Late yesterday, Steve Kean assembled a meeting of staff from across business 
units to discuss the legal and regulatory implications of current events in 
California.   Here are the notes I captured from the meeting.

Background:
The hard cap is still in place in Calif. electric market at this time 
(although the FERC has proposed moving to a soft cap under which prices above 
the cap would be allowed if cost justified).  As of yesterday, electricity is 
still flowing out of the state.   The governor has asked people to cut back 
on their electric usage, including Christmas lights.  With rolling brown-outs 
a possibility, there is a belief that people will go ahead an sell power at 
high prices above the hard cap, counting on the soft cap (i.e. regulators 
wanting generator to keep running at high-prices if that is what it takes to 
keep going).  But, this causes an interesting dilemma under which generators 
which have $5-6 gas are better off selling their gas, as only generators that 
can show a $27 gas price would be able to charge market electric rates.  
Parties with $5-6 gas are better off reselling the gas for another use.
Delivered gas at Cal. border is $26-27 ($33.75 today) for the remainder of 
the month, $19 for Jan. base load and $8 summer deliveries.
It was reported that SoCal gas has been buying $24 gas to fill up storage 
this week to get ready for cold weather/increased loads next week.  This 
doesn't completely track with ETS understanding that SoCal was withdrawing 
gas from storage this week.

Issue:
ENA is  worried about two things:
Whether it is prudent to sell generation at high prices counting on the 
ability under the soft cap to demonstrate that costs exceed $150/MW.
Whether gas will be curtailed & if so what are ENA's obligations

EES is likewise concerned about curtailments to its customers (utilities have 
been curtailing, but not yet down to the core level).    If EES is curtailed 
by the utility, they don't have an obligation to the industrial to keep 
serving them.   But if the utility is operating under the diversion section 
of its tariff to meet core customers needs, the utility can require that the 
marketer keep their gas on or pay a penalty.  ENA is EES' supplier.  If EES 
load is cut, ENA might face the choice of keeping the gas on and being paid a 
diversion payment or paying a penalty under the utility tariff.

Action Steps:
Steve formed a task force to study how curtailment/diversion/force majeure 
risks play out at each chain across the gas and electric grid in California.  
Once completed, he wants to undertake this analysis for the east coast, 
Alberta, TX and Florida regions.
Develop a PR campaign.  Steve's preference would be to get out early with a 
message about what is going on in the California gas market.  In essence, he 
would like to be on the offensive with a message that the problem is (1) that 
utilities are gambling with ratepayer money -- not filling storage, not 
entering fixed price deals; and (2) the electric price cap is also causing 
strange behavior in the markets.   The ENA traders do not support this 
strategy.  They prefer to lay low, arguing that the PR strategy did not work 
in the California electric market.