FW: FERC rulemaking on Generator Interconnection ,
 FYI.

-----Original Message-----
From: Parquet, David=20
Sent: Friday, October 26, 2001 11:47 AM
To: Lindberg, Susan; Hueter, Barbara A.; Rasmussen, Dale; Dieball,
Scott; Tweed, Sheila; Booth, Chris; Carnahan, Kathleen; Churbock, Scott;
Comeaux, Keith; Gimble, Mathew; Grube, Raimund; Hausinger, Sharon;
Inman, Zachary; Jacoby, Ben; Keenan, Jeffrey; Kellermeyer, Dave; Krause,
Greg; Krimsky, Steven; Kroll, Heather; Mitro, Fred; Moore, John;
Tapscott, Ron; Whitaker, Rick; Baughman, Edward D.; Coulter, Kayne; Day,
Smith L.; Gilbert, Gerald; Kinser, John; May, Tom; Miller, Jeffrey;
Will, Lloyd
Cc: Comnes, Alan; Fulton, Donna; Nicolay, Christi L.; Novosel, Sarah;
Steffes, James D.; Wehn, Samuel; Fillinger, Mark
Subject: RE: FERC rulemaking on Generator Interconnection


I skimmed the attached NOPR looking for the approach FERC was proposing to =
take to the key issue we fought over here in CA a couple of years ago.  Alt=
hough I did not see the word "congestion", the implication of what I read i=
s that the generator would pay for his extension cord plus any congestion i=
mpacts that it makes on the grid.  The implication of the last statement is=
 that the generator would put the grid back into the condition it was in "b=
ut for" the new generator.  That is great, assuming I did not skim from too=
 high an altitude.  Did I?

I also read the thing from the point of view of an issue that I had forgott=
en about until recently.  That is, if the generator pays for all of this up=
grade and "but for" stuff, and then "gives" it to the utility, are there ta=
xes due on the "gift"?  When we developed our project in Pittsburg, CA, PG&=
E's initial position was that we owed them for the upgrades AND for the tax=
es on the upgrades (about 35 - 40% additional charge), which they turned ov=
er to the state and fed.  (This is potentially A LOT of money to "waste" on=
 an interconnect, if it is an expensive one.)  Working with Enron's tax dep=
t (I do not remember specifically with whom), we convinced PG&E that taxes =
were probably not due for various reasons, and we mutually agreed to get a =
private letter ruling from the IRS confirming.  (We also agreed that IF the=
 taxes were ever due, that we would pay them.)  I understand that that IRS =
ruling was put in abeyance, pending some sort of law congress was consideri=
ng.  (I may be making this up here as I go along because Calpine bought the=
 project from us and I lost track of the various machinations.)  The point =
of all of this.  Is it reasonable in this NOPR process on interconnection t=
o address the tax issue?  Is it too late?  Is it irrelevant to the FERC pro=
cess?  Does anyone know the status of the law making process? =20

I am concerned about taxes for two reasons.  First, many of the opponents t=
o the proposed NOPR approach thought that all grid upgrades should be paid =
for by the utility and  included in rate base.  (In other words, "all gener=
ators are good and benefit the ratepayers.")  On fundamental grounds they w=
ill resist paying for upgrades.  If they believe that they will get the ins=
ult after injury treatment (pay for upgrades AND for taxes on the upgrades)=
, they will resist the NOPR more strenously.  (FYI to everyone, Calpine str=
ongly resisted paying for upgrades at Pittsburg and somehow got out of it. =
 And guess what?  Now with all of the new plants - ~1200MW added by Calpine=
 within a 5 mile area of 2500 MW of existing - there are congestion problem=
s around all of the projects, just as we forecasted.  ISO is now considerin=
g adding a new zone and/or charging PG&E and/or the projects for congestion=
.  Because PG&E did not, and probably never will in our lifetime, add the g=
rid upgrades so as to include in ratebase, the projects will be hurt.  Beca=
use all of this is not forecastable in the context of developing a project =
in a timely manner, this outcome, exactly as we had forecasted, is why we s=
upported the approach in the proposed NOPR.)  Second, perhaps naively, I am=
 assuming that the tax issue is no different for gas pipeline upgrades than=
 for electric transmission system upgrades.  On a project we are now develo=
ping in Roseville, CA, we are faced with significant gas pipeline system up=
grades in PG&E's system.  Significant grossups for tax impacts of the "gift=
" are are being discussed as I remember for Pittsburg's electric transmissi=
on system upgrades.  Since it sounds like the same issue, sure would be nic=
e if we could get some appropriate precedence going.  Any possibliity of de=
aling with the tax issues in this NOPR?



-----Original Message-----
From: Lindberg, Susan=20
Sent: Friday, October 26, 2001 7:29 AM
To: Parquet, David; Hueter, Barbara A.; Rasmussen, Dale; Dieball, Scott;
Tweed, Sheila; Booth, Chris; Carnahan, Kathleen; Churbock, Scott;
Comeaux, Keith; Gimble, Mathew; Grube, Raimund; Hausinger, Sharon;
Inman, Zachary; Jacoby, Ben; Keenan, Jeffrey; Kellermeyer, Dave; Krause,
Greg; Krimsky, Steven; Kroll, Heather; Mitro, Fred; Moore, John;
Tapscott, Ron; Whitaker, Rick; Baughman, Edward D.; Coulter, Kayne; Day,
Smith L.; Gilbert, Gerald; Kinser, John; May, Tom; Miller, Jeffrey;
Will, Lloyd
Cc: Comnes, Alan; Fulton, Donna; Nicolay, Christi L.; Novosel, Sarah;
Steffes, James D.
Subject: FW: FERC rulemaking on Generator Interconnection


Please see the attached.  FERC has asked for preliminary comments on its pr=
oposal to adopt a standard generator interconnection agreement and procedur=
es; the deadline for comments is December 21.  After it has considered the =
comments, FERC will issue a NOPR.

EPMI will participate in the Nov. 1 meeting at FERC; an update will be sent=
 to you.  I will be taking the lead on drafting our comments. =20

Please contact me if you need further information.

Susan Lindberg
713.853.0596

-----Original Message-----
From: Jackie Gallagher [mailto:JGallagher@epsa.org]
Sent: Friday, October 26, 2001 8:57 AM
To: acomnes@enron.com; Hawkins, Bernadette; Nersesian, Carin; Nicolay,
Christi L.; Fulton, Donna; Scheuer, Janelle; Hartsoe, Joe; Shelk, John;
jsteffe@enron.com; Noske, Linda J.; Robertson, Linda; Alvarez, Ray;
Shapiro, Richard; Novosel, Sarah; Mara, Susan; Lindberg, Susan; Hoatson,
Tom
Subject: FERC ANOPR on Generator Interconnection


Last night, FERC issued an Advanced Notice of Proposed Rulemaking (ANOPR) o=
n Standardizing Generator Interconnection Agreements and Procedures.  The A=
NOPR incorporates the ERCOT interconnection procedures, modified by various=
 "best practices" identified by the Commission in an attachment.  A public =
meeting has been scheduled for November 1st in Washington, although the not=
ice of the meeting is not yet available.  We will forward it when it become=
s available.  The ANOPR is attached.
susan.lindberg@enron.com