On Monday, the Mediator in this case informed the parties that he planned to recommend to the FERC that it adopt a methodology for computing refunds that largely parallels the methodology that FERC adopted for prospective price ceilings in its June 19 order.  That methodology caps prices at a so-called competitive market price proxy equal to the operting cost of the last genertor dispatched in an hour, which will almost always be a single cycle gas plant with a relatively high heat rate.  The Mediator said that he would recommend that this measure be applied from October 2 forward; that it use the actual heat rate and NOx cost of the units dispatched; and that it include a 10 percent adder for credit risk.  Apparently, but not entirely clear, the Mediator will also recommend that two retroactive price caps actually be applied:  one for Northern California, using  the average price of gas at the PG&E citygate and Malin, and another for Southern California, using the SoCal Gas large package price for gas.  The Mediator finally informed the parties that he would recommend that FERC convene an evidentiary hearing to be concluded in 60 days for the purpose of taking testimony on, among other things, what were the actual operating costs of marginal generators in both the North and South.

The group of power marketers of which Enron is a part was obviously disappointed that the Mediator and his staff felt bound to use this methodology based in generator costs, even while acknowledging that it has little relevance to the cost or value of a marketer's supply portfolio.  The group also expressed interest in participating jointly and using a joint expert witness in the evidentiary hearing.   I have contacted Seabron Adamson who said he would have not conflict in serving as an expert witness for the group.

If (as appears likely) a hearing is convened in the very near term, it will be imperative to nail down selection of an expert immediatly so that he can begin preparing discovery to be sent out as soon as a procedural schedule is put in effect.  Thus it would be helpful if you could let me know as soon as possible how you wish to proceed.  Do you want to participate in the hearing individually or as part  of a group?  Do you want to sponsor an expert witness? and, if so, do you want to use Seabron or someone else.

As you consider this last question, you should be aware that  PowerEx has interests largely alligned with the marketer group.   PowerEx is going to sponsor Richard Tabors.  Tabors, in turn, recommended to me that the marketers use Seabron because he believes their strengths complement each other.