---------------------- Forwarded by Mary Hain/HOU/ECT on 01/31/2001 02:01 PM 
---------------------------


Mary Hain
01/30/2001 02:38 PM
To: scott.miller@ferc.fed.us
cc:  
Subject: ISO problems

At your request, here's a write-up of our problems with the ISO.

Issue 1 - Concerning the intertie going North out of California into the 
Northwest (NW) at the California Oregon Border (COB), since about the 24th of 
January, the ISO has started telling market participants that the available 
transmission capacity, which is usually 2300 MW, is zero.  Last Friday, this 
caused prices to increase at the Mid-Columbia (NW trading hub) by about 
$50-75, costing the NW wholesale market an estimated $2-5 million per day.  
This transmission capacity is within the ISO's control and, because capacity 
is available, the ISO's actions seem to violate Order No. 888.  I also wonder 
what would happen if another control area decided they were going to take 
similar action.  This hurts Enron financially because we own FTRs and if 
there is no congestion, we don't get paid anything.  This is like "economic" 
force majeure.  The reason the ISO is listing zero ATC is that they're in a 
Stage 3 Emergency and they're not offering sufficient price/credit terms to 
get the power they need.  California obviously thinks its power needs are 
more important than the NW's. 

Issue 2 - We have transmission we are purchasing from some California munis 
using transmission facilities that are not part of the Cal ISO.  The ISO 
advised today that they are thinking about cutting exports from California.  
We are concerned that the ISO will cut our transaction even though it uses 
transmission assets and rights that are not under the ISO's control.  If our 
deal were cut, it could cost us $20,000 to $100,000 per hour (we have a 125 
MW deal and spreads now are $125 and they would likely blow out more if 
exports were cut).   We hesitate to call the ISO and ask if they are going to 
cut us because we are afraid we might suggest something that they haven't 
thought of.  

I'd be happy to answer any questions.  I'm at (503) 464-8862.