fyi
----- Forwarded by Susan J Mara/NA/Enron on 11/08/2000 11:43 AM -----

	Gary Ackerman <foothill@lmi.net>
	11/06/2000 11:41 PM
	Please respond to foothill
		 
		 To: Bill Ross <billr@calpine.com>, Bob Anderson <Robert_Anderson@apses.com>, 
Carolyn Baker <cabaker@duke-energy.com>, CHARLES A MIESSNER 
<camiessn@newwestenergy.com>, Corby Gardin <jcgardin@newwestenergy.com>, curt 
hatton <curt.Hatton@gen.pge.com>, Curtis Kebler 
<Curtis_L_Kebler@reliantenergy.com>, Denice Cazalet <dcazalet@apx.com>, Greg 
Blue <gtbl@dynegy.com>, Jack Pigott <jackp@calpine.com>, Ken Czarnecki 
<Ken_J_Czarnecki@calpx.com>, Kent Wheatland <KEWH@dynegy.com>, "Klemstine, 
Barbara A(F56661)" <barbara_klemstine@apses.com>, Randy Hickok 
<rjhickok@duke-energy.com>, Rob Lamkin <rllamkin@seiworldwide.com>, Rob 
Nichol <rsnichol@newwestenergy.com>, robert berry <berry@apx.com>, Roger 
Pelote <roger.pelote@williams.com>, Sue Mara <smara@enron.com>, Jeff Crowe 
<jcrowe@apx.com>, Dan Douglass <douglass@arterhadden.com>
		 cc: 
		 bcc: 
		 Subject: Draft Comments for Thursday

Folks,

Here is my first draft.  My time trial shows it takes 6 min and 45
seconds to deliver.  We need to cut.

Dan, can you send me a front end to this that I will utilize to make
copies?  Send me the front end from last week's filing supporting EPSA's
motion.

I'll take comments up to 12 noon Wednesday.
gba
=============================


The Western Power Trading Forum (WPTF) is a California non-profit trade
association of almost thirty members who sell, buy and exchange power
throughout the Western U.S.  We are pleased to provide comments on the
following areas in response to your Order issued last week.

1. Price caps and their unintended consequences

2. Forward scheduling, penalties, mandatory must-buy, and

3. Independent Governing Boards.

First, I would like to take this opportunity to express our overall
gratitude to the Commission for issuing its Order.  The members of WPTF
have been bitterly frustrated by the events of the last summer, and
equally upset by the actions of non-jurisdictional parties in their
attempt to grab the steering wheel of restructuring, and drive it into
the ground. As I listened to your comments last week, I took note of all
the things you said, and the stated purpose of your actions.  After
listening to you, and reading the Order, I very much wanted to be here
today, even if it only afforded me a brief 5-minutes of your time.  I
would have flown here from California even if you only allowed me one
phrase to be uttered publicly.  And that phrase would be "Thank you.
Thank you for taking the bold step forward to revive California's
wholesale power market.  Thank you for having the courage to stand up to
parochial interests which are entirely self serving, and absent of any
national policy goals."

This Commission took a stab at correcting California's problems
utilizing several measures, one of which was a $150 price cap.  Whereas
we applaud the Commission's effort,  we find that price caps send the
wrong signal to both suppliers and load.  We have found that price caps
misallocate resources, and as your Staff report demonstrates, increases
exports of power to other parts of the grid where no caps exists.  We
find that price caps discourage demand-side participation, and at the
level proposed, will discourage much needed peaking generation
resources.  We also find that any price cap, but especially at the level
you have proposed, will create unintended consequences.  For example,
when market bids exceed $150, sellers will avoid bidding into the ISO or
the PX.  Will the market solution be as simple as bidding instead into a
competitive exchange to the PX, such as APX, or AlTrade?  Will the
liquidity of the bids suddenly flip from one market to another because
of an arbitrary line below which the single price auction operates, and
above which the bilateral market prevails?  That is a huge hammer, a
huge movement of tens of millions of dollars moving within the space of
an hour from one trading vehicle to another.

WPTF has been against price caps, and continues to believe that price
caps do much damage, and do not protect consumers.  The damages include
prolonging high prices, reducing price discovery, and reducing the
quantity of long-term offers that otherwise would afford consumers
much-needed price protection.  Average prices do not diminish with caps,
in fact, as you know, August prices in California were much higher than
last June, even though the buyer price cap imposed by the ISO Governing
Board was $250 instead of $750.

We recognize that the political reality is such that regulators don't
like price spikes, and caps are a quick solution.  If you feel that
price caps must be imposed, then limit the damage.  We believe that
Commissioner Hebert's price cap proposal which starts at $250, and
increments upward by specific amounts at specific times would be the
least damaging.  We also believe that a formulaic price cap that moves
with respect to demand, or fuel price would be the most harmful.  Market
participants can not conduct business with so much uncertainty hanging
in the balance.  The Commission recognized on the matter of Governance
that California needs regulatory stability, and the Commission is
pursuing policy options to regain much needed stability.  On the other
hand, floating price caps work in the opposite direction.  They reek
havoc because they inject more uncertainty, and lessen stability.  If
price caps are at all necessary, stick to the least damaging approach.

WPTF supports forward scheduling of demand, the imposition of real-time
penalties, and we support elimination of the must-buy provision embedded
in the California PUC Preferred Policy Decision.  Underscheduling of
load has been a practice that has lead to economic dislocation, and
reduced grid reliability.  Mandatory pre-scheduling will get the ISO
back on track by prudently limiting the amount of load that can be
exposed to real-time resolution.  Also, by eliminating the must-buy
provision, the UDCs can no longer complain about "supply not showing
up". Their avenues for finding cost-effective supply will be unlimited.

Finally, we support the replacement of the stakeholder boards with
independent board members.  Whereas we have been troubled by the antics
of the ISO Governing Board, we must note that the PX Governing Board has
not had the same type of problems. The PX Governing Board has done much
better at finding solutions to thorny problems.  But it is asking too
much, we think, to spare one and eliminate the other.  The actions of
the ISO Governing Board have proven to be highly damaging to the
credibility of electric restructuring.  Other states eschew
restructuring after observing the endless debates, the layers upon
layers of State interference in the workings of the California ISO
Governing Board, and the leverage exercised by voting blocks of
Governors with interests totally removed from the well-being of the very
institution on whose Board they serve.

We are concerned that the rules you have laid out for replacing the
stakeholder Governing Board may not be enough.  There may be incredible
pressure placed upon the existing Board members to select candidates
that further the aims of those that claim to protect consumers, but in
fact, are making a power grab.  My organization promises the Commission
that if we suspect, if we have evidence, if we detect, or otherwise
observe actions by a few to undermine the independence of a new Board, I
can assure you I will be back here raising my voice loudly in protest.
The California market simply can not survive serving two masters.  The
jurisdictional tug of war must end quickly so that we all can move
forward and pursue the goals and ambitions set out by this Commission in
Orders 888, and 2000.


Thank you.