FW: Judge's Final SE RTO Mediation Report + CN summary ,
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FYI
-----Original Message-----
From: Nicolay, Christi L.=20
Sent: Tuesday, September 18, 2001 8:45 AM
To: Shapiro, Richard
Subject: FW: Judge's Final SE RTO Mediation Report + CN summary


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-----Original Message-----
From: Nicolay, Christi L.=20
Sent: Monday, September 10, 2001 7:09 PM
To: Presto, Kevin M.; Kitchen, Louise; Lavorato, John; Carson, Mike; Will, =
Lloyd; May, Tom; Davis, Mark Dana; Sturm, Fletcher J.; Herndon, Rogers; Kea=
n, Steven J.; Shapiro, Richard; Steffes, James D.; Robertson, Linda; Guerre=
ro, Janel; Shortridge, Pat; Shelk, John; Novosel, Sarah; Fulton, Donna; Roa=
n, Michael; Palmer, Mark A. (PR); Nord, Sue; Lindberg, Susan; Duran, W. Dav=
id; Kroll, Heather; Fairley, David; Connor, Joe; Maurer, Luiz; Jacoby, Ben;=
 Staines, Dan; Montovano, Steve; Robinson, Marchris; Migden, Janine; Stroup=
, Kerry; Robertson, Linda; Portz, David; Sager, Elizabeth; Nettelton, Marcu=
s; Acevedo, Rudy; Comeaux, Keith; Forney, John M.; Garcia, Miguel L.; Herna=
ndez, Juan; Lotz, Gretchen; Marshall, Howard; Rorschach, Reagan; Rust, Bill=
; Meyn, Jim; Walton, Steve; Perrino, Dave; Comnes, Alan; Jafry, Rahil; Fors=
ter, David; Baughman, Edward D.
Subject: Judge's Final SE RTO Mediation Report + CN summary


The ALJ submits her report to FERC to obtain FERC review of the Southeast P=
ower Grid platform that resulted from the mediation.=20
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** JUDGE'S FINAL RECOMMENDATIONS:  FERC should consider adoption of Grid Mo=
del (the one Enron likes best) to fullest extent possible and that remainin=
g unresolved issues be addressed through continued stakeholder process.  Ho=
wever, since complete consensus was not reached, FERC should provide its de=
termination of which of the two models best meets FERC's expectations as a =
platform for the SE Power Grid RTO.  This should be done by FERC quickly.  =
There should be no further delay.  Regardless of the model, FERC should enc=
ourage the collaborative process.  She thinks that this should be done by t=
he parties without FERC intervention except to the extent to respond to FER=
C orders. (I think FERC staff should be involved or it will get bogged down=
).  Parties should reconvene within 15 days after FERC's order adopting a m=
odel and the FERC order should direct the participants (like us) to submit =
a joint proposal within 45 days thereafter.  She recommends to FERC that pa=
rties be allowed to file comments to FERC within 20 days (however, she reco=
mmends against permitting reply comments since they may prove counterproduc=
tive to the collaborative nature of the mediation process.)  The Commission=
 will then issue an order that can adopt her recommendations, may reject he=
r recommendations, or change something.  I would expect that the Commission=
 would adopt many of her recommendations, while allowing further mediated-t=
ype discussions on some issues (hopefully, FERC will adopt many of our sugg=
ested changes).  Judge McCartney then basically describes both proposals of=
 the Grid Group and the Southern, etal. group, then provides the stakeholde=
r participants' comments (almost verbatim from all submissions to her).  Wh=
ile she states that the process should keep moving quickly, she does not ad=
opt any timeframes (we will comment that FERC should retain its Dec 02 Day =
2 start date (for LMP/financial rights congestion model to be implemented).
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The attachments below are her report, the Southern, etal proposal and the G=
rid pricing, congestion management, operating, and planning protocols (with=
out any changes).  Clearly, our response FERC will include our proposed cha=
nges to the documents.  Highlights from her report below:

