Excellent update Mike.   We have good momentum with some key "players" on the ropes.   I view the next two months as critical in moving the Midwest to one functional market.

-----Original Message----- 
From: Roan, Michael 
Sent: Fri 9/28/2001 3:57 PM 
To: Abler, William; Baughman, Edward D.; Carroll, Lex; Clynes, Terri; Dalton III, Oscar; Kelly, Mike E.; Ratliff, Beau; Sewell, Doug; Valderrama, Larry 
Cc: Presto, Kevin M.; Nicolay, Christi L.; Merola, Jeff; Steffes, James D.; Imai, Rika 
Subject: Midwest Update



Back in May the MidWest regulatory team received two instructions.  Firstly, build a market in the MidWest that uses LMP to clear real time settlements and secondly ensure that that there is one market operator/RTO (i think the phrase was 'kill the Alliance' or something along those lines...).

The strategy we have, and continue to employ to achieve this is twofold: 
- work with the MISO to reshape its day 2 congestion management proposal based on the above instructions.  The MISO is currently proposing a market design consistent with that set out in May (a strawpaper will be circulated in October that i will send around for comment).

- marginalise the Alliance proposal by focusing on its governance structure (all decision rights held by incumbents) while educating stakeholders on the benefits of moving to a more transparent market platform such as that proposed by MISO.  Alliance is currently imploding; one member has left (Detroit Edison) and five are rumoured to be considering their options (Consumers follow DTE to MISO and VEPCO, FE, Comed/Exelon and AEP to PJM).  It is unclear whether these rumours have much basis but as a result of the recent flurry of filing (and more importantly protest) activity, it is clear that the Alliance proposal is totally unacceptable to all stakeholders.

In the last 2 weeks, Enron responded to the following filings: 
- MISO and Alliance 120 day compliance filings. 
- Alliance business plan. 
- National Grid proposal to become Alliance managing member. 
- ITC (Detroit Edison) joining MISO. 

To summarise these pleadings Enron asked FERC to mandate 1 RTO in the MidWest and set out the its favored governance and market structures (there was a high degree of support from all stakeholder groupings although Enron was the only party to ask for this guidance directly).  On Wednesday FERC took a step in this direction, stating that it wanted a standard market design throughout the US (FERC is believed to support PJM) and that the MidWest structure warranted direct attention in the near future.  Alliance stakeholders took a further step by voting to suspend Alliance market development activities and fold these activities into the MISO process to ensure consistency across the region.

We are also working on further responses to the Alliance 120 day compliance, the MISO/Alliance generator interconnection and a similar intervention in the Indiana state proceeding for transfer of assets to the RTOs to add further weight to Enron's arguments.

So we are seeing action as a result of consistent pressure.  I am now comfortable saying that we are close to achieving the goal (but the fat lady hasn't started her last stanza yet, the Alliance will likely continue to wriggle a little in the coming months )....the downside being that and there is a high probability that the combined MISO/Alliance RTO) will not begin operations on 12/15/01.  So the task in the next month will most likely change from beating up on the incumbents to reconciliation in an effort to get one functional RTO in the MidWest as quickly as possible.

regards 
Mike