Alan,
 Sorry I was slow getting to this today.  I think your changes are good 
improvements.  I am fine with this basis.

Steve



	Alan Comnes
	03/19/2001 12:13 AM
		
		 To: Steve Walton/HOU/ECT
		 cc: Jeff Dasovich/NA/Enron@Enron, James D Steffes/NA/Enron@Enron
		 Subject: Re: Interconnection Benefits

Please read the attached.  If OK, I would like to forward to Tim on Monday.

I revised Steve's statement of how to measure benefits.  As I read it, it 
seem cleaner to measure benefits accross interfaces (PNW-CA; DSW-CA) rather 
than for each region seperately.

If you do it my way, price actually falls out of the equation and you 
estimate benefits simply by measuring flow times incremental production costs 
on both sides of the interface.  (That being said, I also propose measuring 
economic benefit of trade using basis differentials rather than estimated 
costs.  Thoughts on which approach is better are welcome).





Steve Walton
03/07/2001 09:45 AM
To: Jeff Dasovich/NA/Enron@Enron, Alan Comnes/PDX/ECT@ECT, James D 
Steffes/NA/Enron@Enron
cc:  

Subject: Interconnection Benefits

Enclosed is a first cut at a very rough approximation of interchange 
benefits.  It assumes that the benefit to the exporting parties is a 
contribution to their fixed costs of capacity of base load plants already 
built equal to the difference between the sale price and the cost of fuel 
(estimated from gas combined cycle operation).  The tricky part is trying to 
unravel exports from the Southwest from the ownership shares of California 
parties.  The gain to California is (1) the capital savings of added peaking 
plants and (2) the variable cost savings from not operating high heat rate 
units.