Charles --

Very well put.  This is another example why it is so important for you and Andy R. to be out with the RTO teams helping us to be more precise.  We need to blend our NERC and FERC advocacy.

Of course, you realize that ELCON will never support a PJM model central marketplace for balancing energy.  At the last EPSA meeting, ELCON really blasted centralized pools.  

Jim

 -----Original Message-----
From: 	Yeung, Charles  
Sent:	Monday, August 06, 2001 2:47 PM
To:	'"John P. Hughes" <jhughes@elcon.org>@ENRON'
Cc:	janderson@elcon.org; Steffes, James D.; Shapiro, Richard; Novosel, Sarah; Maurer, Luiz; Nicolay, Christi L.
Subject:	RE: SE RTO INTERREGIONAL COORDINATION

John 

You are correct in your observations concerning market dynamics and the need for flexibility by the marketplace.  "Control area consolidation risks rebundling the industry and this would stifle innovation and market
dynamics."  Enron agrees with this observation and does not endorse an RTO structure that perpetuates the advantages control areas enjoy today in the marketplace.

We fully support your statement: "Our efforts should be directed at ensuring adequate independence of balancing, security and interchange authorities."

Enron's desire for consolidation of control areas can be misconstrued to advocate the old bundled control area structures.  I want to clarify this is absolutely NOT the case and Enron DOES support the CACTF model.  Specifically, the Interchange Authority functions called for in the CACTF model must NOT be rolled up into a single entity.  The Security Authority(SA), the Transmission Service Provider(TSP), and the Balancing  Authority(BA) all need to be separated from today's transmission owner/generation owner/load serving/control area operator entities.  Independence of these functions from market interest are critical to ensure fair and competitive markets.  

The Interchange Authority (IA) functions do not require centralization or independence from market participants - but rather the scheduling advantages that the IA functions provide for must be available to every market participant.  Today, the entities that operate a "control area" are advantaged by the capabilities NERC rules provide under the Interchange Authority.  Under a contract path transmission model, control areas do not have to keep day-ahead balanced schedules and can "play" in the energy market with unbalanced portfolios up until the schedule ramping times.  Non-control areas can only get transactions approved for scheduling under specific source and sink requirements that forces them to submit balanced interchange schedules.  This is a major reason why competitive generators have sought to become NERC certified control areas.  The CACTF model allows for the scheduling functions required of an IA to be disaggregated from the other "control area" functions without detriment to reliability - thus levelizing the playing field for all competitive PSEs.

To levelize the playing field, Enron supports 2 issues.
1) Consolidation of control areas - to provide independence to eliminate the market advantages. 
2) Elimination of day ahead balanced schedules requirements - to effectively provide the benefits of the IA function for all market players.  If there are no day-ahead balanced scheduling requirements, most of the competitive advantages of control areas will be eliminated.  In the same stroke, all market participants will compete on the same data and timing requriements allowing for the trading of energy up until the ramping times as control areas enjoy today.  This is the scheduling flexibility Enron seeks to create a dynamic energy trading environment.


Charles Yeung
Enron Corp, Director Gov't Affairs (NERC)
713-853-0348

 -----Original Message-----
From: 	"John P. Hughes" <jhughes@elcon.org>@ENRON [mailto:IMCEANOTES-+22John+20P+2E+20Hughes+22+20+3Cjhughes+40elcon+2Eorg+3E+40ENRON@ENRON.com] 
Sent:	Monday, August 06, 2001 12:59 AM
To:	Maurer, Luiz; Yeung, Charles
Cc:	Linxwilerj@safferassoc.com; Jregnery@calpine.com; Mado@dynegy.com; ron_lanclos@oxy.com; hobday@hhlaw.com; sowens@entergy.com; BOBg@sepa.doe.gov; jphill8@entergy.com; Paul.savage@nrgenergy.com; cpmccart@llgm.com; Jane.mudgett@williams.com; Nicolay, Christi L.; ndaggs@mwe.com; Pauline.foley@pseg.com; bmacguineas@dykema.com; leer@sepa.doe.com; janderson@elcon.org; SSchotland@cgsh.com
Subject:	SE RTO INTERREGIONAL COORDINATION

Luiz:
I have reviewed the documents you distributed on Friday regarding Enron's
position on interregional coordination.  In general, we agree with Enron's
position with the following exceptions.  We do believe that the
consolidation of "control areas" is a useful objective in the context of
creating a greater SE RTO, and, in fact, is inconsistent with Enron's
support of the CACTF's reliability model.  The RTO should also not be a
central dispatcher.  Its control of generation should be limited to
redispatch for congestion management and the maintenance of short-term
reliability.  The basic premise behind the CACTF model is that control
areas are becoming obsolete and unbundled.  Control area consolidation
risks rebundling the industry and this would stifle innovation and market
dynamics.  Our efforts should be directed at ensuring adequate independence
of balancing, security and interchange authorities.  This should be done by
FERC because NERC has no authority (or inclination) to do so.
John Hughes
Industrial Consumers