---------------------- Forwarded by Mary Hain/HOU/ECT on 12/11/2000 11:47 AM 
---------------------------


Alan Comnes
12/11/2000 01:29 PM
To: Tim Belden/HOU/ECT@ECT, Christian Yoder/HOU/ECT@ECT, Jeff 
Richter/HOU/ECT@ECT, Robert Badeer/HOU/ECT@ECT, John M Forney/HOU/ECT@ECT, 
Greg Wolfe/HOU/ECT@ECT, Mary Hain/HOU/ECT@ECT, mwood@stoel.com, Elizabeth 
Sager/HOU/ECT@ECT, steve.hall@enron.com
cc:  
Subject: Bullet Summary of the ISO's Amendment No. 33 (December 8 Filing)

After I wrote this I was forwarded Steve Hall's summary.  There's some 
redundancy but hopefully, this provides a few more details.    Also, Mary H. 
and I are informed that on Friday the FERC issued an order that appears to 
approve the ISO,s request in full.

Bullet Summary of the ISO's Amendment No. 33 (December 8 Filing):

The following is a summary of the filing made by the ISO.

1) ISO,s $250/MWh Soft Cap
a) Summarized: ISO Claims its proposal is identical to the FERC proposed soft 
cap but raises the soft cap level to $250 from the $150/MWh proposed by the 
FERC: &The ISO would replace the current cap on Imbalance Energy bids with an 
interim &soft8 price cap based on the price mitigation proposal in the 
Commission,s November 1 Order. The ISO,s scheduling system will not reject 
Energy bids priced in excess of the $250/MWh price cap, but will evaluate 
those bids in price merit order. However, if the ISO issues Dispatch 
instructions to Scheduling Coordinators for Energy that has been bid in 
excess of the $250 soft cap, those bids will not set the Market Clearing 
Price for Imbalance Energy. Rather, those Scheduling Coordinators will be 
paid in accordance with their bids.8

b) Refund risk and cost documentation above $250. &Imbalance Energy above the 
level of the soft price cap would be subject to refund, based on subsequent 
review by the Commission. It also should require Scheduling Coordinators that 
submit such bids to supply supporting cost information to the Commission, as 
well as to the ISO and to the California Electricity Oversight Board so that 
they may bring questionable bids to the Commission,s attention.

i) Appears to imply that the proposed reporting requirement is supplemental 
to what was requested by the FERC. See p. 8

ii) Regarding production costs:  fuel, taxes, emission credits, startup costs 
are all listed as costs.  However, no mention of noncontiguous scheduling 
costs or reasonable profit.

iii) Quasi safe harbor on opportunity costs:  In a footnote to cover letter, 
ISO states it will particularly scrutinize any opportunity costs in excess of 
10% of the production costs or $25/MWh, whichever is lesser.

c) Useful quote: &In light of current fuel prices and the ISO,s recent 
experience in receiving less than a thousand MW of Imbalance Energy bids at 
prices of $150 or less in many hours, the ISO believes that a $150 soft cap 
would be tantamount to procuring all Imbalance Energy on an as-bid basis.8

d) Effective date: 4 p.m. PST 12/8/00. 

e) Term of this soft cap:  lesser of 3 mo (3/8/01) or whenever the Commission 
supercedes it by its own order.

f) Applicable tariff sections.  Section 2.5.23.2 and .3.  See attachments 
A1/B1 to the filing.


2) Participating Generator Penalties
a) Summary: &the ISO proposes in Amendment No. 33 to assess penalties against 
Participating Generators that refuse to operate in response to an ISO 
Dispatch instruction during a System Emergency or when the ISO is acting to 
avoid an imminent or threatened System Emergency. They would be charged an 
amount equal to twice the highest price that the ISO paid for Energy for each 
hour in which the Participating Generator failed to respond. In addition, if, 
during that hour, the ISO curtailed Load to manage a System Emergency other 
than Load that has not been designated by agreement or regulation as 
interruptible, the Participating Generator would pay an additional penalty of 
$1000/MWh for the Energy that it failed to deliver.8
b) Allowed excuse:  The penalties would not apply if the Participating 
Generator has notified the ISO (within the hour of instruction), and 
subsequently demonstrates (documentation within 72 hours) , that its 
Generating Unit, System Unit or System Resource was physically unable to 
operate or that operation would violate a legal restriction that could not be 
waived.

c) Applicable tariff sections. Amends portions of 5.6.1 .2 and .3. See 
attachments A2/B2 to the filing.

d) Effective date: Same as the ISO,s new soft cap: 4 p.m. PST 12/8/00

e) Term:  I did not see any sort of sunset provision.

3) Load Imbalance Penalties

a) Summary: &Scheduling Coordinators who rely on that  market to serve their 
Loads the ISO,s costs of obtaining Energy through bids above the proposed 
soft price cap or through out-of-market Dispatches when bids are 
insufficient. Specifically, those costs would be allocated to Scheduling 
Coordinators in proportion to their Demand that appears unscheduled in 
real-time (underscheduled Load) and Generation that is scheduled but does not 
appear in real-time, except to the extent that the underscheduled Load or 
undelivered Generation is balanced within the Scheduling Coordinator,s 
portfolio.8  The costs of dispatching units that have bid above the Market 
Clearing Price for Energy to Scheduling Coordinators in proportion to their 
Net Negative Uninstructed Deviations (in essence, the amount by which their 
metered Demand exceed their metered Generation). Cover letter, p. 10. 

b) Net Negative Uninstructed Deviation (NNUD) defined: &The real time change 
in Generation or Demand associated with underscheduled Load (i.e., Load that 
appears unscheduled in real time) and overscheduled Generation (i.e., 
Generation that is scheduled in forward markets and does not appear in real 
time). Deviations are netted for each BEEP Interval, apply to a Scheduling 
Coordinator,s entire portfolio, and include Load, Generation, Imports and 
Exports8


c) Applicable tariff sections. Amends portions of  11.2.4.2.1.  See 
attachments A3/A3/B3 to the filing.

d) Effective date:  For loads scheduled for  12/12/00.  (Essentially, loads 
scheduled on 11/11 for next day).

e) Term:  I did not see any sort of sunset provision.


4) Useful Info from the Detmers Declaration

a) &During the recent 7-day period from December 1, 2000 through December 7, 
2000, planned Generating Unit outages have averaged roughly 4,000 MW. During 
this same 7-day period, forced or unplanned outages of generating have be 
very high, averaging approximately 7,000 MW. &
b) &For example, for the last four days (December 4, 2000 to December 7, 
2000) we have purchased 255,000 MWh of OOM Energy. The cost of these 
purchases were approximately $167 million. MWh.8  (Equivalent to an average 
OOM cost of $655/MWh.)