FYI
---------------------- Forwarded by Richard Shapiro/NA/Enron on 04/27/2001 01:07 PM ---------------------------


"Jackie Gallagher" <JGallagher@epsa.org> on 04/27/2001 11:59:30 AM
To:	<bhawkin@enron.com>, <bmerola@enron.com>, <christi.l.nicolay@enron.com>, <donna.fulton@enron.com>, <janelle.scheuer@enron.com>, <jeff_brown@enron.com>, <jhartso@enron.com>, <jsteffe@enron.com>, <ray.alvarez@enron.com>, <rshapiro@enron.com>, <sarah.novosel@enron.com>, <tom.hoatson@enron.com>
cc:	 

Subject:	California Order Proxy Price Calculation

MEMORANDUM

TO: Regulatory Affairs Committee
       Power Marketers Working Group

FROM: Joe Hartsoe, Regulatory Affairs Committee Chair
            Bob Reilley, Power Marketers Working Group Chair
            Julie Simon, Vice President of Policy
            Mark Bennett, Senior Manager of Policy
            Erin Perrigo, Manager of Policy

DATE: April 27, 2001

RE: California Order Proxy Price Calculation

We have had an initial opportunity to review FERC's Order Establishing Prospective Mitigation and Monitoring Plan for the California Wholesale Electric Markets and Establishing an Investigation of Public Utility Rates in Wholesale Western Energy Markets, and will provide a more detailed summary early next week.

However, questions have arisen as to the calculation of the proxy price when a stage 1, 2 or 3 emergency is called.  In initial discussions with FERC staff, we have determined that the price mitigation will work as follows:

For the following day, the ISO will publish at 8 a.m. an average of the daily prices published in Gas Daily for all California delivery points, as well as emissions costs.  The emissions costs will be calculated by the ISO using the Cantor Fitzgerald Environmental Brokerage Service.  The marginal unit will then be determined via the single price auction in the hour, and the ISO will then take the previously submitted and confidential heat rate data and multiply it by the posted average gas price and emissions costs for that hour to determine the market clearing price.  The ISO will not be calculating an estimated market-clearing price in advance.