West Traders et al.

FERC's meeting, which will include the issue of price mitigation for 
California, is on tomorrow's (Wed's) agenda.  I will be patching in the 
meeting in a conference room here in Portland. The meeting begins 7 a.m. PDT.

Based on yesterday's newspapers, staff's proposal appears to have a chance of 
adoption. However, what the FERC will do is very much up in the air.  Any 
mitigation plan will replace the current approach set to expire 4/30/01 that 
requires (1) cost reporting of all accepted bids over $150/MWh, and (2) 
refunds (subject to appeal) of generators who bid and are accepted above a 
index based on a heat rate and monthly gas price.

Staff's mitigation plan has been out since early March 2001.  Here's a 
rundown:

o Applies only in in-CA generators with agreements (PGAs) selling to ISO R/T.

o Applies only in stage 3 (ALTHOUGH one of the easiest "tweaks" the FERC can 
do is make the staff proposal apply to Stage 2/3 or Stage 1/2/3)

o ISO R/T prices within the state will be "mitigated" (capped) at a single 
price based on the marginal cost of the last PGA generator accepted.  Staff 
proposal states:

"PGA generators would be required to propose to the Commission, in advance, a 
dependable capacity for
each unit as well as certain operating parameters necessary to calculate 
marginal costs, such as heat rate. The Commission staff could then use a 
published fuel cost such as that which is available in Gas Daily and emission 
credit data (where applicable) to determine the correct price that can be 
used for mitigation purposes. This would then be the basis upon which the ISO 
would use pre-determined standing prices to mitigate prices during
times of reserve deficiency (e.g., Stage 3)."

o It is not clear whether a daily or monthly index would be used.  Currently 
refund orders use a monthly index.

o By "single price", not that everyone will get the in-state clearing price 
based upon the marginal cost of the last PGA generator selected.  

o Imports: the staff proposal punts on imports.  I read staff proposal imply 
that there will be no mitigation on imports per se but that imports are 
likely to be taken on an OOM basis more frequently when stage 3's are in 
effect.

If you have any questions, please contact me.

Alan Comnes.