I'd like to propose a conference call to discuss our response to multiple 
FERC cases detailed below.

Section 206 Proceeding and SDG&E Complaint Case

As you know, last week the FERC established a  Section 206 proceeding to 
examine the justness and reasonableness of the rates of power sellers 
(including EPMI) in the California markets.  The Commission consolidated this 
proceeding with its case involving the SDG&E's complaint against the power 
marketers (including EPMI) in California.  This type of proceeding differs 
from the Staff's investigation of the wholesale market in several respects.

(1) It establishes a formal evidentiary process where all parties have an 
opportunity to present evidence and arguments on the record before the 
Commission.  In Section 206 proceedings, the FERC usually establishes a 
discovery and testimony schedule followed by a hearing before an 
administrative law judge (ALJ).  Such proceedings usually take a long time.  
The Commission did not establish a schedule here, suggesting that it either 
would decide the case via a paper hearing or prompt its staff to try to 
settle the case.  The Commission may wish to act by paper hearing to obviate 
the slow procedural schedules that usually result from using an ALJ or, as is 
often the case with California, the FERC may wish to avoid the political 
backlash that might result from issuing a controversial order by letting 
parties fight the case out at the bargaining table after the Staff does its 
discovery and recommends an outcome to the parties.

(2) Although the Commission equivocated on whether it would use refund 
authority, it established a refund date of sixty days from the date the order 
is published in the federal register.  This was apparently because 
Commissioner Hebert wrote a concurrence indicating his opposition to 
instituting a refund obligation that might predate the FERC's conclusion of 
its investigation (because it would prohibit wholesale providers from knowing 
what rates they will be able to recover).  

Ron Carroll has now raised the question of whether we should request 
rehearing of the FERC's order, challenging the Commission's authority to 
impose a refund effective date on the basis that no defendant has requested a 
refund.

Cal PX Price Cap Filing

As you also know, the California PX has filed to decrease its price cap to 
$350.

Electricity Oversight Board Complaint

Yesterday, the Electricity Oversight Board's (EOB) filed a complaint with 
FERC against "sellers" (including munis, federal power marketers and "sellers 
located beyond the border of the United States" (in other words PowerEx)) and 
scheduling coordinators that sell into the California wholesale market.  It 
urges FERC to find that the California wholesale market is not workably 
competitive.  It alleges that scheduling coordinators are particularly well 
positioned to take advantage of "gaming" opportunities because they often bid 
on behalf of more than one seller - undermining the benefits of divestiture.  
It alleges that sellers and SCs can exercise market power under two 
circumstances:

1. When all sellers and scheduling coordinators know with substantial 
certainty that the ISO will be accepting all bids or
2. When a number of sellers and scheduling coordinators know that they 
control enough capacity in relation to the system demand at that time and the 
resulting margin of residual supply that they have a high likelihood of being 
able to successfully set the price.

It claims that once demand reaches or exceeds approximately 33,000 MW, 
sellers and/or scheduling coordinators have the ability, and do, exercise 
market power and that a bid cap is necessary during these periods.  It urges 
FERC to take immediate steps to lower prices and ensure the bid caps (of $250 
for energy and ancillary services and $100 for replacement reserves) remain 
in effect pending FERC action.  EOB is concerned that if the FERC doesn't 
require continuation of price caps, the ISO could undo its price cap vote at 
any time.  It asks FERC to take any and all actions necessary to ensure that 
California's wholesale rates are just and reasonable.  Its asks to 
consolidate its filing into the FERC's section 206 proceeding.  Assuming the 
FERC consolidates this cases, which I'm sure it will, this would create a 
defendant for refund purposes so I think Ron's rehearing idea has been 
overtaken by events.

However, we need to decide what entities should make what filings in 
reference to the above.  I recommend the following:
EPMI doesn't need to intervene in the Section 206 proceeding because the FERC 
combined it with the SDG&E case so EPMI is already a party.  I think we 
should use Seabron  to develop a detailed analysis of problems with the 
California market and to draft responses to the data requests that we will 
undoubtedly be receiving soon from FERC.  This analysis should include the 
points we presented to FERC but should also include all other important 
problems with the California wholesale market.  
We are parties of right in the Electricity Oversight Board's case because we 
are respondents and as such we are required to file an answer under the 
Commission's rules.  I think we should agree that the FERC should consolidate 
this case with the Section 206 case because they are obviously the same 
case.  We should oppose price caps in California and lay out the same 
arguments we made in our presentation to FERC.  We also need to refute the 
contention that capping the PX price will encourage energy sales to move into 
the forward market.  We will also need to develop an analysis of how we can't 
exercise market power under the circumstances alleged by the EOB.  We should 
use Seabron for this.
Although it would be convenient to work with EPSA in these dockets, I'm not 
sure that will work since I bet the FERC will combine these cases and will be 
seeking discovery individually from EPMI.  On the other hand, we may wish to 
use EPSA for any of the less popular messages that we may want to deliver 
about the market in California.

Lysa - Please set up a conference call about this ASAP.