FYI (BM = balancing market in his email).

I'm still on Eklavya's back to produce a white paper analysis of possible 
trading stretagies under NETA and their likely implications for prices and 
volatilities.  I'll forward it on as soon as (if ever) I receive it.

Steve
---------------------- Forwarded by Steven Leppard/LON/ECT on 02/09/2000 
03:10 PM ---------------------------
   Eklavya Sareen                09/02/2000 14:43

To: ECT London UK Power Trading, Enron London Power Analytics, ECT London UK 
Gas and Power Origination, Paul Dawson/LON/ECT@ECT
cc:  

Subject: Gaming of NETA Prices - Constraints on The McCoy Strategy

I believe most people are now familiar with the McCoy strategy for 
manipulating imbalance prices in a favourable direction:

1) Take a massive long or short position in forward trading

2) Choose physical production decisions to drive system 
 i) long if forward market postion is long
 ii) short if forward market postion is short

3) If system is long it needs to accept bids, if system is short it needs to 
accept offers

4) If forward market postion is long submit very large postive bids to the BM 
to drive SSP high - SSP is price received for spilling power to the BM (going 
into BM long)

5) If forward market postion is short submit very small (even negative) 
offers to the BM to drive SBP low - SBP is price paid for purchasing power 
from BM (going into BM short) 

The NETA programme intends to tag transmission cosntraint related trades in 
the BM. According to DISG 24 "Tagging Constraint Trades" (21 Dec 99) Option 
3(a) [the option that is proposed to be adopted], paragraph 2.3 (p.4):

"In the relevant Settlement Period, all accepted Offers and Bids volumes that 
can be arbitraged, i.e. where a volume has been bid higher than the price at 
which a volume has been offered, are eliminated;"

One of the implications of the above procedure is that the highest bids (the 
McCoy bids) and the lowest offers (the McCoy offers) are likely to be 
eliminated from the calculation of imbalance prices. This will make it harder 
to pursue the McCoy strategy successfully.

Thoughts and comments welcome.

Thanks,

Eklavya.