RE: Order 888 Argument ,
 My only addition would be to strengthen the answer to #5 - RTOs, even if fo=
rmed, do not explicity resolve the question of the Native Load Exception.  =
I think that this is critical to highlight if this issued is raised.
=20
Jim

-----Original Message-----
From: Novosel, Sarah=20
Sent: Friday, August 24, 2001 4:31 PM
To: Hartsoe, Joe; Robertson, Linda; Shapiro, Richard; Steffes, James D.; Ni=
colay, Christi L.; Kean, Steven J.
Subject: FW: Order 888 Argument


Please see Lou's email below.  It's rather lengthy, and we will be working =
with him to help him prepare for oral argument, but to the extent any of yo=
u have the time or inclination to read his questions and add your thoughts,=
 your comments would certainly be welcome.
=20
Thanks
=20
Sarah
-----Original Message-----
From: Palansky, IJay [mailto:IPalansky@wilmer.com]
Sent: Friday, August 24, 2001 4:43 PM
To: Cohen, Louis; 'Jeffrey D. (Dan) Watkiss (E-mail)'; Plotnick, Michael
Cc: Novosel, Sarah; Killory, Ted; Frankel, Jonathan; Palansky, IJay
Subject: RE: Order 888 Argument


See comments below
-----Original Message-----
From: Cohen, Louis=20
Sent: Thursday, August 23, 2001 11:17 AM
To: Jeffrey D. (Dan) Watkiss (E-mail); Palansky, IJay; Plotnick, Michael
Cc: Sarah Novosel (E-mail); Killory, Ted; Frankel, Jonathan; Cohen, Louis
Subject: Order 888 Argument


