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Date: Tue, 12 Dec 2000 07:58:18 -0600
From: "Tracey Bradley" <tbradley@bracepatt.com>
Cc: "Andrea Settanni" <asettanni@bracepatt.com>, "Charles Ingebretson" 
<cingebretson@bracepatt.com>, "Charles Shoneman" <cshoneman@bracepatt.com>, 
"Deanna King" <dking@bracepatt.com>, "Jeffrey Watkiss" 
<dwatkiss@bracepatt.com>, "Gene Godley" <ggodley@bracepatt.com>, "Kimberly 
Curry" <kcurry@bracepatt.com>, "Michael Henry" <mhenry@bracepatt.com>, 
"Michael Pate" <mpate@bracepatt.com>, "Paul Fox" <pfox@bracepatt.com>, 
"Ronald Carroll" <rcarroll@bracepatt.com>
Subject: DJ - Transalta Stops Pwr Sales To Cal-ISO; Questions Credit
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FYI

DJ Transalta Stops Pwr Sales To Cal-ISO; Questions Credit
Copyright , 2000 Dow Jones & Company, Inc.



LOS ANGELES (Dow Jones)--Transalta, an investor-owned utility based in 
Alberta, Canada, stopped selling power to the California Independent System 
Operator at 6 p.m. PST Monday (0200 GMT Tuesday) because it fears the grid 
operator won't be able to pay, market sources told Dow Jones Newswires.

For about eight hours Monday, Transalta sold the ISO 400 megawatts of power 
from its Centralia generating station in western Washington state at $1,000 a 
megawatt-hour, the source said. The 1,000 MW will cost the ISO about $3.2 
million.

The cost of producing electricity at the 650-MW Centralia plant is about 
$14-$15/MWh, company officials said.

Because the ISO, which manages electricity reliability in the state, was 
buying a large quantity of power in the spot market, Transalta questioned the 
ISO's credit-worthiness.

A Transalta spokesperson wasn't immediately available for comment Monday. 
Transalta could resume sales to the ISO at a later date. Representatives from 
the ISO wouldn't comment.

To illustrate just how dire the supply situation in California is, other 
power suppliers, including British Columbia Hydro & Power Authority (X.BCH) 
subsidiary PowerEx, have requested that the ISO secure a letter of credit 
from one of the state's three investor-owned utilities before any 
transactions take place. Last week, Edison International (EIX) unit Southern 
California Edison did just that, issuing a letter of credit to PowerEx for 
$23 million.

Steve Maviglio, press secretary to California Gov. Gray Davis, confirmed with 
Dow Jones Newswires that he received a telephone call from Transalta saying 
the company planned to stop selling power to the grid operator Monday evening.

The ISO has since called a stage-two power emergency and requested that 
Pacific Gas & Electric Co. interrupt about 400 MW of power to large 
industrial customers who get reduced rates in exchange for having their power 
cut during peak demand periods.

-By Jason Leopold and Mark Golden, Dow Jones Newswires; 323-658-3874; 
mailto:jason.leopold@dowjones.com

(END) Dow Jones Newswires 12-12-00

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DJ CalPX:FERC Should Extend Soft Cap To Day-Ahead Pwr Mkt
Copyright , 2000 Dow Jones & Company, Inc.



NEW YORK (Dow Jones)--The California Power Exchange asked the U.S. Federal 
Energy Regulatory Commission to extend the California Independent System 
Operator's new "soft" price cap to the CalPX's day-ahead market, over the 
objections of the ISO.

"The ISO amendment, as proposed and already implemented, threatens to bring 
dire, irreparable and unintended consequences to the California markets," the 
CalPX said in its filing.

On Friday, the FERC approved an ISO emergency request to change the price-cap 
rules for its real-time market. The ISO asked to be able to purchase power 
for more than $250 a megawatt-hour, so long as any seller agrees to provide 
documentation on costs to justify the high price. In time, the FERC could 
reduce prices for any sales above $250/MWh if the FERC deems the price 
unreasonable.

