A couple of thoughts --

1.	NG is trying to schedule a meeting in Columbus either Dec 4 or Dec 5.

2.	I did speak with Ashley.  He indicated that NG has no specific inclination to avoid LMP in the real-time.  He did not, however, confirm that NG was indifferent.

3.	I am very concerned with the implication that Mike highlights in his point #1.  NG may simply have misstated its intentions.  But clearly this position makes it difficult for NG to join MISO under Appendix I (they would be giving up too much).

4.	I agree that what NG is really saying is a for-profit RTO with ownership of some (but not necessarily all) transmission plant in its footprint.

5.	Let's try and coordinate our discussions with Paul Dawson in the London office to gather his thoughts on NG in the UK market.

Luiz -  Can you please develop some questions / talking points based on the attached comments that we can transmit to Ashley Brown prior to the meeting?

Thanks

 -----Original Message-----
From: 	Roan, Michael  
Sent:	Monday, November 12, 2001 3:14 PM
To:	Steffes, James D.; Nicolay, Christi L.; Maurer, Luiz; Stroup, Kerry
Subject:	RE: Alliance

Just been through the paper and have the following thoughts or concerns depending on your viewpoint:

1.  The model is inconsistent with the approach taken by FERC.  NG propose that every transco. sets its own rates, runs its own OASIS and manages congestion....how can this ensure 'seamless practices' within each RTO footprint?  I suggest the opposite will occur, that is balkanization.  For example, Transco's can join MISO under Appendix I, and a number are proposing to do so.  Based on NG's proposed split of functions each transco. could join MISO with its own tx rates, OASIS platform and congestion protocol regardless of whether they are consistent.  Under this scenario transmission rates and markets would remain balkanized and vary depending on transmission company geographic reach (similar to today).
2.  NG state that the benefit of a 'for profit' entity is that it can and will manage risk commercially, i agree!  However NG miss the point here....If an RTO/ISO is a non profit organisation, it will only provide services such as tariff admin., OASIS and congestion management (such an RTO will not own tx. assets...the tx. companies that it provides services on behalf of will continue to do so!).  In providing these services the RTO/ISO only manages risk associated with non provision of service, not the underlying transmission delivery risk.  The transmission companies, for whom the RTO provides services, will continue to be 'for profit entities' and will continue to manage risks commercially (RTO benefits result primarily from aggregation of services not from more appropriate commercial risk management...there is nothing to stop tx. owners from managing risk more effectively regardless of proposed RTO structure.  For example NG as a transco., Translink or Cinergy transmission could propose liquidated damage clauses for overselling firm transmission under the non profit RTO structure.  Likewise NG as transco and RTO could make the same proposal).  Commercial form is a second order issue!
3.  NG should have concentrated on supporting FERC policy (4 RTO's) rather than stating one parties view on separation of RTO functions between profit/non profit entities.  FERC policy suggests that the key structural issues are; increasing market size (4 regional markets) and third party access ('level playing field').  This was the basis for the CGM proposal that came out of the SE mediation.  Separating CM and OATT admin. from planning and security coord. improves third party access to real time information which in turn will facilitate market based investment decision making (being investment in transmission, generation or DSM).  Suggesting that transmission investment is necessary to resolve existing transmission constraints either shows ignorance or more likely the conflict that NG has...i suggest that investment in generation or DSM could resolve the problems just as adequately.
4.  The model seems to be based on the assumption that transmission charges will continue to be based on 'contract path' (congestion managed through redispatch).  I assume that NG, and other transmission companies, prefer this approach as it allows them to both maximise cash returns (above appropriate regulated rates) and control information that facilitates new investment (retain monopoly).  I agree with Jim that this suggests a physical approach to congestion management.  NG's concept that third parties can 'energy markets' is consistent with the ARTO approach (i.e. allowing an APX to provide day ahead market functions for example).  I would propose that a transco. should not care what tx. charging methodology was in place as long as it is perceived to be reasonable by customers and receives its aggregate regulated revenue requirement.  Thus CM and OATT administration are not core transco. functions at all...

In summary, I suggest that NG actually propose the paper to reflect a 'for profit' RTO but they do not state this anywhere (even if true, they do not state anywhere that a transco. should have consistent OATT and CM protocols if the assets they own are non contiguous or the transco. has a number of owners). I agree with Luiz that in this form it is a hard sell and does not resolve Enron's ongoing concerns...

regards
Mike
  
 -----Original Message-----
From: 	Maurer, Luiz  
Sent:	Tuesday, November 06, 2001 10:57 AM
To:	Steffes, James D.
Subject:	RE: Alliance

Jim

As per your request, I examined the attached doc (Response of National Grid US to Questions posed by the  Com << File: National Grid Transco White Paper.doc >> m ission)

My initial reaction is:

1) The simple answer to your question is: yes, I think the proposed governance and organization structure can live with an LMP model. I am not familiar with other MISO CM model, but at least in terms of LMP, my feeling is that those are not mutually exclusive. It may be worth asking Ashley Brown

2) National Grid and other proponents of For-Profit-Transcos may have other ideas on how to manage congestions (e.g. different reliability level products by customer segment). However, the attached paper makes no allusion to avoid LMP and to introduce other congestion management models. The paper does not imply a physical model either. Your feeling may be right, but it does not surface from the paper per se.