Please think about the following:
=20
In a 20-minute Supreme Court argument [the limit will be strictly observed]=
, one needs to be ready to answer questions of all sorts, but one cannot co=
unt on being able to make more than 2-3 points, and each of them needs to b=
e clear from the first sentence; points that require development don't work=
.  In light of that:
=20
1.    Should I plan to spend any minutes on the "New York" side of the case=
, i.e., arguing that *all transmissions over the grids are in interstate co=
mmerce and FERC has jurisdiction whether the ensuing sale is wholesale or r=
etail*?  On the one hand, the "NY issue" is more important to Enron than th=
e "Enron issue"; on the other hand, my sense is that we are way ahead on th=
e NY issue after the briefs, and the SG will likely do a good job on it in =
argument.  My sense is that I should be prepared, if necessary, to utter so=
mething like the starred portion of the first sentence of this paragraph, a=
nd to defend it against any questions, but should not otherwise plan to get=
 into these issues.=20
We should probably also have a canned sentence ready to address NY's wacky =
preemption argument, which the one that it relied on most heavily in its op=
ening brief.
=20
2.    I think my most important tasks are to make clear that (i) this case =
is about FERC's power to require nondiscriminatory access to the interstate=
 grids (and not about rates or state regulation of retail sales) and (ii) i=
t is important to the nation that FERC have such power.  I need to make the=
se points quickly and vividly, in a way that the Justices will carry away. =
 That is going to be hard, because theoretical abstractions are not vivid, =
examples take too long to develop and provoke quarrels about details, and m=
etaphors are generally too inexact.  Please consider whether I am right abo=
ut the two points being most important, and think about how to make them.
 I think these points are the most important, along with making the Court c=
omfortable with the idea that if they adopted our position they would not b=
e turning upside down a federal/state regulatory division that's been in pl=
ace for 60 years. =20
=20
3.    Although in a formal sense our case turns on the Chevron issue (plain=
 language, no ambiguity, hence no room for discretion), my instinct (but I =
am not at all sure about this) is that I should not plan to devote time to =
these matters.  First, they are covered well in the briefs.  Second, whethe=
r one sees "ambiguity" does not really depend on staring at the language bu=
t on understanding what "transmission in interstate commerce" necessarily c=
overs in the present age.  In other words, the way to win the Chevron point=
 is to win the points in the previous paragraph.  Hence I ought to prepare =
to get the word "unambiguous" in there somewhere in the middle of a sentenc=
e, and defend it if necessary, but not do more.  Does this seem right?=20
I think it's worth giving a little more attention since this is the key iss=
ue below and, ultimately, the issue on which the Court must rest its decisi=
on.  We don't want to lose the trees for the forest.  That said, since we'v=
e dealt with it at length in the briefs, I don't know that we need much mor=
e than a reminder of the issue and the arguments:  FERC asserts that sectio=
n 201(b) does not unambiguously determine whether transmission bundled with=
 retail sale is a transmission or a "sale of electric energy at wholesale".=
  It concluded that such transmission is a sale.  The D.C. Circuit erroneou=
sly held that FERC's interpretation was permissible.  But transmission does=
n't stop being transmission merely because it is sold together with generat=
ion:  it is both transmission and a necessary component (query whether "com=
ponent" is the best word to use) of a retail sale.  Therefore, under the cl=
ear language of section 201(b), jurisdiction over all transmissions, includ=
ing transmissions bundled with retail sales, is vested in FERC.
=20
On the related point of NY's position that the wholesale/retail bright line=
 applies to transmission:  in particular light of NY's interpretive gymnast=
ics in its reply (re: 201(a), at p.6), isn't a good one-liner simply that i=
f Congress intended to limit FERC's transmission jurisdiction to transmissi=
ons for wholesale, then s. 201(b) would read "The provisions of this subcha=
pter shall apply to the sale of electric energy at wholesale and all associ=
ated transmissions" (or something to that effect)?
=20
Note:  this issue opens the door to discussion of, among other things, whet=
her the exclusive purpose of section 201(b) was to fill the Attleboro gap; =
and questions about the structure of the FPA, e.g., the relationship betwee=
n 201(b) and 211/212, 206(d), etc.
=20
4.   What do I do in argument with LP&L?  I find the NGA parallel very comp=
elling, and IF the Court decides to go with us it will have no problem citi=
ng and following that case.  On the other hand, the argument does not seem =
to have persuaded anybody but our team (not CADC for example).  On balance,=
 I am inclined to say "The Court has already decided this issue under the p=
arallel provision of the NGA" and use some time to press that point.  One r=
eason for doing so is that in general it will be much EASIER for the Court =
just to affirm FERC and CADC than to push thru the complexities and agree w=
ith us, but LP&L gives them both a precedent for overruling FERC on its own=
 jurisdiction and a comparatively easy way thru the case.=20
Agreed.  =20
=20
5.  I need to understand why FERC's powers and plans to create regional tra=
nsmission organizations do not fully solve the problem.  I need to get a de=
tailed understanding of the facts, and a one-sentence answer to why there i=
s still a problem.    =20
The primary answer in our reply is that Order 2000 does not require RTOs, i=
t only encourages their voluntarily formation; and that there's no indicati=
on that monopolists will give up their market power unless compelled.  (p. =
19)
=20
6.  Most important:  What other points (in addition to 2 and 4) does anyone=
 think I need to be sure to make?  Even more important, what points made by=
 NY, SG, EEI, California are most likely to trouble the Court and provoke q=
uestions?  Which of them should I plan to answer even if I get no question?
We might also need to address whether our position runs against 60 years of=
 history:  Didn't the states regulate all aspects of bundled retail sales u=
ntil Order 888?  Does our position mean that FERC historically abdicated it=
s responsibility and the states were regulating without authority?  What is=
 the effect of section 201(a) if not to allow states to continue to regulat=
e the matters that they regulated in 1935?  This may be an issue to broach =
only if the Court indicates interest, though, since I think it's the toughe=
st one for us to answer.
=20
We might also reconsider our position that unbundling is merely an accounti=
ng issue.  It seems to me that reversing the position we took in our initia=
l brief will basically hedge our bets:  it makes our affirmative argument a=
 little harder (since we can't simply say that it's crazy to base FERC's ju=
risdiction on an accounting technique), but it also makes NY's argument har=
der, since they can't simply say that but for a change in the accounting fo=
r electric service the states would still be regulating interstate transmis=
sions for retail sale.  This would also dovetail with some of the other bri=
efs that made a strong argument that unbundling is a major change in electr=
ic service necessary to support competition among generators, and something=
 over which the states have never exercised jurisdiction.
=20
 Thanks to all for thinking about this.
sarah.novosel@enron.com