From: Harry Kingerski@ENRON on 03/06/2001 09:02 AM
To: Susan J Mara/NA/Enron@ENRON, Jeff Dasovich/NA/Enron@Enron, James D 
Steffes/NA/Enron@Enron, Paul Kaufman/PDX/ECT@ECT
cc: Fred L Kelly/ENRON_DEVELOPMENT@ENRON_DEVELOPMENt, Dave 
Roberts/HOU/EES@EES, Gary Weiss/HOU/EES@EES, Scott Stoness/HOU/EES@EES, 
Jubran Whalan/HOU/EES@EES, Neil Bresnan/HOU/EES@EES, Leslie 
Lawner/NA/Enron@Enron, Robert Frank/NA/Enron@Enron, Scott Gahn/HOU/EES@EES 
Subject: AB31X - Response Needed

Mike Day left me a message saying in discussions yesterday on AB 31X 
(Wright's load curtailment bill), the utilities were making the point that 
31x should only address bundled customers since the utilities were making the 
incentive payments out of funds that would otherwise go to pay DWR  (in 
effect, the curtailments are reducing the utility net short position).  They 
were ok with having ESPs aggregate the loads of bundled customers (which will 
be a very significant win, if we get it).   They think DA customers can get 
curtailment benefits through existing (and new) ISO programs.

The dilemmas are:
the ISO programs may or may not be finalized for this summer and may or may 
not give incentives that are as beneficial as AB31X the utility plan 
discriminates against DA  ( The ISO program definitely does not sound as 
beneficial as AB31X. I have a call into the ISO, the last I heard was that 
the Demand Relief Program was the closest product they had to being finalized 
)
preferably, the ISO would administer the programs described by AB31X for all 
customers but that puts the ISO in the position of having to get approvals 
from FERC for a CA-legislated program (they will have to do this anyway) 
(nearly) all of our customers will be bundled this summer anyway, so there's 
no immediate loss from going with the utility's position


We owe Mike an answer today.  Any thoughts?  My suggestion at this point is 
to stick with the high road and argue for non-discriminatory treatment with 
equal incentives paid to bundled and DA customers. At this point a 
non-discriminatory treatment with equal incentives is the only way you are 
going to get participation.

Background:  AB31X would give $500/mwh incentives for day ahead curtailment, 
$750/mwh incentives for day-of curtailments, and incentives to be determined 
for scheduled load reductions.  The ISO would invoke the programs based on 
system conditions. These prices seem reasonably priced and should definitely 
persuaded customers to participate.

The ISO so far has put in place the equivalent of a scheduled load reduction 
program, with specific payments, but has not finalized any day ahead or day 
of programs. The current proposed  ISO Programs outlined Below

Program 1)

Demand Relief Program

The customer will curtail prior to stage 3 rotating blackout. Loads without 
back-up generators can be curtailed up to 24 hours per month and loads with 
back-up generators can be curtailed a total of 21 hours for the duration of 
the program. The duration of the program is scheduled for June 1 through 
September 30.

There will be a fixed monthly capacity reservation payment, adjusted based on 
actual average monthly performance, and a performance energy payment that 
will be made for each curtailment. The performance energy provides incentives 
for over performance and penalties for under performance. Additionally, loads 
that don't perform will be penalized through loss of a portion of their 
capacity payment. Settlement will occur through SC's/Aggregators separately 
from the normal retail billing process. The reservation price is preset at 
$20,000 per MW-month and the curtailment performance payment is $500 per MWh.

Eligibility for this program is still being worked out. Currently loads that 
were served under an interruptible tariff in 2000 were not allowed to 
participate in the February 6 submittal for the Summer 2001 program. ISO 
management may open, subject to board approval, the Demand Response Program 
to a subsequent bids from PG&E and possibly SCE interruptiple customers that 
have exhausted their required 2001 curtailments, pending CPUC rulemaking on 
interruptibles.

As soon as the board approves in the program, which is expected in days, the 
ISO will initiate a major activity immediately to have all participants ready 
by May 15 to establish the 10 day baseline for performance measurement.

Program 2)

ISO Discretionary Load Program

Intent of this program is to attract significant voluntary curtailments 
before the ISO enters emergency conditions. This program provides a set 
energy-only payment of $250/MWh. This provides the ISO a Known curtailment 
comminment.

Notifications will be sent to SC's/Aggregators when the ISO issues warnings 
and anticipates a stage 1 emergency, typically early morning. There will be 
60 to 90 minutes for the SC's/Aggregators  to issue their voluntary 
curtailment notices and firm-up the actual block of curtailment available to 
the ISO. This Program will operate through March 2002. ISO plans to accept 
proposals from aggregators starting on February 28-March 7th.

Payment will be based on an as-delivered basis with a preset payment per 
MW-hour. ISO is considering several options on where to set there price 
range. One proposal is $250MWh-$500MWh. There is no capacity or reservation 
payment.

Program 3)

ISO Participating Ancillary Services Load Program

This allows loads to bid into the A/S and supplemental energy market. The 
program allows loads to participate as price-responsive demand in the ISO A/S 
market and Supplemental markets. This market has been extended indefinitely 
as part of the semi-annually filing to FERC in the ISO tariff.
As an amendment to the tariff the ISO is making the following changes. The 
telemetry requirement has also been relaxed some for loads bidding into the 
supplemental energy market. Loads bidding into the Non-spinning and spinning 
reserve will still require telemetry. Loads can bid in above the $150 cap but 
must have cost justification for bids selected above the cap.


Jubran