Dear Energy Supply/Power Marketing Executive:

This Alliance Info Alert provides 1)  a summary of FERC's 5/30/01 meeting, and 2)  a listing of recent filings at FERC.


FERC Meeting Summary:

At Wednesday's Commission meeting, FERC denied, without discussion, rehearing requests of its March 14 , 2001 order provisionally approving the GridSouth RTO, and in a last-minute change, removed several RTO proceedings from scheduled consideration, including PJM, PJM West, ISO-NE, NYISO, and GridFlorida.

In other RTO developments, Chairman Hebert announced that FERC will convene a technical conference on Function 8 - Interregional Coordination issues, as initially requested by the Electric Power Supply Association, among others.  Hebert hopes to hold the conference in either June or July 2001.

In other notable action, marked by Comm. Massey's strong dissent on the issue of appropriate analytic method for evaluating market-based rate (MBR) applications, FERC accepted Sierra Southwest Cooperative Services* (Sierra) request for MBR authority using the current hub and spoke method for which to evaluate market power concerns.  In a related proceeding, FERC denied a request from the Illinois Commerce Commission (ICC) requesting that Exelon be directed to abandon the use of the hub and spoke method and commit to using another method in the 2003 year.

Commission Discussion
Market Power Analysis
Commissioner discussion centered around MBR authority and the method used to perform market power analysis.  The issues were raised within the context of two MBR cases approved yesterday involving Sierra and Exelon, over Commissioner Massey's objections, as noted below.

Comm. Massey dissented from both orders expressing his dismay with the majority*s decision to continue the use of what he called *old-fashioned hub and spoke analysis,* saying that the method  *does not produce meaningful conclusions.*   While Massey allowed that *it may be premature to decide" on a particular analytic method for use in 2003, he argued that the current analysis is outdated.  Massey stated that the 20% hub and spoke market share threshold is "too simplistic."  In Massey's view, the hub and spoke method makes assumptions about the market that ignore important factors, producing unreliable results that do not protect ratepayers from unjust and unreasonable rates.  Massey was concerned that fears about high rates resulting from MBRs have been inadequately analyzed by FERC is leading to a slowdown in state restructurings.  Massey asserted that states are now delaying plans and others will not implement reforms as a result.

Massey expressed his desire for to conduct a generic inquiry into improving current standards for performing market power analysis.  He identified three focuses for such a proceeding:

(1)   look at market concentration, i.e. scope of trade, supply concentration in varying load periods, explore use of computer modeling and simulation;
(2)   evaluate whether market rules create perverse incentives and encourage gaming of the system; and
(3)   ensure that adequate demand responsiveness exists to aid in putting a check on market power.

In addition, Massey recommended that instances of price spikes and price abnormalities be investigated for identifying possible sources of volatility.
I
 n these cases, Comm. Breathitt pointed out that the generator dominance analysis performed concluded that the market share percentages for the applicants in the two orders are well below the market abuse and dominance levels.  In fact, they are only 1.82% and 1.95%, respectively.  Breathitt assured the ICC that it will have the opportunity to participate in the process in 2003, no matter what market power analysis is being used.
While supporting the two orders on market based rate authority, Chairman Hebert pointed out that no party objected to Sierra*s receiving market based rate authority, nor did any party request that FERC deny the Exelon application.  Hebert clarified that the Exelon order does not pick one method over the other, but rather declines to commit to a particular method of market power analysis at this time.

RTO Seams Conference
Announcing FERC's intention to schedule a technical conference on RTO seams issues, Chairman Hebert stressed that seams issues are *absolutely crucial to the RTO process.*   Although a specific date has yet to be chosen, Hebert stated that his hope is that it be held *sooner rather than later*.  Hebert also invited parties to submit comments on proposed dates for the technical conference.  Both Massey and Breathitt voiced strong support for the Chairman's decision to hold such a technical conference.

Other Notable Action
GridSouth -
FERC denied the multiple requests for rehearing of its March 14, 2001 order provisionally approving the GridSouth RTO. RT01-74-001.  Issued May 30, 2001.

PJM Interconnection -
FERC denied rehearing and provided clarification of its March 14, 2001 Order establishing that the netting of station power is a wholesale function and thus FERC jurisdictional.  FERC agreed with New York State Electric and Gas and other utilities that third party sales of station power is a sale for end-use and should remain state jurisdictional.  However, FERC denied requests to clarify whether generators owned by the same company may use station power from one another without the exchange being classified as a third party sale, rather than as self-supply. ER00-3513-002; EL99-86-001; EL00-113-001.  Issued May 30, 2001.