3) National Grid proposal is, in fact, an expanded version of the Southeast Model proposed at the Mediation. It reinforces the role of the Transco Company, preempting, to some extent, the role of the System Admininstrator. This was a very controversial topic in the mediation: the System Adminstrator was in charge of some functions to avoid potential bias.  (particularly from transmission companies who are not willing/able to transfer their T assets)

4) National Grid will face a lot of resistance when selling this idea; Your concerns on generation redispatch and long term transmission planning are "surfaced" in the paper, by creating a concept of "core vs. additional" functions and a chinese wall, if necessary.  But the perception of potential bias does exist. National Grid will probably face a lot of difficulty in " selling"  this idea. Particularly when we get to the details

LM


 -----Original Message-----
From: 	Steffes, James D.  
Sent:	Monday, November 05, 2001 4:50 PM
To:	Maurer, Luiz; Stroup, Kerry; Roan, Michael; Nicolay, Christi L.
Subject:	FW: Alliance

FYI.  If we were to ask NG, could they live with the MISO CM/market model??

Thanks.

 -----Original Message-----
From: 	Steffes, James D.  
Sent:	Monday, November 05, 2001 12:40 PM
To:	Nicolay, Christi L.; Roan, Michael; Novosel, Sarah
Cc:	Shapiro, Richard
Subject:	FW: Alliance

NG proposal for "splitting" work between Transco and other parties.  Don't think they do a great job of managing the key fears - (1) generation redispatch and (2) long-term transmission plant over generation investments.  

As I read this document, I get the strange feeling that NG is a physical-right player.  Meaning, NG needs to build a model based on physical flows so they can control (a) TTC/ATC and (b) use of non-firm transmission.  

While the NG letter states that the "functions related to energy markets can be performed by a disinterested third-party", NG specifically reserves as a Core Function the "Ability to propose congestion pricing methodology".  Sure APX could go in and operate the balancing and CM system, but NG has the right to design subject to FERC procedures.

Not sure what you guys think?  

I will probably get back to Ashley Brown later this week.

Jim

 -----Original Message-----
From: 	"ASHLEY BROWN" <ACBROWN@LLGM.COM>@ENRON  
Sent:	Monday, November 05, 2001 9:18 AM
To:	dennis.flaherty@cinergy.com; david.a.svanda@cis.state.mi.us; gary.r.kitts@cis.state.mi.us; greg.r.white@cis.state.mi.us; janet.c.hanneman@cis.state.mi.us; laura.chappelle@cis.state.mi.us; michael.a.fielek@cis.state.mi.us; michel.l.hiser@cis.state.mi.us; robert.b.nelson@cis.state.mi.us; william.j.celio@cis.state.mi.us; harvey.reed@constellation.com; Mfgildea@dukeenergy.com; rfahey@edisonmission.com; Steffes, James D.; airobbins@gkase-law.com; rrismill@icc.state.il.us; Snaumer@icc.state.il.us; tharvill@icc.state.il.us; diane.munns@iub.state.ia.us; gforman@mail.state.ky.us; gwgillis@mail.state.ky.us; rgraff@mail.state.ky.us; rsphillips@mail.state.ky.us; rkind01@mail.state.mo.us; wsmith@max.state.ia.us; skelly@mbolaw.com; Jim.mayhew@mirant.com; mina.turner@mirant.com; susann.felton@mirant.com; Srandazzo@mwncmh.com; ervin@ncuc.net; richard.doying@neg.pge.com; clane@psc.state.wv.us; dellis@psc.state.wv.us; don.howard@puc.state.oh.us; judy.jones@puc.state.oh.us; Kim.wissman@puc.state.oh.us; nicci.crocker@puc.state.oh.us; eckenrod@puc.state.pa.us; levin@puc.state.pa.us; jcrowley@pwrteam.com; jorr@reliant.com; cwalker@scc.state.va.us; boyntonh@state.mi.us; bborum@urc.state.in.us; Bpauley@urc.state.in.us; dhadley@urc.state.in.us; dziegner@urc.state.in.us
Cc:	Paul Connolly; nick.winser@us.ngrid.com; paul.halas@us.ngrid.com
Subject:	Alliance

Attached please find a copy of the paper entitled "Response of National Grid USA to Questions Posed by the Commission" for your review.




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 - National Grid Transco White Paper.doc << File: National Grid Transco White Paper.doc >>