The ISO filed a response at FERC to the PX's request to remove the hard cap 
on adjustment bids and 
replace it with a floating cap that would track the price of energy in the 
market.  

The ISO opposes the proposal arguing that it may produce extremely high 
constrained Zonal market clearing 
prices in the forward markets and may be subject to the exercise of market 
power and to gaming.  

The ISO suggests the PX fix this by anchoring its Adjustment Bids 
(incremental and  decremental bids) prices 
to the unconstrained market clearing price, as opposed to absolute Energy 
bids.  In other words, the PX would 
establish its constrained market clearing price as the sum of the 
unconstrained market clearing price and the 
Usage Charge resulting from the ISO,s Congestion Management process.  

To effectuate this change, the PX would have to impose a new rule that 
Adjustment Bids be within $125 of the 
unconstrained market clearing price. The PX would then be required to process 
the Adjustment Bids prior to 
passing them on to the ISO. The PX would have to subtract the unconstrained 
market clearing price from each 
Adjustment Bid prior to submitting it to the ISO. The ISO would then utilize 
these Adjustment Bids, as well as 
those submitted by other Scheduling Coordinators, to run its Congestion 
Management system. After the ISO 
completes its  Congestion Management process, the ISO would then 
"post-process" the Adjustment Bids 
(add back the unconstrained market clearing price) for use by the PX in 
establishing its constrained Zonal 
Energy prices and, as needed, by the ISO in real-time Congestion Management. 

The ISO says it does not intend, by presenting this alternative to the PX,s 
proposal, to preclude consideration 
of other solutions that may be presented by one or more of the utilities or 
by the EOB.  

The ISO also argued that the Commission should impose reporting requirements 
on those entities who submit 
Adjustment Bids in the ISO,s Congestion Management process.  It recommends 
that the Commission require 
the submission of all Adjustment Bids to the Commission, the ISO and the 
EOB.  It also asked the Commission 
to direct the PX Market Monitoring Unit, in concert with the ISO,s Department 
of Market Analysis, to increase its 
monitoring of Adjustment Bids and bids submitted in the PX forward Energy 
markets for evidence of the 
exercise of market power.

The ISO argues that the effect of the FERC's December 8 Order on supply 
sufficiency in the ISO,s real time 
Imbalance Energy market was immediate and beneficial.  It states the 
following in support.  Although supply 
in California is still very tight, after implementation of Amendment No. 33, 
there were bids available in the ISO,s 
"BEEP Stack" to address California,s real time balancing needs for the first 
time in nearly a week. Immediately 
after the order was issued 3000 to 5000 MW of Generation internal to 
California and up to an additional 1990 MW 
of imports became available to the ISO.  The following day there was only one 
hour in which reserves dropped 
below 6% and one hour in which reserves were as great as 10%. In addition, it 
alleges that the implementation 
of Amendment No. 33 has substantially relieved the burden which had 
previously been placed on the ISO,s 
operators by in-state Generators attempting to negotiate prices in real time 
in response to ISO Dispatch instructions.

The ISO also requests that the Commission clarify its December 8 Order to 
confirm that sellers submitting bids 
above $250 in the ISO,s Imbalance Energy Market are required to report their 
bids and provide cost information 
on a weekly basis not only to the Commission, but also to the California 
Electricity Oversight Board and the ISO.  

The ISO requests clarification that the Commission intended to approve the 
proposed December 12, 
2000 effective date for the cost allocation elements of Amendment No. 33.