                               == RECENT FERC FILINGS ==

(1)  RTO DEVELOPMENTS

*  GRIDFLORIDA, pursuant to the Commission's March 28, 2001 Order provisionally granting GRIDFLORIDA RTO Status, submitted its RTO compliance filing.  RT01-67-003.  Filed May 29, 2001.

*  SPP, pursuant to the Commission's March 28, 2001 Order, submitted its RTO compliance filing.  RT01-34-003.  Filed May 25, 2001.

*  ENTERGY SERVICES, pursuant to the Commission's March 28, 2001 Order, submitted its RTO compliance filing.  RT01-75-003.  Filed May 25, 2001.

*  The following entities filed motions to intervene regarding the CAISO's proposed revision to its by-laws regarding the composition and authority of its Board.   EL00-95-030 and EL00-98-029.  Filed May 25, 2001.

-  CALIFORNIA ELECTRIC OVERSIGHT BOARD
-  NRG POWER MARKETING
-  RELIANT ENERGY POWER GENERATION and RELIANT ENERGY SERVICES
-  WESTERN POWER TRADING FORUM
-  MIRANT AMERICAS ENERGY MARKETING, MIRANT CALIFORNIA, MIRANT DELTA and MIRANT POTRERO

*  CALIFORNIA MUNICIPAL UTILITIES ASSOC. filed comments in support of SOUTHERN CITIES' motion for clarification of the Commission's April 26 Order regarding mitigation and monitoring of the CA wholesale market and a western wholesale rate investigation.  EL00-95-012.  Filed May 25, 2001.

*  NEPOOL submitted an informational filing and a request for an expedited Commission Order regarding its Standard Market Design for a congestion management system and multi-settlement system.  ER01-2115-000.  Comments due by June 12, 2001.

*  LOS ANGELES DEPARTMENT OF WATER AND POWER requested an opinion from the FERC General Counsel as to whether the sale of surplus energy LADWP makes to the CALIFORNIA DEPARTMENT OF WATER RESOURCES is subject to the price mitigation and "must sell" obligations in the Commission's April 26, 2001 Order.  Filed May 25, 2001.

*  AES SOUTHLAND filed comments out of time regarding the CAISO's outage coordination filing pursuant to the Commission's April 26, 2001 Order regarding mitigation and monitoring of the CA wholesale market and a western wholesale rate investigation.  EL00-95-034 and EL00-98-033.  Filed May 24, 2001.

*  PJM, pursuant to a Commission Order, filed Second Revised Sheet No. 54 to its Reliability Assurance Agreement Among Load Serving Entities, which eliminates the limit on the Alternative Value calculation.  ER01-1440-001.  Comments due by June 11, 2001.

*  PJM filed an amendment to Section 1.49 of its Amended and Restated Operating Agreement in order to clarify the definition of the term Weighted Interest.  ER01-2105-000.  Comments due by June 13, 2001.


(2) OATT/TRANSMISSION

*  ENTERGY SERVICES, on behalf of ENTERGY ARKANSAS, filed an Interconnection and Operating Agreement and a Generator Imbalance Agreement between itself and GENPOWER KEO.  ER01-2106-000.  Comments due by June 12, 2001.

*  COMMONWEALTH EDISON CO. and COMMONWEALTH EDISON CO. of INDIANA withdrew their April 20, 2001 filing, which would have amended the generator Interconnection Procedures set forth in Attachment K of COMED's OATT.  ER01-1833-000.  Filed May 25, 2001.

*  AMERICAN ELECTRIC POWER SERVICE CORP. filed a response to DUKE ENERGY NORTH AMERICA's comments regarding AEP's proposed amendments to its OATT regarding Interconnection Procedures.  ER00-2413-002.  Filed May 25, 2001.


(3) MERGERS/CORPORATE RESTRUCTURING

*  WESTERN RESOURCES and KANSAS GAS & ELECTRIC CO. filed an application for authorization to transfer operational control of certain jurisdictional transmission facilities to the SPP RTO.  EC01-103-000.  Comments due by June 11, 2001.

*  NIAGARA POWER COALITION filed a protest against the NIAGARA MOHAWK - NATIONAL GRID USA proposed merger as being procedurally and substantively deficient or in the alternative requests an evidentiary hearing.  EC01-63-000.  Filed May 25, 2001.


__________________________________________________________

Nancy Tarr
Manager, Business Development
EEI Alliance of Energy Suppliers
701 Pennsylvania Ave., N.W.
Washington, D.C.  20004
Telephone:  202-508-5680
FAX:  202-508-5600
www.eei.org/alliance


ntarr@eei.org
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