Alan -

My read of the report is that the MSC wants a 2 year fixed price (established 
by some administrative procedure that works off of the natural gas index) for 
small commercial and residential retail customers and then they want to force 
all suppliers (SCs) that participated in the Cal ISO market in 1999 to meet 
this physical and financial obligation [isn't that a taking?].  

They only want the fixed price for 2 years because they want to capture the 
downside opportunity in later years (real generous).

It seems that the same result could be had if the UDCs contracted forward for 
80% of their small commercial and residential with people like us (or DENA in 
SDG&Es case).  

I don't know if we need to respond directly.  We may want to understand what 
type of obligation this would put on EPMI and EES (how many Mwh) for 2 years 
and try and figure out what our mandatory sales price would be under their 
model?

Give me a call.

Jim






	Alan Comnes@ECT
	12/04/2000 12:36 PM
		 
		 To: James D Steffes/NA/Enron@Enron, Jeff Dasovich/NA/Enron@Enron, Tim 
Belden/HOU/ECT@ECT, Susan J Mara/NA/Enron@ENRON, Mary Hain/HOU/ECT@ECT
		 cc: Paul Kaufman/PDX/ECT@ECT
		 Subject: New MSC Committee Report

All:

I just downloaded the attached from the ISO's website.  It is dated 12/1/00.  

To boil it down, the MSC comes down against "soft" caps and recommends the 
"get market-based rates in return for selling forward" proposal that the ISO 
staff is pushing.  Forward contracts would need to at rates that 
"approximate" competitive prices.  Based on my quick read that does not mean 
market prices; it means somthing more akin to cost of service.  MSC also 
wants there to be a penalty on generators for underscheduling.  They also 
claim there proposal will not exacerbate reliability problems.

I would be interested in people's opinion if Enron should be responding to 
this report.  Given the date of the report, I am not sure if/how the ISO 
would file this at the FERC.

G. Alan Comnes (GAC)

Here's the list of recommendations from the report.

(1) The PX &must-buy8 requirement would become a &must-schedule8 requirement. 
IOUs
would be required to schedule all forward energy through the PX, but would be 
free to
purchase it from any source.
(2) California generators and entities that sell to any California purchaser 
(not limited to the
PX and ISO) could continue to be eligible for market-based rates (and would 
be free of
refund obligations) only if they offer a substantial portion of their sales 
in the form of
two-year contracts at rates that approximate competitive prices. The details 
of such a
proposal are outlined in this report. The volume offered by sellers, in the 
aggregate,
would be sufficient to cover the all three IOUs, residential and small 
commercial
customer load using an average load profile for weekdays and weekends for 
each month.
(3) Any market participant that does not offer these two-year 
market-power-mitigation
forward contracts would be subject to cost-of-service rates for all of their 
sales of energy
and ancillary services into the California market for at least the two-year 
market power
mitigation period.
(4) The CPUC would be encouraged to set a default rate for IOU residential 
and small
commercial customers based on projected wholesale energy costs under the 
2-year
contracts described above.
(5) The under-scheduling penalty should be even-handed. The MSC recommends a 
real-time
trading charge that is applicable both to load and generation and, more 
important, does
not distinguish between instructed and uninstructed deviations from schedule.