---------------------- Forwarded by Mark Guzman/PDX/ECT on 12/12/2000 12:07 
PM ---------------------------


Carla Hoffman
12/12/2000 07:27 AM
To: Tim Belden/HOU/ECT@ECT, Robert Badeer/HOU/ECT@ECT, Jeff 
Richter/HOU/ECT@ECT, Phillip Platter/HOU/ECT@ECT, Mike Swerzbin/HOU/ECT@ECT, 
Diana Scholtes/HOU/ECT@ECT, Sean Crandall/PDX/ECT@ECT, Matt 
Motley/PDX/ECT@ECT, Mark Guzman/PDX/ECT@ECT, Tom Alonso/PDX/ECT@ECT, Mark 
Fischer/PDX/ECT@ECT
cc:  
Subject: FW: CalPX:FERC Should Extend Soft Cap To Day-Ahead Pwr Mkt


---------------------- Forwarded by Carla Hoffman/PDX/ECT on 12/12/2000 07:36 
AM ---------------------------
   
	Enron Capital & Trade Resources Corp.
	
	From:  "Pergher, Gunther" <Gunther.Pergher@dowjones.com>                      
     12/12/2000 07:26 AM
	

To: undisclosed-recipients:;
cc:  
Subject: FW: CalPX:FERC Should Extend Soft Cap To Day-Ahead Pwr Mkt




> -----Original Message-----
> From: Golden, Mark
> Sent: Tuesday, December 12, 2000 10:24 AM
> To: Pergher, Gunther
> Subject: CalPX:FERC Should Extend Soft Cap To Day-Ahead Pwr Mkt
>
> FYI, if you missed this, it is what I was able to find out about the ISO
> constraining down of PX prices as of late Monday. It seems to me like the
> ISO staff is opposed to the implementing the soft-cap that Winter got the
> FERC to approve on an emergency basis.
>
>  CalPX:FERC Should Extend Soft Cap To Day-Ahead Pwr Mkt
>
>   NEW YORK (Dow Jones)--The California Power Exchange asked the U.S.
> Federal
> Energy Regulatory Commission to extend the California Independent System
> Operator's new "soft" price cap to the CalPX's day-ahead market, over the
> objections of the ISO.
>   "The ISO amendment, as proposed and already implemented, threatens to
> bring
> dire, irreparable and unintended consequences to the California markets,"
> the
> CalPX said in its filing.
>   On Friday, the FERC approved an ISO emergency request to change the
> price-cap
> rules for its real-time market. The ISO asked to be able to purchase power
> for
> more than $250 a megawatt-hour, so long as any seller agrees to provide
> documentation on costs to justify the high price. In time, the FERC could
> reduce
> prices for any sales above $250/MWh if the FERC deems the price
> unreasonable.
>   The CalPX assumed, based on FERC's approval of the ISO filing, that the
> $250/MWh hard price cap no longer applied to its day-ahead market. The
> CalPX
> cleared state-wide prices on Sunday for Monday delivery that averaged
> $611.53/MWh.
>   The CalPX had the approval of California's three investor-owned
> utilities for
> whom it buys power to dispense with the price cap, according to CalPX
> spokesman
> Jesus Arredondo.
>   But, when the CalPX submitted the day-ahead market results to the ISO
> for
> transmission scheduling - a daily procedure - the ISO changed almost all
> the
> prices to $250/MWh. The ISO can adjust prices according to delivery zones
> within
> the state based on transmission congestion. Prices for supplies from
> Arizona and
> Nevada often get constrained downward somewhat during the winter because
> available energy far outweighs transmission capacity from the Southwest
> into
> California.
>   But for the CalPX's day-ahead market Sunday, the ISO constrained prices
> downward for all zones by hundreds of dollars even though there was no
> transmission congestion for many hours.
>   California Gov. Gray Davis publicly denounced the ISO's new 'soft cap'
> rules,
> and thinks the old, 'hard' price cap should be lowered to $100/MWh.
>   The CalPX management has always opposed price caps.
>   "The ISO approach is resulting in prices significantly below those of
> surrounding markets, including the ISO's own out-of-market and real-time
> operations and other control areas.  This results in a significant supply
> migration out of the California forward markets. Specifically, CalPX notes
> that,
> in order to accomplish the very purposes that the ISO intended to achieve,
> it is
> imperative to add one fundamental missing part to the CAISO proposal -
> i.e., to
> allow the existing 'hard cap' on Adjustment Bids to rise from $250 per MWh
> to an
> equivalent of the energy price, that is a floating cap," the CalPX told
> the
> FERC.
>   On Monday morning, suppliers avoided the CalPX day-ahead market because
> of the
> bottom-line constrained prices of $250/MWh they ended up getting Sunday.
> With
> few suppliers and demand about the same, Monday's market priced at about
> $350/MWh higher than Sunday's market.
>   CalPX staffers spent the weekend and Monday pleading with ISO staffers
> not to
> constrain all day-ahead prices down to $250/MWh, but the ISO did anyway,
> negotiations broke down, and the CaLPX aked the FERC to referee.
>   "Without immediately adding this component to the ISO proposal, trading
> in the
> day-ahead and day-of markets is unlikely to occur, real-time trading will
> dramatically increase and real-time prices can be expected to rise well
> above
> competitive levels.  All of this is occurring already as a result of the
> ISO
> proposal, and all of this is fundamentally at odds with the ISO's
> objectives of
> promoting forward activity and ensuring reliability during real-time
> operations," CalPX's filing says.
>   "Moreover, all of this is a result of an abrupt change in approach to
> price
> caps which was not discussed with CalPX, or to CalPX's knowledge, any
> other
> stakeholders, before being filed with the FERC. CalPX has discussed the
> need for
> an immediate fix to ISO's incomplete tariff amendment repeatedly with the
> ISO
> since Friday, and understands from discussions that continued until this
> very
> afternoon, that the ISO is aware of the problem created by its proposal
> but
> unwilling to remedy it with a new filing of their own," the filing states.
>
>   "This mixture of hard and soft caps has resulted in a complete
> disconnect
> between unconstrained and constrained prices which has crippled the CalPX
> day-ahead auction and disrupted the bilateral markets," the CalPX said.
>   After the CalPX filing to FERC, the ISO produced its constrained prices
> for
> Tuesday. For the nine hours when there will be no transmission congestion,
> the
> ISO allowed the PX prices - around $1,000/MWh - to stand, but the ISO
> lowered
> the prices for other hours - when there will be congestion - down to
> $250/MWh
> and $500/MWh.
>   The lower, constrained prices aren't the result of any market formula,
> according to one CalPX staff member, but are completely arbitrary.
>   The ISO was unable to comment Monday on the issue.
>   By Mark Golden, of Dow Jones Newswires; 201-938-4604;
> mark.golden@dowjones.com
>
>   (END) Dow Jones Newswires  12-11-00
>   1959EST(AP-DJ)--12-11-00 1959EST
>