Summary of today's meeting from our trade association and a news article picked up by Steve Hall.

GAC 

FYI.  At today's FERC meeting two sets of items were voted out that pertain directly to the CA markets.  This summary is based upon the discussion at the meeting, and the actual orders will contain additional details that may not be reflected here.  A subsequent email will circulate with links to the FERC orders once they are posted.

1)  FERC voted out an order granting in part, and denying in part, the Reliant / Mirant complaint against CAISO.  The order builds on the 11/7 creditworthiness order and finds that DWR is a Scheduling Coordinator, that it should not have access to confidential information not also available to others, and that DWR should be scheduling and operating pursuant to the CAISO tariff.

During the discussion on this item, Massey noted concern about CAISO allegation that the BEEP stack is not reliable b/c generators are not following dispatch instructions.  Massey wants CAISO to promptly inform the Commission where they believe an entity is not complying with the tariff or failing to follow the dispatch instruction.

2) The second set of orders involves three dockets: (a) a new 206 rulemaking regarding market-based rate authority; (b) revision of the market power test, made in the context of a triennial review of market based rate authority; and (c) a narrow exemption to the FERC market mitigation for entities with market power pursuant to the order in (b).

FERC is putting out a new rulingmaking regarding market-based rate authority to close what they find to be a flaw with existing tariffs in the wake of California's problems.  The rulemaking initiated today calls for the imposition of a refund provision in all market-based rates.  The refund requirement attaches to "bad behavior" such as economic or physical withholding or other anticompetitive actions.  Apparently there is a portion of the rulemaking that asks for comments within 15 days.  During discussion, Massey pointed out that no "bad behavior" was found in California, and that customers should not be forced to bear the burden where the market goes out of control.

FERC has revised the market power analysis used to support a request for market-based rate authority.  FERC is now establishing a "supply margin analysis" (SMA) to replace the "hub & spoke" analysis used to determine the presence of market power.  The SMA looks for "pivotal" suppliers based on peak demand within a market.  The definition of the market would recognize the role of transmission constraints.  A generator is considered "pivotal" where its supply is required to meet system peak demand.  If such status is found, the market-based rate authority does not extend to those peak conditions, and instead the applicable rates are a cost-based rate that is applicable only to the uncommitted unit capacity.  Rates for any such capacity would be posted in INCs and DECs for that uncommitted capacity.  This policy revision occurs in the context of a triennial review of market based rate authority for AEP, Southern and Entergy.  Additional details will be in the order and we'll send an email
with links when it gets posted.

The last item would create a narrow exemption to the application of SMA and maket power mitigation in the case where the supplier is in a ISO or RTO with existing, FERC-approved market mitigation mechanisms.  While this order was to be adopted along with the other two noted above, it was held for some revisions and is expected to come out either later today or tomorrow.  The context for this order is the Huntington Beach application.  The language revisions are aimed at addressing concerns that at the end of the west-wide mitigation in the coming September, there would not be an effective replacement mitigation mechanism at CAISO.

We will have a short discussion on these items during the FERC call at 10 am today.  ABB


--
Andrew Brown
Sacramento, CA
andybrwn@earthlink.net




 -----Original Message-----
From: 	Hall, Steve C. (Legal)  
Sent:	Tuesday, November 20, 2001 10:09 AM
To:	Comnes, Alan
Subject:	FW: USA: UPDATE 1-FERC claims jurisdiction over Calif water dept.

You may have seen this.

 -----Original Message-----
From: 	Bryson, Jesse  
Sent:	Tuesday, November 20, 2001 10:07 AM
To:	Hall, Steve C. (Legal)
Subject:	USA: UPDATE 1-FERC claims jurisdiction over Calif water dept.

USA: UPDATE 1-FERC claims jurisdiction over Calif water dept.
  
11/20/2001 
Reuters English News Service 
(C) Reuters Limited 2001. 
WASHINGTON, Nov 20 (Reuters) - The Federal Energy Regulatory Commission on Tuesday said it has jurisdiction over California's main power purchasing arm, the California Department of Water Resources, which took over buying power for much of the state earlier this year. 
FERC also told the California Independent System Operator (ISO), which manages the power grid, to stop giving preferential treatment to the state water agency. 
As a power scheduling coordinator for PG&E Corp and Edison International's Southern California Edison, the water department must file with FERC a tariff schedule, FERC staffers said at a commission meeting. Those schedules are routinely required of other market players. 
The water department also should not be privy to market information unavailable to other market participants, the commission said. Such information sharing constitutes "preferential treatment of the ISO towards the (state) water department, said FERC Commissioner William Massey. 
The California ISO manages the state's transmission grid and runs a complicated daily power auction to match buyers and sellers. FERC is currently auditing the ISO. 
The California Department of Water Resources became the state's only credit-worthy buyer earlier this year. The state stepped into the role after power shortages and impending price spikes barred direct purchases by the state's two largest utilities. 
Pacific Gas & Electric filed for Chapter 11 bankruptcy protection in April and SoCal Edison's credit is rated junk status. 
Generators accused the California ISO of sharing sensitive market information with the water department and tilting its auction rules to favor long-term contracts inked in the wake of the power crisis. 
Power generators Mirant Corp. and Reliant Energy Inc. have complained to FERC that information-sharing between the water department and the California ISO violates the California ISO's tariff.