Supplemental Market Notice
Regarding Implementation of FERC's May 25, 2001 Order

On May 26, 2001, the ISO sent out a Market Notice explaining its
implementation of FERC's May 25, 2001 Order (Order Providing Clarification
and Preliminary Guidance, 95 FERC ? 61,275).  The May 26 Market Notice noted
that FERC accepted the ISO's proposal to substitute a $0/MWh bid for all
available capacity that is not bid into the ISO's Imbalance Energy market
and for which either the ISO has not received heat and emission rate
information or the information is not complete.
Under the price mitigation proposal contained in FERC's April 26, 2001 and
May 25, 2001 Orders, generation owners selling into the ISO's markets or
transmitting power over the ISO Controlled Grid have the responsibility to
bid in any available capacity into the real-time Imbalance Energy market.
As noted above, if such capacity is not bid into the Imbalance Energy
market, the ISO has the authority to create price taker bids for any
non-hydro resource that has available capacity.   Such price-taker bids will
be created by either expanding a submitted Supplemental Energy bid to
include the unbid capacity or creating a Supplemental Energy bid of $0 value
for that unbid capacity.

Although the ISO has not started inserting the $0 price-taker bids, the ISO
will begin  doing so for Trade Day June 6, 2001.  For resources in which
available capacity can not be calculated in real-time due to the lack of
relevant information (e.g., resources with significant load behind the meter
for which there is no telemetry or separate metering of load and generation
or resources that are scheduled on aggregated basis), the ISO will not be
inserting price-taker bids.

Resources for which available capacity can not be calculated in real-time
generally include Qualifying Facilities ("QFs") under Public Utilities
Regulatory Policy Act of 1978.  On May 16, 2001, the FERC issued an Order
granting, in part, motions for emergency relief filed by entities
representing QFs, see, 95 FERC ? 61,226.  The FERC authorized the sales of
"excess" QF power at negotiated rates provided that the power is sold to
serve load in California. The FERC stated that excess QF sales may be made
pursuant to either bilateral contracts at negotiated rates, or may be bid
into the  ISO's real-time market.  If the QFs choose the real-time market,
the FERC required the QFs to be price-takers.

The ISO notes that in all cases where it does not have adequate information
to calculate available capacity, the owners still have the responsibility to
bid in all available capacity under FERC's Orders.

Client Relations Communication
CRCommunications@caiso.com