Here it is.
Thanks
Gary

-----Original Message-----
From: Jeffrey Watkiss [mailto:dwatkiss@bracepatt.com]
Sent: Thursday, December 14, 2000 11:35 AM
To: gfergus@brobeck.com; linda.robertson@enron.com
Cc: Ronald Carroll
Subject: Response to ISO Dispatch Orders


As of noon EST, the DOE still had not issued any order under section 202(c).
Thus, at least for now, Enron's obligations are a function of the ISO Tariff
and the Participating Generator Agreement.   Last Friday, the ISO filed with
FERC Amendment No. 33 to its tariff.  Among other things, the Amendment adds
to the section 5 of the  tariff  new provisions empowering the ISO to assess
a penalty against Participating Generators that refuse to operate in
response to an ISO Dispatch instruction during a System Emergency or when
the ISO is acting to avoid an imminent or threatened System Emergency.   The
penalty is stiff:  (1) a charge for each MWh of the Dispatch instruction
with which the Participating Generator does not comply equal to twice the
highest price for Energy, per MWh, paid in each hour by the ISO to any other
entity to produce Energy; and (2) if the ISO is required t call for the
involuntary curtailment of firm Load to maintain Applicable Reliability
Criteria during the System Emergency, then an additional charge equal to
$1,000 for each MWh of the Dispatch instruction with which the Participating
Generator does not comply.  The only defense to these penalties is to
provide proof that the generating unit in question was physically incapable
of running or it would have violated state or federal law to run it (e.g.,
air emission allowance limits).  The ISO asked FERC for an immediate
effective date of December 8, which FERC granted in a December 8 order.

 The ISO Tariff defines "Participating Seller or Generator" to mean  "A
generator or other seller of Energy or Ancillary Services through a
Scheduling Coordinator over the ISO Controlled Grid and which has undertaken
to be bound by the terms of the ISO Tariff."  If Enron is a Participating
Generator (Mary Hain informs me that Enron is not one), then it risks
incurring the new penalty if it fails to respond to an ISO order to sell
ancillary services to  the ISO.  I believe Enron might also risk incurring
the penalty in cases where it controls or has rights to all or a portion of
a generating capacity of a Participating Generator's unit.  If that capacity
is called on and the call is not answered because Enron is making some other
use of the capacity, the Enron may incur the penalty .  This seems to be
contemplated by section 4.1.1 of the Participating Generator Agreement which
obliges a Participating Generator to comply with the tariff (section 5.3) by
identifying the Generating Units that it owns, operates or has a contractual
entitlement to in Schedule 1, as required by Section 5.3 of the ISO Tariff.
(emphasis added).   As far as I know, it is that Schedule 1 that the ISO
consults when making decisions as to which Participating Generator to call
on.

I will forward to you Secretary Richardson's order as soon as it is issued.
Please call me if you have any questions.


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