RE: Stakeholder Committee Notes ,
 Jose & Charles --

Thanks for the update.  I am concerned that "customers" are talking about h=
aving NERC deal with commercial matters without first agreeing to FERC's co=
ntrol over everything? =20

We should discuss the Goulding Report when you return.

Jim

 -----Original Message-----
From: =09Bestard, Jose =20
Sent:=09Tuesday, October 16, 2001 2:28 AM
To:=09Yeung, Charles
Cc:=09mbennett@epsa.org; mfgildea@duke-energy.com; Steffes, James D.; Inger=
soll, Richard
Subject:=09Re: Stakeholder Committee Notes

To add to Charles memo..

1) The Trustees were all present to listen the debate at the stakeholders c=
ommittee. That was very positive.

2) The agenda order was changed to allow ample time to discuss the issues.=
=20

3) Time and time again it was stated that NERC was running out of time to m=
ake the required transition. If not alternatives would be pursued; example =
EISB

4) Time and time it was stated that the Goulding task force Recommendations=
 should be taken as a package, as a necessary first step.  These include:

1. Committee Representation . The Task Force recommends that the NERC Board=
 direct the standing committees to modify the standing committees represent=
ation and voting to reflect the Task Force's attached "Initial Sectors and =
Criteria Model." This Model is based on the Task Force's preference for rep=
resentation by "sector," and incorporates the Task Force's general recognit=
ion that an RTO sector should be included. The Task Force recognizes that s=
ome work remains to be done to refine the definitions of each sector and th=
e criteria for belonging, but believes that the Initial Sectors and Criteri=
a Model is an appropriate next step and should be taken immediately. Assumi=
ng that it may take some months to put in place the details of the new Mode=
l, including the new weighted voting procedures, the Task Force recommends =
that two ISO/RTO representatives be added immediately to each of the existi=
ng standing committees to provide formal representation and a voting role f=
or ISOs/RTOs until the Initial Sectors and Criteria Model has been implemen=
ted.

2. Committee Participation and Voting . The Task Force recommends open part=
icipation in each sector, subject to certain criteria and qualifications. T=
he Task Force has evaluated the qualification criteria and voting procedure=
s used in several Regions (ERCOT and MAAC), and has incorporated features o=
f those procedures into the recommended participation and voting procedures=
. Specifically, the Task Force recommends weighted voting by and within eac=
h sector, similar to what is done in MAAC.

3. Due Process . The new Organization Standards Process, which will be pres=
ented to the Board in October, addresses most due process issues and concer=
ns. The Task Force recommends implementing this new process immediately.

4. One-Stop Shop . The Task Force favors having a single organization for d=
eveloping Reliability Standards, Market Interface Practices, and Commercial=
 Practices. The Task Force believes that NERC has an opportunity to reinven=
t itself to become this organization, and should take definitive steps in t=
hat direction at its October 2001 Board and Stakeholders Committee meetings=
.

5. Funding . The Task Force recommends that steps be taken immediately to d=
ecouple the funding of NERC from the Regional Reliability Councils. The Fun=
ding Task Group recommendations, adopted by the Board in February 2001, sho=
uld be pursued.

6. MIC Role in Standards Approval . The Task Force recommends, as an immedi=
ate step to address concerns with the current NERC Standards Approval Proce=
ss, and to provide a "bridge" until the new Organization Standards process =
is implemented, requiring the MIC to vote on all new/proposed NERC Operatin=
g Policies and Planning Standards and report results to the Board, includin=
g consideration of any minority positions.

5) Lots of discussion about EISB and how NERC may interface with it as a po=
ssible alternative.

6) Silence on the issue of "self regulating organization" . No one advocati=
ng that position.

7) Good opportunity to speak with Trustees one-on-one at dinner.

