In answer to your first point, the FERC did exempt demand side bids from the 
$150.  See footnote No. 84 of the order.




Susan J Mara@ENRON
11/02/2000 01:50 PM
To: Mary Hain/HOU/ECT@ECT
cc: Alan Comnes/PDX/ECT@ECT, carrrn@bracepatt.com, Christopher F 
Calger/PDX/ECT@ECT, Dave Parquet@ECT, Donna Fulton/Corp/Enron@Enron, James D 
Steffes/NA/Enron@Enron, Jeff Dasovich/NA/Enron@Enron, Joe Hartsoe@Enron, Mona 
L Petrochko/NA/Enron@Enron, Sarah Novosel/Corp/Enron@Enron, Tim 
Belden/HOU/ECT@ECT 
Subject: Re: November 9 FERC Comments  

Gang,

I didn't get Jim's e-mail but .....  Here are my comments

This looks good as a bottomline message, but I'd like to dress it up and take 
it out on a date first (doesn't dasovich talk like this?)

I'm afraid we'll look greedy unless we focus strongly on the RETAIL affect of 
the low price cap and how raising it would ultimately allow retail customers 
to save money and wholesale markets to work more efficiently.  there is some 
stuff we can quote in the iso's market surveillance com report.  we also have 
some real world experience to draw upon (i'm told that FERC occasionally 
really likes to hear about the real world) -- we had a number of customers on 
demand responsiveness plans in the east and we sent them checks for BIG BUCKS 
this summer.  To the contrary, in the west, we were working with some 
customers (a  few hundred MWs)  to participate in the ISO's program -- after 
the Board voted to lower the cap to $250 -- the customers all said sayonara 
-- could no longer justify the expense and the interference in their 
operations.  These are powerful examples of how price caps influence retail 
demand response.

This only goes so far, however...

The FERC could easily eliminate the problem by exempting demand side bids 
from the price caps.  SO, we need more...

I think we should focus on the practical effects of a "soft" cap (not simple 
and not certain) -- and how stable markets need stable price caps -- "soft" 
caps are not a stable price and do not send a stable signal for investment in 
new generation (the market may never know the real price since it doesn't set 
the MCP). The staff report provides some good evidence on why the caps are 
too low and we could also use the ISO's calculation of prices for short-term 
peaking capacity.  Then mention the issues Mary discussed below (information; 
cap mechanism bad for power marketers in particular)

Sue



	Mary Hain@ECT
	11/02/2000 01:03 PM
		 
		 To: Susan J Mara/NA/Enron@Enron, Mona L Petrochko/NA/Enron@Enron, Jeff 
Dasovich/NA/Enron@Enron, Alan Comnes/PDX/ECT@ECT, Tim Belden/HOU/ECT@ECT, 
Dave Parquet, Christopher F Calger/PDX/ECT@ECT
		 cc: James D Steffes/NA/Enron@Enron, Joe Hartsoe@Enron, Sarah 
Novosel/Corp/Enron@ENRON, carrrn@bracepatt.com, Donna Fulton/Corp/Enron@ENRON
		 Subject: November 9 FERC Comments

In response to Jim's E-mail  - here's is my proposed list of issues for 
Enron's November 9 comments.  We have to send our issue list to FERC tomorrow 
so please comment on this ASAP.

We should discuss price signals including:
price caps and
market information

Here's my rationale.  Since we'll only have five to ten minutes to talk, our 
comments should focus on the most important commercial issues to us: removing 
or improving price caps and improving market transparency by providing market 
information to market participants.  We could summarize the positions we took 
in the white paper about why the Commission shouldn't allow a price cap at 
all and why we need information.  In addition, we should assume that they 
will adopt price caps anyway and may reaffirm their own proposal, so we 
should also tell them how the $150 cap will be too low to incent investment 
in new generation, how the reporting requirement will create special problems 
for power marketers  (we don't have marginal costs and the Commission has yet 
to determine what opportunity costs are), and how they still have not 
addressed the problems created by OOM.

In addition, although I don't think we need to tell FERC this, our comments 
could briefly congratulate the Commission for removing the buy/sell 
requirement, addressing underscheduling of load, creating independent 
governance and directing the ISO to file generation interconnection 
procedures.  Although our written comments will probably want to discuss any 
clarifications of this measures as well as the long term measures the 
Commission discussed (reserve requirements, alternate auction mechanisms, 
balanced schedules, enhanced market mitigation, congestion management 
redesign, demand response programs, RTO development and compliance) our oral 
comment time is too precious to use on these issues.  In addition, our 
written comments will want to beef up the legal support for the Staff's 
conclusion about refunds and perhaps request rehearing of the Commission's 
decision to move the refund effective date.  I'm sure we'll find more issues 
as we go.