She recommends that SPP pursue an RTO coalition in the Midwest=20
She encourages FERC to continue to encourage and utilize a collaborative pr=
ocess which accommodates stakeholders and state utility commission input, r=
egardless of the RTO platform ultimately adopted by FERC=20
Her opinion is that the "Grid (Entergy, GridSouth and GridFlorida utility s=
ponsored) Model" (transco in RTO, LMP/financial rights congestion managemen=
t) is better developed and more clearly in compliance with the requirements=
 of Order No. 2000 based on a "best practices" analysis of other RTOs and C=
ommission precedent.  This is good because Enron generally favors the Grid =
model. However, she does provide the Commission information on Southern, et=
al.'s proposal (independent system administrator--like National Grid-type) =
in her report, even though she has concerns that the Southern, etal model i=
s not Order No. 2000 compliant.  The Southern, etal. model has a hybrid phy=
sical congestion management with day ahead balanced schedule requirements a=
nd LMP in real time (with penalties) and significant control area responsib=
ilities.  The significant aspects of the Grid model are discussed below:=20
Grid Governance: RTO is a for profit transco with an independent board and =
an enhancement:  the Independent Market Administrator (IMA).  The IMA was a=
dded to facilitate public power participation (worried that transmission ow=
ner on top, even if divested from generation, would favor its transmission =
solutions over generation or other transmission solution).  The IMA would a=
dminister the markets; exercise operational authority over the transmission=
 system; administer one OASIS (with one process for interconnection and tra=
nsmission requests); and assume the Security Coordinator function.  She str=
ongly encourages this split.=20
Good stakeholder advisory Committee (provides majority and minority views) =
and an independent Market Monitor to monitor the RTO and the markets=20
Allows for Independent Transmission Companies (Entergy wants to be one), wi=
th RTO oversight=20
Describes that control area operators will initially maintain their control=
 areas for physical operation, such as switching transmission elements, pur=
suant to operating procedures approved by the RTO/IMA.  Recognizes that con=
solidation of control areas may occur as RTO matures.  (Protocols should be=
 subject to further discussion)=20
RTO/transco has primary responsibility for tariff administration, including=
 rate changes and tariff filings=20
All load under the rates, terms and conditions of OATT (GridSouth group has=
 appealed this part of earlier Commission orders, and, thus, retains their =
rights should they win on appeal)=20
4 transmission pricing zones initially: Entergy, Southern, GridSouth, and G=
ridFlorida.  Allows for participant funded, direct assigned, and merchant t=
ransmission.  Transmission rates to loads in RTO will be zonal (for existin=
g facilities) and regional charge (for new facilities, other than those abo=
ve).  There will be one "through and out rate", plus a Grid Management Char=
ge for RTO operation.=20
Encourages conversion of existing transmission agreements to OATT=20
Financial Rights/LMP (includes "real time spot market") is clearly the pref=
erred model and represents best practices model (from PJM and SPP) -- many =
details need to be worked out in continued discussions.  Model allows parti=
es to transact bilaterally and provides financial congestion hedges (FCH). =
 Stakeholder process needs to be continued for FCH allocation, auction and =
non-discriminatory release.  The Grid model includes a "balancing resource"=
 requirement that we will provide comments against=20
Will allow establishment of markets for ancillary services once they can be=
 supported -- control area operators required to provide before such market=
 establishment=20
RTO runs single OASIS and independently calculates ATC and TTC=20
RTO/transco is responsible for planning through a participatory stakeholder=
 process=20
Numerous comments from marketers, IPPs on reduction of control area functio=
ns (all of our comments from last week's response are included)=20
Judge McCartney had numerous meetings with state commissioners.  (1) Many a=
re still concerned that FERC had not conducted a "cost-benefit" analysis an=
d had concerns over the costs.  She responds that extrapolation of costs to=
 the entire SE RTO seems unwarranted because it ignores the "economies of s=
cale" and initial reliance on existing control centers and infrastructure. =
 In any event, FERC could explore the feasibility of a rate setting process=
 that would involve the state commissions. (2) concerned about cost shiftin=
g:  mediation team discussed phase in of rates that the Commission has allo=
wed. (3) Concern that SE RTO would preempt state ability to approve asset t=
ransfers to RTO and want state retail customers to receive full value for a=
ssets.  (4) concern that SE RTO may prematurely put Southern states into re=
tail open access (concerns with Cal.)  Judge encourages the Commission to u=
tilize a collaborative process that includes input from state commissioners=
.

I think our message for any press discussions tomorrow should focus on the =
extremely beneficial aspects of the mediation and the significant "jump sta=
rt" it gave to the SE RTO process due to the significant role played by Jud=
ge McCartney and her team on focusing the discussions.  Furthermore, the in=
itial results after 45 days show the majority of participants favoring a "b=
est practices" PJM/SPP cornerstone type real time spot energy market with L=
MP pricing and financial congestion hedges and an RTO with an independent b=
oard structure that accommodates a for-profit RTO entity with a significant=
 stakeholder advisory process.  The Commission should consider utilize the =
fundamentals resulting from this mediation for other regions, or, at a mini=
mum, consider similar mediated "jump starts."=20

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 -----Original Message-----
From: Bobbie McCartney [mailto:bobbie.mccartney@ferc.fed.us]
Sent: Monday, September 10, 2001 4:05 PM
To: mddesselle@aep.com; john.a.cohen@bakernet.com; mcrosswh@balch.com; dex@=
bbrslaw.com; FHR@bbrslaw.com; fochsenhirt@bbrslaw.com; mrossi@bdrnet.com; j=
lphillips@calpine.com; JRegnery@calpine.com; tkaslow@calpine.com; OHaraC@ds=
mo.com; mary.doyle@dynegy.com; jhughes@elcon.org; Nicolay, Christi L.; JCas=
hin@epsa.org; charles_askey@fpl.com; steved@gdsassoc.com; GHobday@HHLAW.com=
; jschneid@huberlaw.com; richard.spring@kcpl.com; jpalermo@kemaconsulting.c=
om; RLAMKIN@LLGM.com; relliott@mbolaw.com; beth.bradley@mirant.com; ndaggs@=
mwe.com; paul.savage@nrgenergy.com; ron_lanclos@oxy.com; billdegrandis@paul=
hastings.com; MaryCochran@psc.state.ar.us; Pauline.Foley@pseg.com; linxwile=
rj@safferassoc.com; twoodbury@seminole-electric.com; bobg@sepa.doe.gov; lee=
r@sepa.doe.gov; msmith@sf-firm.com; GLBERNST@skadden.com; gary.newell@spieg=
elmcd.com; nbrown@spp.org; dacrabtree@tecoenergy.com; jrdalrymple@tva.gov; =
jpwest@westlawpc.com; Jane.Mudgett@Williams.com; SMALL@wrightlaw.com
Cc: Herbert Tate; Jonathan Siems; Laura Sheppeard
Subject: RE: Final SE RTO Mediation Report


Pursuant to the agreement of the parties, service of the attached document =
is hereby effected on this Restricted Service List, which has been previous=
ly approved in this Docket, via this email. =20
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Please  note that there are a total of six attachments, only five of which =
can be sent via email.  The 6th attachment is a two page copy of the TVA MO=
U which can be accessed on  RIMS, or will be provided via fax upon request.
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I want to take this opportunity to thank the parties once again for their h=
ard work and dedication throughout this arduous and sometimes difficult med=
iation process.  It was a pleasure to work with you!
                                                     Judge McCartney
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david.duran@enron.com, m..presto@enron.com, tim.belden@enron.com, 