an opportunity to make a profit. To the extent we stated in the July 25 Order that we would not allow such a showing regarding sellers' purchased power costs,131 we grant rehearing. We will also allow sellers of hydroelectric power to demonstrate the impact of the refund methodology. "

4. CAISO is required to submit a comprehensive congestion management redesign and plans for a day-ahead energy market by May 1, 2002.  This is a good requirement because it gives FERC cover to NOT extend mitigation past 9/30/02.  CAISO must have known this is coming since it is already circulating a proposal. 

5. Government agency exemptions.  The FERC was firm that government entities and RUS-financed cooperatives are NOT exempt from the mitigation and refund requirements if the power was sold to one of the FERC-approved markets; namely, the CAISO's R/T market and the PX day-ahead market.  However, FERC granted rehearing of government entity requests to be exempt from the West-wide cap.  Thus, government entities are now exempt from the WSCC wide cap!  However, marketers cannot resell government generated power  above the cap.  The key difference is that government agencies selling power outside the CAISO are not necessarily using a FERC- regulated market.

6. No special treatment for vertically integrated utilities acting as marketers (p. 88) 

"We will not allow LSEs to justify sales above the mitigated Market Clearing Prices based on their cost of purchased power."

7. Enron wins on certainty of price in mitigated ancillary service markets.  In one of the few places a rehearing was granted, FERC approved Enron's request to make the cap binding at the time the deal is consummated, not when power flows (p. 94):

"The ISO, Enron and Reliant seek some type of ex ante pricing. The ISO proposes that prices in the Ancillary Services capacity markets in all hours including system emergency hours be limited to 85 percent of the most recently established mitigated reserve deficiency MCP, asserting that such an approach is more consistent with the Commission's intention to set prices before they are charged. While Enron and Reliant also seek a price that is known before the price is charged and that will not change, that price would not be capped. This topic is addressed in the order on the ISO's compliance filings that is being issued concurrently with this order. As we explain in that order, changes in the mitigated reserve deficiency MCP for the Imbalance Energy market should have no effect on prices in the Ancillary Services markets. Thus, we agree with Enron and Reliant that the price for the hour a transaction is entered into, and not the hour of delivery, is relevant for establishing the market-clearing price for ancillary Services. We will grant rehearing of our prior orders on this point, to the extent needed to allow this modification."

However, EPMI asked for similar certainty in the mitigated market price in the R/T energy market  (p. 62).  FERC raised the question but I could not find a response. (?)

8. Marketers (still) cannot sell above the cap. Marketers were denied rehearing in several places (e.g., p. 46).  Marketers cannot be treated like generators even if they own or control generation.  In one of the more ambiguous passages:

"The Commission denies clarification that marketers that own or control generation and engage in marketing through a portfolio of resources, or that perform scheduling or tolling functions on behalf of generators, will be treated as generators; they must be price takers. By contrast, entities that are able to trace a transaction to a specific generating unit will be treated as generators. With respect to Calpine's request for clarification, the Commission will require marketing affiliates of generators to be price takers. Furthermore, marketer-to-marketer transactions in the bilateral spot market are subject to price mitigation and marketers selling outside of the ISO's single price auction will receive the price up to the mitigated Market Clearing Price."

I am not sure how the second sentence jives with the first.  If market prices rise, we will need to research this issue.

9. Option contracts are forward sales (yeah, we won!) (p. 152):

"Similarly, with respect to Enron's request for clarification that option agreements exercised for spot-market sales are not themselves spot-market sales, we clarify that such sales are entered into for future periods and therefore are not subject to mitigation."