All,
	I attended the Market Issues Forum at the California ISO yesterday and wanted to inform you of an important upcoming change in Grid Management (GMC) rates.  Starting January 1st, 2002, the CAISO anticipates raising GMC charges significantly.  They cited the following reasons for this:  1.  An under collection of GMC for year 2001, this must be past on to the following year according to the tariff.  2.  The lack of credit for the CAISO, increasing interest charges, as well as creating an inability to issue bonds for capital projects.  They must raise 100% of any capital expenditures in the current fiscal year, rather then spreading out the cost over a number of years with a bond issuance.  3.  A decrease in overall market volumes.  GMC is allocated on a flat fee, per megawatt basis, so decreasing volumes results in decreasing collections.  
	The CAISO points out their costs will remain flat from 2001 to 2002.  They anticipate volume levels next year similar to what current volumes are, thus reducing the amount of megawatts they can effectively spread out their GMC charges over.  
	I have the following observations:  1.  Despite the decrease in volumes, and the decrease in overall market activity, the CAISO has no plans to reduce its current workforce of 500+ employees.  2.  When posed the question: Is CERS charged GMC for out of market energy?  Their answer was circumspect at best.   3.  The CAISO currently does not assess GMC charges to ancillary service volumes, they indicated however that they are strongly considering changing this policy to increase the denominator that they can spread out GMC.  
	The CAISO would also like to point out that these increases are worse case scenarios, and may not be this high.  But as we are all aware, in the California energy market, the worst-case scenario ends up looking optimistic in comparison to what actually ends up happening.  Below is a detailing of the changes.  

-Kit

Charge Code	Description	Current Rate	Proposed New Rate	Percentage Increase	
521	Control Area Services Charge	$0.4060 	$0.5140 	27%	
522	Inter-zonal Scheduling Charge	$0.2230 	$0.3080 	38%	
523	Market Operations Charge	$0.9510 	$1.6080 	69%