Christi,
 As I have been thinking about this problem, my opposition to a standard 
model is declining, partly out of frustration with the slow progress being 
made.  I think, however, that we ought to think about the potential 
consequences of recommending a standard model.  If we simply endorse PJM, 
then we may inadvertently get its warts as well -- no secondary transmission 
market, ICAP market, etc.  I think we are considering the same thing approach 
as was reported by Charles Yeung's in his note on Tuesday's Inter-RTO 
Coordination (Seams) Conference:

"Harvey Reed, Constellation Power, suggested that FERC impose a standard 
tariff for all RTOs to work from that did not restrict RTOs from filing 
different proposals, but would limit their ability to diverge from a single 
market model."

 In addition to the standard model, there needs to be a deadline for either 
filing the tariff or for filing the standard tariff.  Without a "feet to the 
fire" feature, nothing the grand stall will continue.  In arguing for a 
standard model, the PJM system could be the core of a proposal but we should 
specific modifications to address our concerns.  On the transmission rights 
issue, for instance, a simple "don't allocate" solution won't work.  The lack 
of the secondary market for NY TCCs or PJM FTRs goes both to the lack of 
information and to the way the rights are defined.  If as Harvey Reed 
suggests, RTOs can submit alternative approaches, at least there will be 
pressure to get moving.  I have not discussed this idea with West Power.  

 It then occurred to me that FERC  is unlikely to impose a standard tariff 
without a rulemaking proceeding.  Whether they could act by fiat or not is a 
moot point, since  I doubt that they would do so without creating a record.  
There are two possible down sides to a rule making.  (1)  The outcome of a 
rulemaking is something of a crap shoot.  The incumbents have a pretty good 
record in the past, of coming out of rulemakings with plenty of goodies such 
as the native load exemption in Order No. 888.  There is a also a distinct 
risk that PJM's ICAP or transmission right allocation process is given 
blessed status, which will make revision of them later to be a huge uphill 
battle.  (2)  The other consequence of a rulemaking its effect on current  
RTO discussions.  The best outcome is that the uncertainty of the rulemaking 
creates an urgency  to get a proposal filed before a new FERC rule cuts off 
options from a new the standard for review.  The uncertainty prior to the 
issuance of Order No. 888 in fact had that effect in the West.  On the other 
hand it can mean that nothing happens until the new rule is issued.  This 
also happened prior to Order No. 888, with a number of companies sitting on 
their hands, using the time delay to protect existing positions, while 
whipping up State regulators' fears of jurisdictional shift as necessary to 
boost their own position.

 These are only own views.  I have not had a chance to speak with West Power 
this week, but I will approach Tim when I am in Portland again next week.

Steve




	Christi L Nicolay
	06/19/2001 04:21 PM
		
		 To: Steve Walton/HOU/ECT@ECT
		 cc: James D Steffes/NA/Enron@ENRON, Richard Shapiro/NA/Enron@Enron, Sarah 
Novosel/Corp/Enron@ENRON, Steven J Kean/NA/Enron@Enron
		 Subject: Re: INTERIM MODEL TALKING POINTS

Can we focus the PJM language as an interim fix toward the East (while maybe 
the threat of PJM in the West will make the West RTOs act quickly and adopt 
everything that Steve W. has been advocating).  Also, I agree with the ISO 
being required to provide much greater information on where the congestion 
occurs.  While the allocation of FTRs is a problem and the idiosyncratic 
nature is also a problem, it is because the traders do not have access to all 
the information.  They have told me that if they had access to all the 
information about congestion from the past several years, they could 
essentially build a model for anticipated congestion that could trade "above" 
the underlying FTRs as financial instruments.



Steve Walton
06/18/2001 03:30 PM
To: James D Steffes/NA/Enron@ENRON
cc: Christi L Nicolay/HOU/ECT@ECT, Richard Shapiro/NA/Enron@Enron, Sarah 
Novosel/Corp/Enron@ENRON, Steven J Kean/NA/Enron@Enron 

Subject: Re: INTERIM MODEL TALKING POINTS  

Jim,

 I have added my comments to your draft.  My concern with the "Adopt PJM" 
approach is that it will become a fiat accompli with regard to congestion 
management. and the nature of future transmission rights.  Once adopted as 
the standard, nothing else will be accepted and any move to a decentralized 
approach is highly unlikely.  Unlike the British, we have a hard time 
changing horses because of our multi-jurisdictional Federal system of 
government.

 The PJM's lack of a secondary FTR market is more that just an allocation 
problem.  If that were true, they New York would have a secondary market -- 
none exists there either.  The unpredictability of prices is probably the 
biggest problem since no one knows how to value FTRs or TCCs.  I think the 
nature of instrument is also not particularly helpful.

 During our discussion of Seabron Adamson's last draft, I maintained that a 
centralized unit commitment process didn't fit the Pacific Northwest (PNW) 
with its pattern of trading to achieve coordination between hydroelectric and 
thermoelectric generation.  You asked me to provide more detail hydro-thermal 
operation.  I am including a paper that covers the nature of PNW operations 
and contracting with observations about the nature of unit commitment.  Given 
other work and travel, it has taken some time to complete the paper and its 
examples.  I hope this will help to explain why I am hesitant to endorse a 
centralize unit commitment implementation.

Steve





	James D Steffes@ENRON
	06/18/2001 01:48 PM
		 
		 To: Steven J Kean/NA/Enron@Enron, Richard Shapiro/NA/Enron@Enron, Christi L 
Nicolay/HOU/ECT@ECT, Sarah Novosel/Corp/Enron@ENRON, Steve Walton/HOU/ECT
		 cc: 
		 Subject: INTERIM MODEL TALKING POINTS

Here is the draft of an Interim step for Enron to give to Lay.  Please give 
me your comments.  This is CONFIDENTIAL and should not be shared outside the 
company.

Jim