Here are some initial reactions and questions to the CAISO market 
stabilization plan, which is attached.

Give me or Sue Mara your comments and then we can turn it into message points 
for  media / advocacy folks.

In addition to reviewing the plan, I listened in to part of a stakeholder 
call that occured Friday 10 a.m. PST.

DRAFT MESSAGE POINTS:

With limited exceptions, the plan does nothing to increase supply or decrease 
demand.  It primarily addresses costs and market "stability"

INTERESTING QUOTES:
 
"Over the edge into cost based regulation" Duke Power

Although the plan provides for cost control and for improving market 
"stability" (whatever that means), the ISO staffer (Byron Wortz) who 
presented the study admitted it "Will do nothing to increase supply this 
summer"

A staffer, Lorenzo,  stated (paraphrased)" all out of state suppliers are 
cost of service based and do not need to recieve market based rates

ON SPECIFICS

The Ugly:

Resource-specific cost based bid caps (RSBC or bid caps):  cost of service 
regulation that disincent supply
The ISO will hold in-state resources hostage--cuts any exports when reserves 
fall below a stated critera

Imports can only participate as price takers.  Thus if the highest-cost 
in-state resource is below the opportunity cost of power, needed imports will 
not come in:
 >>this will decrease supply!!
 >> Staffer stated ISO hopes to sign "longer term deals" if necessary to 
secure out-of-state power but acknowledged the proposal needs more work.

The Bad:

The ISO is considering pay as bid, which is complex and does not increase 
supply.  However, on the call they said they are leaing to a single price 
auction.  However, with bid caps the market will still be distorted.

The Good?:

The ISO wll implement an hourly day-ahead and hour-ahead market, essentially 
filling  a void created by the PX's demise.
 >>( Enron has strongly advocated market seperation in the past but do we 
want to consider supporting a day ahead market?)

Market separation rules (MSR).  ISO is leaning towards option 2 in which SCs 
submit bundled schedules but that market seperation would be suspended after 
congestion process is conducted; i.e., final schedules may be imbalanced.
 >>What do we think of this?
.