Today's FERC Meeting ,
 Summary of today's meeting from our trade association and a news article pi=
cked up by Steve Hall.

GAC=20

FYI.  At today's FERC meeting two sets of items were voted out that pertain=
 directly to the CA markets.  This summary is based upon the discussion at =
the meeting, and the actual orders will contain additional details that may=
 not be reflected here.  A subsequent email will circulate with links to th=
e FERC orders once they are posted.

1)  FERC voted out an order granting in part, and denying in part, the Reli=
ant / Mirant complaint against CAISO.  The order builds on the 11/7 creditw=
orthiness order and finds that DWR is a Scheduling Coordinator, that it sho=
uld not have access to confidential information not also available to other=
s, and that DWR should be scheduling and operating pursuant to the CAISO ta=
riff.

During the discussion on this item, Massey noted concern about CAISO allega=
tion that the BEEP stack is not reliable b/c generators are not following d=
ispatch instructions.  Massey wants CAISO to promptly inform the Commission=
 where they believe an entity is not complying with the tariff or failing t=
o follow the dispatch instruction.

2) The second set of orders involves three dockets: (a) a new 206 rulemakin=
g regarding market-based rate authority; (b) revision of the market power t=
est, made in the context of a triennial review of market based rate authori=
ty; and (c) a narrow exemption to the FERC market mitigation for entities w=
ith market power pursuant to the order in (b).

FERC is putting out a new rulingmaking regarding market-based rate authorit=
y to close what they find to be a flaw with existing tariffs in the wake of=
 California's problems.  The rulemaking initiated today calls for the impos=
ition of a refund provision in all market-based rates.  The refund requirem=
ent attaches to "bad behavior" such as economic or physical withholding or =
other anticompetitive actions.  Apparently there is a portion of the rulema=
king that asks for comments within 15 days.  During discussion, Massey poin=
ted out that no "bad behavior" was found in California, and that customers =
should not be forced to bear the burden where the market goes out of contro=
l.

FERC has revised the market power analysis used to support a request for ma=
rket-based rate authority.  FERC is now establishing a "supply margin analy=
sis" (SMA) to replace the "hub & spoke" analysis used to determine the pres=
ence of market power.  The SMA looks for "pivotal" suppliers based on peak =
demand within a market.  The definition of the market would recognize the r=
ole of transmission constraints.  A generator is considered "pivotal" where=
 its supply is required to meet system peak demand.  If such status is foun=
d, the market-based rate authority does not extend to those peak conditions=
, and instead the applicable rates are a cost-based rate that is applicable=
 only to the uncommitted unit capacity.  Rates for any such capacity would =
be posted in INCs and DECs for that uncommitted capacity.  This policy revi=
sion occurs in the context of a triennial review of market based rate autho=
rity for AEP, Southern and Entergy.  Additional details will be in the orde=
r and we'll send an email
with links when it gets posted.

The last item would create a narrow exemption to the application of SMA and=
 maket power mitigation in the case where the supplier is in a ISO or RTO w=
ith existing, FERC-approved market mitigation mechanisms.  While this order=
 was to be adopted along with the other two noted above, it was held for so=
me revisions and is expected to come out either later today or tomorrow.  T=
he context for this order is the Huntington Beach application.  The languag=
e revisions are aimed at addressing concerns that at the end of the west-wi=
de mitigation in the coming September, there would not be an effective repl=
acement mitigation mechanism at CAISO.

We will have a short discussion on these items during the FERC call at 10 a=
m today.  ABB


--
Andrew Brown
Sacramento, CA
andybrwn@earthlink.net




 -----Original Message-----
From: =09Hall, Steve C. (Legal) =20
Sent:=09Tuesday, November 20, 2001 10:09 AM
To:=09Comnes, Alan
Subject:=09FW: USA: UPDATE 1-FERC claims jurisdiction over Calif water dept=
.

You may have seen this.

 -----Original Message-----
From: =09Bryson, Jesse =20
Sent:=09Tuesday, November 20, 2001 10:07 AM
To:=09Hall, Steve C. (Legal)
Subject:=09USA: UPDATE 1-FERC claims jurisdiction over Calif water dept.

USA: UPDATE 1-FERC claims jurisdiction over Calif water dept.
 =20
11/20/2001=20
Reuters English News Service=20
(C) Reuters Limited 2001.=20
WASHINGTON, Nov 20 (Reuters) - The Federal Energy Regulatory Commission on =
Tuesday said it has jurisdiction over California's main power purchasing ar=
m, the California Department of Water Resources, which took over buying pow=
er for much of the state earlier this year.=20
FERC also told the California Independent System Operator (ISO), which mana=
ges the power grid, to stop giving preferential treatment to the state wate=
r agency.=20
As a power scheduling coordinator for PG&E Corp and Edison International's =
Southern California Edison, the water department must file with FERC a tari=
ff schedule, FERC staffers said at a commission meeting. Those schedules ar=
e routinely required of other market players.=20
The water department also should not be privy to market information unavail=
able to other market participants, the commission said. Such information sh=
aring constitutes "preferential treatment of the ISO towards the (state) wa=
ter department, said FERC Commissioner William Massey.=20
The California ISO manages the state's transmission grid and runs a complic=
ated daily power auction to match buyers and sellers. FERC is currently aud=
iting the ISO.=20
The California Department of Water Resources became the state's only credit=
-worthy buyer earlier this year. The state stepped into the role after powe=
r shortages and impending price spikes barred direct purchases by the state=
's two largest utilities.=20
Pacific Gas & Electric filed for Chapter 11 bankruptcy protection in April =
and SoCal Edison's credit is rated junk status.=20
Generators accused the California ISO of sharing sensitive market informati=
on with the water department and tilting its auction rules to favor long-te=
rm contracts inked in the wake of the power crisis.=20
Power generators Mirant Corp. and Reliant Energy Inc. have complained to FE=
RC that information-sharing between the water department and the California=
 ISO violates the California ISO's tariff.
tom.alonso@enron.com, ray.alvarez@enron.com, robert.badeer@enron.com, 