*  from Robert Neustaeder in Govt Affairs

---------------------- Forwarded by Jennifer Rudolph/HOU/EES on 05/03/2001 
10:08 AM ---------------------------


Robert Neustaedter@ENRON_DEVELOPMENT
04/30/2001 06:02 PM
To: Jennifer Rudolph/HOU/EES@EES
cc:  
Subject: California Update

Jennifer,

Just a bit of an update with regard to California regulatory and legislative 
issues brought up in the Govt. Affair conference call.

Edison transmission sale - Serious problems being encountered with 
legislation dealing with government purchase of SCE transmission assets.  
Both democrats and republicans are having problems with the Governor's 
proposal.

Hearings are being held this week on the windfall profit tax bill (SB1X).  Of 
note, Intergen is expected to testify that if the bill is passed it will not 
go forward with plans to build a power plant within the state.







.? Divided FERC Approves Price Mitigation for Spot Market in California. 
Following more than a nine-hour delay for the Commission meeting this week, 
the divided FERC voted out a controversial market monitoring and mitigation 
plan. FERC approved a plan that will establish a single-market clearing price 
auction for real-time transactions in the Cal-ISO during times of reserve 
deficiencies in the state. 
???????? During Stage I, II, and III emergencies, real-time transactions will 
be based on a proxy price tied to natural gas prices.
???????? Each generator, through a participating generator agreement, is 
required to offer all available power and bid its marginal cost based on the 
generator's heat curve, emission rates, gas costs and emission costs plus $2 
for O&M.
???????? Gas cost will be the average daily cost of gas for all delivery 
points into California. 
???????? FERC opened Section 206 investigation to determine whether bulk 
power prices in West are just/reasonable, but only applies to prices on 
transactions for 24 hours or less during emergencies.
???????? Cal-ISO must submit RTO proposal by June 1. If it fails to do so, 
the state will lose its mitigation plan completely
???????? Massey took issue with the offer of price mitigation during 
emergencies; further criticized the provision on refunds as too narrow; 
believes FERC should concentrate more on prices for gas, considering the 
growing use to fuel power generation
???????? The order expires one year from date of issuance. 
???????? Enron's read on the order is that price caps won't help the state's 
problems; they will neither increase supply nor decrease demand. 
?
13.? In a related development, the California State Assembly passed a joint 
resolution urging FERC to place a "cost-based rate cap on natural gas coming 
into the state over the next 18 months. The resolution goes on to the State 
Senate where it is expected to pass, and then formally sent to the federal 
regulators.
?
14.? New RTO Accepted by FERC For Western States. FERC issued an order 
accepting a new RTO, RTO West, that includes Avista Corporation, Bonneville 
Power Administration, Idaho Power Company, Montana Power Company, Nevada 
Power Company, PacifiCorp, Portland General Electric Company, Puget Sound 
Energy and Sierra Pacific Power. RTO West will operate more than 90% of the 
high voltage transmission from the Canadian border into southern Nevada.