Just to clarify.

The product that is traded in New York is a financial swap that settles 
against the Day Ahead clearing price.  It is changes to HQ's physical 
deliveries (0 to 1500 MW) into NY that can swing the clearing price by at 
least $20.  This is not just due to the price that HQ sells their energy for, 
but is mostly due to the impact on congestion in NY of HQ deliveries.  When 
HQ is not delivering high volumes, NY is generally uncongested and the price 
for the entire state is set by gas generation in the East.  When HQ delivers 
high volumes, the system becomes congested and the west price is set by much 
lower cost resources and the east price is set by gas generation.  The impact 
on the NY West price (Zone A) is at least $15 dollars.  Since the majority of 
the OTC trades are settled against this price, it gives HQ tremendous ability 
to trade financially and then influence the settlement price.  Large 
generators in New York west could also do this but it would be quite costly 
for them to withhold 1000 MW of generation and this would be easily noticed.  
HQ however, has hydro generation and can easily store their water for 
delivery another day.

HQ trades directly in the New York OTC market as HQ Energy Services (US) 
Inc..  The general market realizes the impact that HQ can have on the 
clearing price and will often pull out of the market when HQ is trading.  I 
have heard from a couple of sources that HQ is using Select to trade for them 
to avoid this problem but I cannot confirm this.

Hope this helps clarify things.

Tom.


   
	
	
	From:  Christi L Nicolay @ ECT                           09/22/2000 11:03 AM
	

To: Sarah Novosel/Corp/Enron@Enron
cc: Howard Fromer/HOU/EES@EES, James D Steffes/HOU/EES@EES, Kevin M 
Presto/HOU/ECT@ECT, Tom May/Corp/Enron@Enron, Joe Hartsoe/Corp/Enron@Enron, 
Richard Shapiro/HOU/EES@EES, Steven J Kean/NA/Enron@Enron 

Subject: HQ Energy Mkt. Power

Tom May asked me to get a summary of what FERC reviewed and why FERC found 
that HQ had mitigated its market power initially.  HQ's 3 year update is due 
in Nov.

HQ, acting through Select, has the ability to move the price $20 or more.

In accordance with our strategy to protest MBRs for problem utilties, EPMI 
will most probably protest the HQ request for continuation of MBRs.  Please 
proceed with the RCR for Tabors and B&P to research this problem and begin 
work on a protest.