Re: Demand buy-down for Hertzberg ,
 Jeff --

Some thoughts -

1. Your key assumption seems to be that this Summer the energy supply manager 
(CDWR buying net short of utility) has enough "power" to sell the negawatts.  
I am not so sure.   I belive that a more realistic assumption is that in most 
hours this Summer, CDWR will be buying energy from the ISO.

2. If my assumption is closer to reality, than CDWR will not be able to sell 
"excess" MWs and pay the customer.  Even if you are right, CDWR buys at 
$80/Mwh (LT contracts delivered today) and sells at $300/Mwh = net benefit to 
deliver to customer of $220/Mwh [unless you are saying the $80/Mwh goes to 
retail rates and $300/Mwh to customer = which is what I say in #3].

3. I think that we should just call a spade a spade.  CDWR should give the 
customer for a negawatt $300/Mwh independent of how they manage their 
portfolio.  The $ should be put into the general expense of power and 
collected through CPUC approved rates.  Had the customer consumed, that Mwh 
would have cost CDWR at least $300/Mwh (and probably more given the increased 
load).  The state and/or customers still spends the same $.  The only 
argument that one could have is that the customer who conserves "costs" other 
customers $.  But these other customers should not feel slighted.  Again, 
CDWR was already going to pay the generators.  Why not pay someone who has a 
real business in CA?

4. So let's compute the cost = 

2000 MW x 80 hours [5x16] x $350/Mwh = $56MM for a one month, 2,000 MW 
on-peak curtailment.  

But the other benefit is (a) reliability, (b) less fossil fuel burned = 
cleaner environment, (c) sticking it too those damn greedy generators, and 
(d) probably lower overall prices and costs because lower demand.

Jim
jeff.dasovich@enron.com