1.	OTR's Allowance Banking & Flow Control Process
?	Allowances not used in one year can be banked for use in later years.
?	Allowances in the bank are a benefit to the environment, but
?	Withdrawing too many allowances at once can be bad for the environment.
?	Flow control regulates the rate of withdrawal.

2.	Flow Control
?	If the bank is greater than 10 percent of the budget then only some portion of the banked allowances can be used normally.
?	Allowances in each account beyond that portion must be retired at 2:1.
?	The ratio is:
0.10*regional NOx budget
total number of banked allowances in the region

3.	The Trigger
?	At the end of the season, if banked allowances are more than 10 percent of the budget, then flow control is triggered for the use of banked tons in the next year.
?	When each source retires banked allowances for compliance at the end of the next year, it will have to address flow control.
?	All banked allowances in the account are affected regardless of where they came from.

4.	The Effect
?	If the source doesn't use its banked allowances, there is no discount.
?	If the source uses banked tons below the flow control ratio, there is no discount.
?	Only banked tons that are used from the flow-control portion of the bank account are subject to 2:1 retirement.
?	Example
?	For the 1999 season, the calculation is approximately:
?	0.10*218,733=50%
?	43,585   
?	In the next year, each account can use up to 50% of its banked allowances at 1:1.
?	Beyond that, they must be retired 2:1.

5.	Flow Control Summary
?	Flow control took effect in 2000.
?	It only affects banked allowances when they are used.
?	Some banked allowances can be used at 1:1.
?	Unused allowances can be banked to future years when flow control may not apply.


This was from a presentation we did to the emissions desk about a year ago.  Does it help answer your questions?  

Mary Schoen
Environmental Strategies
Enron Corp
415.782.7803 (phone)
415.782.7854 (fax)

 -----Original Message-----
From: 	Taylor, Michael E  
Sent:	Thursday, November 01, 2001 7:16 AM
To:	Schoen, Mary
Subject:	OTR NOx

Mary,

Can you please explain how OTR NOx allowances roll from year to year only in OTR NOx program (not SIP CALL)?

What is the banking system? (see flow control explanation above) Is there devaluation? (yes, if flow control triggered and allowances used in the year it is triggered) Does it matter what state the allowances are from?
(no)

Thanks
Mike