Federal Electricity Restructuring Update ,
 Ginger:  would you please distribute the following memo to the Government 
Affairs group.  Thank you!

Congress continues to advance the Electricity Restructuring Legislative 
debate.  On Tuesday, June 20th, the Senate Energy Committee plans to mark-up 
and pass Senator Gorton's Reliability bill including the consensus state 
savings clause language.  Attached below (attachment 6-17 jt.st.wpd) is the 
46 page joint Senate staff draft which represents agreement in many areas, 
but the differences remain significant.  No agreement was reachable at this 
time in Committee on the extent of FERC jurisdiction to prevent unreasonable 
differences between wholesale and retail service nor reached on the RPS.   
Although the 46 page draft includes language on PURPA, Reciprocity ,Consumer 
Protection, Interconnection, etc.; currently only two Senators support the 
additional language included in the 46 pages; thus, the only chance of moving 
through the Senate Energy Committee this year is to pass Reliability-only 
now.  With the make-up of the Senate Energy Committee, our strategy is "to do 
no harm" in committee thus, making the reliability language-only option 
acceptable as a means to an end.  Enron does support the Reliability bill but 
we will insist on adding transmission access and functional separation 
language later in the process while EEI will insist on adding PUHCA while 
APPA will insist on adding Private Use (thus, we can see what the final 
consensus will look like; plus we have been involved in drafting the 
consensus in all these provisions.....but timing and sequence are crucial.)

It might be helpful to remind everyone that the bills leading up to the 
Energy Policy Act of 1992 as passed by the Committees were also amended in 
Conference since it was impossible to garner the necessary Committee votes or 
survive a Senate filibuster with any Committee-included wheeling language.  
Transmission wheeling/ access language was successfully added in Conference.  
Thus, the sequence of adding our necessary provisions remains key to a 
successful strategy then as it does now.

Also attached is Chairman Bliley's Reliability and Transmission discussion 
draft (section by section, summary and 005_PDF).  This is the foundation from 
which he is willing to add additional consensus amendments. From Enron's view 
,this foundation draft is our exact wish list to clarify FERC jurisdiction 
over both bundled and unbundled transmission (although we have suggested a 
few technical drafting points which have already been conveyed to staff.)  It 
is important for all of us to convey our support for this draft as the 
essential foundation for the bill.  Mark-up  will likely be scheduled to 
occur during  the week of June 26th.

It is important to note that Subcommittee Chairman Barton is philosophically 
opposed to the Bliley/Enron "pro-FERC" approach.  As such, he has asked Texas 
PUC Chairman Pat Wood and Oklahoma Corporate Commission Chairwoman Denise 
Bode to draft a compromise to lighten the FERC authority in favor of a more 
Regional Approach.  I just got off the phone with Pat who walked me through 
the draft he was submitting this evening to Barton (once it is officially 
transmitted, I will be able to get a copy to you, likely on Monday or 
Tuesday.)  From Pat's description, we should be able to be supportive since 
he shares our views about  wholesale markets needing federal authority.   He 
discussed a draft that mandates RTO participation, a seven point mandatory  
RTO test  filed at FERC in 60 days after enactment, Ratemaking established by 
the state but allowing FERC appeal, allowing FERC appeal if 2/3rd's 
disagree,  State authority but also ongoing FERC authority with an expedited 
dispute resolution process.  The seven point mandatory filing details are 1.  
full wholesale competition under the same terms, rates and conditions; 2. RTO 
sole functional control of transmission; 3. functional separation of 
generation from transmission; 4. curtailment on non-discriminatory basis; 5. 
all transmission uses disclosed and transparent (889); 6. constant assessment 
of construction needs; and 7.  remedy and emergency authority for dispute 
resolution.  He mentioned Denise's insistence for interconnection on a 
non-discriminatory basis which he feels is adequately addressed in their 
draft.

From Pat's discussions with Reliant on his draft, they again spoke in support 
of Enron's transmission open access goals.  TXU remains concerned that ERCOT 
will be pulled under FERC jurisdiction in the draft.  But, it is Pat's view 
that this already has happened under the state law.

Our goal next week is to lock-in bipartisan House Committee support and House 
Leadership support for the mark-up plus tighten the mark-up process so it is 
transparent to all; plus to pass the Senate Committee bill.   A bill to meet 
our established goals is still doable this year.  My strategy was always 
based upon the necessity to lead with the reliability language in order  to 
create a legislative vehicle for us to include our non-discriminatory 
transmission access provisions.    Please call should you need clarification 
or have questions.  Many thanks for your continued support.

 

 - sectionbysection.wpd - summarydoc.wpd - 005_.PDF
ginger.dernehl@enron.com