-----Original Message-----
From: 	Lin, Martin  
Sent:	Wednesday, October 31, 2001 1:15 PM
To:	Shanbhogue, Vasant
Cc:	Kaminski, Vince J
Subject:	ERCOT TCR votes

Lance and I participated in the Wholesale Market Subcommittee (WMS) meeting at ERCOT yesterday.  WMS was meeting to vote on various aspects of the proposed TCR design.  I'm happy to report that most votes went our way and the vote we lost does not matter significantly to Enron.

The following is a brief summary of issues and the votes.

1.  Derating
We oppose derating.  I presented a few PowerPoint slides to advocate our position.  Amorng the proposals were:
a)  issue 100% of the commercially significant constraint (CSC) limit with non-deratable TCRs
b)  issue 100% of the CSC limit, but with deratable TCRs
c)  issue < 100% of the CSC limit with non-deratable TCRs
d)  issue X% of the CSC limit as non-deratable and 100-X % as deratable.
WMS selected option (a), where 60% of the total would be made available in the annual auction and the remainder would be auctioned off monthly.  All TCRs would be non-deratable.

2.  Closely Related Elements
The CSC is a single line.  The proposition is to introduce closely related elements (CREs) to create a flowgate equivalent for the CSC.  There were several votes on how to develop the CREs, if allowed, and what to do about certain units that would complicate congestion management with CREs.  We were satisfied with the decision to allow CREs, have them determined in advance of the year (as is done with the CSCs), and to prohibit certain units from participating in the balancing energy market when they fall between the CSC and a CRE.

3.  TCR Primary Auction single party quantity limit
Should a single entity be allowed to acquire the entire lot of TCRs available in an auction?  We think so.  If a party is willing to pay more than anybody else for the TCRs, that party should be allowed to have them.  Since TCRs have no value beyond the realized congestion, there is always the alternative to simply pay the congestion.  If all TCRs are held by one party who wishes to charge excessive prices for them, everybody would opt to pay congestion.  The only game potential is that a party with market power in balancing energy can manipulate price spreads and gain from the TCR position.  This is a result of TCRs being financial and can be done whether the party with market power holds all TCRs or not.  Furthermore, there is no way to enforce limited ownership in the secondary market, so a party wishing to control all TCRs can buy them in the secondary market or gain effective financial control.  We lost to vote to allow for complete ownership, but this provision has little effect on the market anyway.