Elizabeth and Christian:

Please brief me on what impact you believe the FERC proposed order could have 
on our contracts.

Mark
----- Forwarded by Mark E Haedicke/HOU/ECT on 11/03/2000 04:33 PM -----

	Steven J Kean@ENRON
	11/01/2000 03:43 PM
		 
		 To: Mark E Haedicke/HOU/ECT@ECT
		 cc: 
		 Subject: USA: FACTBOX-FERC details changes for Calif power market.

Joe Hartsoe, Rick Shapiro, or Jim Steffes can fill you in on the details of 
what FERC did today.  One question you need to think about is how their 
decision on price caps affects any contracts which we may have indexed to 
California's spot market.  The way it reports the market clearing price will 
change fundamentally if prices over 150 will be accepted but not used to 
clear the market for all bids.  So, if we are using this as a reference price 
in our contracts it may trigger the need to look for alternatives.
----- Forwarded by Steven J Kean/NA/Enron on 11/01/2000 03:39 PM -----

	Ann M Schmidt
	11/01/2000 10:37 AM
		 
		 To: Mark Palmer/Corp/Enron@ENRON, Karen Denne/Corp/Enron@ENRON, Meredith 
Philipp/Corp/Enron@ENRON, Steven J Kean/NA/Enron@Enron, Elizabeth 
Linnell/NA/Enron@Enron, Eric Thode/Corp/Enron@ENRON, Laura 
Schwartz/Corp/Enron@Enron, Jeannie Mandelker/HOU/ECT@ECT, Mary 
Clark/Corp/Enron@ENRON, Damon Harvey/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, 
Keith Miceli/Corp/Enron@Enron, James D Steffes/NA/Enron@Enron, Richard 
Shapiro/NA/Enron@Enron
		 cc: 
		 Subject: USA: FACTBOX-FERC details changes for Calif power market.

USA: FACTBOX-FERC details changes for Calif power market.

11/01/2000
Reuters English News Service
(C) Reuters Limited 2000.

WASHINGTON, Nov 1 (Reuters) - The U.S. Federal Energy Regulatory Commission 
on Wednesday approved several actions to revamp California's power market 
over the next two years. 
Immediate changes include the following:
* Eliminate requirement that three utilities - Pacific Gas & Electric, San 
Diego Power and SoCal Edison - must sell all of their power to and buy all 
their power from the state Power Exchange (PX). 
* Require market participants to schedule 95 percent of their transactions in 
the day-ahead markets to reduce chronic underscheduling of load and 
generation and over-reliance on the ISO's real-time imbalance market to meet 
supply. FERC also proposed a penalty charge for scheduling deviations in 
excess of 5 percent of hourly load requirements. 
* Temporary modification of the single-price auction so bids above $150 MWh 
cannot set the market clearing price paid to all bidders. 
* Establish independent, non-stakeholder governing boards for the California 
Power Exchange (PX) and Independent System Operator (ISO). 
* Create congestion management design proposal. 
* Establish generation inter-connection procedures. 
* Explore alternatives to the single price auction by the ISO and PX. 
* Develop market rules to ensure sufficient supply is available to meet load 
and reserve requirements. 
FERC also approved changes to protect wholesale customers from unreasonable 
rates during the time it will take to adopt longer-term market remedies. The 
following price mitigation measures will remain in effect until Dec. 31, 
2002: 
* Single-price auctions for all sales in the ISO and PX markets at or below 
$150 MWh. The single price would be used for all load which clears below this 
amount in the auction. 
* If an auction does not clear below the $150 MWh level, suppliers who choose 
to bid above $150 would be paid their price bid. In other words, the highest 
bid of the day, if above $150 per MWh, would no longer be the clearing price 
paid by all. 
* Sellers receiving above $150 per MWh would be required to report their bids 
to FERC on a weekly basis and provide certain cost information to the agency. 
* The ISO and PX would be required to report monthly information on such 
bids, allowing FERC to monitor competitive conditions and assure just and 
reasonable rates. Sellers would be subject to potential refund liability but 
no lower than their marginal or opportunity cost if FERC finds 
non-competitive conditions. The potential refund liability would extend the 
full 24 months it would take to implement the market reforms.

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