Jose=20





From:=09Charles Yeung/ENRON@enronXgate on 10/15/2001 06:01 PM
To:=09mbennett@epsa.org@SMTP@enronXgate, mfgildea@duke-energy.com@SMTP@enro=
nXgate
cc:=09James D Steffes/ENRON@enronXgate, Richard Ingersoll/ENRON@enronXgate,=
 Jose Bestard/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT=20

Subject:=09Stakeholder Committee Notes

Here are some bullet points of what transpired at the NERC meeting in Vanco=
uver this Monday.

The customers met for almost 2 hours before the start of the SHC meeting.  =
Reps from Enron, Mirant, Dynegy, DENA, APPA and ELCON were present.

All agreed that a unified voice is needed to show strong direction from the=
 customer side.  This may mean putting aside some internal positions.  Cust=
omers need to show support of the Goulding Task Force recommendations which=
 offers a package deal to move NERC forward as a single standards setting o=
rganization for both reliability and commercial issues. The Goulding Task F=
orce recommendations do fall short of asking for NERC action.

Agenda Item 5 - Scope of NERC over Commercial Issues
To ensure unity in appearance, customers agreed to maintain discussions in =
front of the Independents at a higher policy level.   Many details are need=
ed to get individual entities "on board" however, such details should not i=
mpede on the ability for customers to show strong support on principles, i.=
e.-one-stop-shop, balance of membership, etc.  Therefore, all agreed to kee=
p details out of the discussion, i.e.-funding, seats, charter, etc.

The actual SHC discussion was constructive, and persons articulated the nee=
d for a package deal to the room. The debate brough the expected concerns o=
f the transmission providers to the surface.  TVA (Terry Boston) was most v=
ocal about keeping NERC out of the commercial side.   Dominion Resources (G=
lenn Ross) supported the customers' position.  PJM (Phil Harris was also su=
pportive). =20

Agenda Item 6 - Independence of Security Coordinators
Comments made that this is a long standing stalemate at NERC and that NERC =
does not have the authourity to require corporate independence. Suggestions=
 made to perform better and more audits.  Dave Penn brought up the memo fro=
m Roy Thilly.  Need to ask the Board to bring this issue to FERC for resolu=
tion.  Good arguments made by customers on need for independence in a new c=
ompetitive market structure.  FRCC (Wiley) made arguments that the NERC sho=
uld not revamp policies to police the few bad apples.  Should deal directly=
 and specifically with the problem.=20

A straw poll was taken of the persons in the room over recommending actions=
:
1) NERC should require corporate indepdence and ask FERC to address it.
2) NERC should focus in on the problem Security Coordinators and take speci=
fic actions to safeguard independent judgement (audits)

The vote was 21/24.  There were strong comments that this vote was not inte=
nded to be an industry representative vote, only to show how split the indu=
stry is over this issue.

The meeting adjourned for lunch and the Independents left after the meeting=
 reconvened.
The SHC agreed to ask the BOT the following:

?=09Establish a goal/vision to become the one stop shop for development of =
wholesale electric industry standards. =20
?=09Add words that "we need to go forward from where we are.
?=09Take immediate action to adopt the initial recommendations contained in=
 new Board agenda item 22.
?=09Actively solicit cooperation collaboration and support from Canadian an=
d US government entities.
?=09Facilitate - jointly with interested trade associations; federal, state=
 and provincial regulators, and other stakeholder organizations - an open a=
nd inclusive process to achieve consensus on the definitions and attributes=
 of the functions necessary for the development of wholesale electric indus=
try standards and practices, an on a course of action to institute such cap=
abilities.
?=09Interface with state and provincial regulators to address retail operat=
ion issues as they affect wholesale operations.

Agenda Item 9 -Transmission Expansion
Reference to "incentive rates", and "accelerated amortization", should be r=
emoved, not a reliability policy need.=20
The reference to these expansion solutions are intended to be tutorial and =
does not assume NERC will begin to undertake rate issues.  APPA - public pe=
rception will be different.  Must remove this language.  Glen Ross will pre=
sent this report to the Independents outlining the strong opinions on both =
sides.
jose.bestard@enron.com, charles.yeung@enron.com, john.shelk@enron.com, 