The CalPX assumed, based on FERC's approval of the ISO filing, that the 
$250/MWh hard price cap no longer applied to its day-ahead market. The CalPX 
cleared state-wide prices on Sunday for Monday delivery that averaged 
$611.53/MWh.

The CalPX had the approval of California's three investor-owned utilities for 
whom it buys power to dispense with the price cap, according to CalPX 
spokesman Jesus Arredondo.

But, when the CalPX submitted the day-ahead market results to the ISO for 
transmission scheduling - a daily procedure - the ISO changed almost all the 
prices to $250/MWh. The ISO can adjust prices according to delivery zones 
within the state based on transmission congestion. Prices for supplies from 
Arizona and Nevada often get constrained downward somewhat during the winter 
because available energy far outweighs transmission capacity from the 
Southwest into California.

But for the CalPX's day-ahead market Sunday, the ISO constrained prices 
downward for all zones by hundreds of dollars even though there was no 
transmission congestion for many hours.

California Gov. Gray Davis publicly denounced the ISO's new 'soft cap' rules, 
and thinks the old, 'hard' price cap should be lowered to $100/MWh.

The CalPX management has always opposed price caps.

"The ISO approach is resulting in prices significantly below those of 
surrounding markets, including the ISO's own out-of-market and real-time 
operations and other control areas. This results in a significant supply 
migration out of the California forward markets. Specifically, CalPX notes 
that, in order to accomplish the very purposes that the ISO intended to 
achieve, it is imperative to add one fundamental missing part to the CAISO 
proposal - i.e., to allow the existing 'hard cap' on Adjustment Bids to rise 
from $250 per MWh to an equivalent of the energy price, that is a floating 
cap," the CalPX told the FERC.

On Monday morning, suppliers avoided the CalPX day-ahead market because of 
the bottom-line constrained prices of $250/MWh they ended up getting Sunday. 
With few suppliers and demand about the same, Monday's market priced at about 
$350/MWh higher than Sunday's market.

CalPX staffers spent the weekend and Monday pleading with ISO staffers not to 
constrain all day-ahead prices down to $250/MWh, but the ISO did anyway, 
negotiations broke down, and the CaLPX aked the FERC to referee.

"Without immediately adding this component to the ISO proposal, trading in 
the day-ahead and day-of markets is unlikely to occur, real-time trading will 
dramatically increase and real-time prices can be expected to rise well above 
competitive levels. All of this is occurring already as a result of the ISO 
proposal, and all of this is fundamentally at odds with the ISO's objectives 
of promoting forward activity and ensuring reliability during real-time 
operations," CalPX's filing says.

"Moreover, all of this is a result of an abrupt change in approach to price 
caps which was not discussed with CalPX, or to CalPX's knowledge, any other 
stakeholders, before being filed with the FERC. CalPX has discussed the need 
for an immediate fix to ISO's incomplete tariff amendment repeatedly with the 
ISO since Friday, and understands from discussions that continued until this 
very afternoon, that the ISO is aware of the problem created by its proposal 
but unwilling to remedy it with a new filing of their own," the filing states.

"This mixture of hard and soft caps has resulted in a complete disconnect 
between unconstrained and constrained prices which has crippled the CalPX 
day-ahead auction and disrupted the bilateral markets," the CalPX said.

After the CalPX filing to FERC, the ISO produced its constrained prices for 
Tuesday. For the nine hours when there will be no transmission congestion, 
the ISO allowed the PX prices - around $1,000/MWh - to stand, but the ISO 
lowered the prices for other hours - when there will be congestion - down to 
$250/MWh and $500/MWh.

The lower, constrained prices aren't the result of any market formula, 
according to one CalPX staff member, but are completely arbitrary.

The ISO was unable to comment Monday on the issue.

By Mark Golden, of Dow Jones Newswires; 201-938-4604; 
mailto:mark.golden@dowjones.com

(END) Dow Jones Newswires 12-12-00

But, when the CalPX s*******************************************