Message-ID: <33032850.1075862455727.JavaMail.evans@thyme>
Date: Fri, 2 Nov 2001 10:55:13 -0800 (PST)
From: j.kaminski@enron.com
To: vkaminski@aol.com
Subject: FW: ERCOT TCR votes
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 -----Original Message-----
From: =09Lin, Martin =20
Sent:=09Wednesday, October 31, 2001 1:15 PM
To:=09Shanbhogue, Vasant
Cc:=09Kaminski, Vince J
Subject:=09ERCOT TCR votes

Lance and I participated in the Wholesale Market Subcommittee (WMS) meeting=
 at ERCOT yesterday.  WMS was meeting to vote on various aspects of the pro=
posed TCR design.  I'm happy to report that most votes went our way and the=
 vote we lost does not matter significantly to Enron.

The following is a brief summary of issues and the votes.

1.  Derating
We oppose derating.  I presented a few PowerPoint slides to advocate our po=
sition.  Amorng the proposals were:
a)  issue 100% of the commercially significant constraint (CSC) limit with =
non-deratable TCRs
b)  issue 100% of the CSC limit, but with deratable TCRs
c)  issue < 100% of the CSC limit with non-deratable TCRs
d)  issue X% of the CSC limit as non-deratable and 100-X % as deratable.
WMS selected option (a), where 60% of the total would be made available in =
the annual auction and the remainder would be auctioned off monthly.  All T=
CRs would be non-deratable.

2.  Closely Related Elements
The CSC is a single line.  The proposition is to introduce closely related =
elements (CREs) to create a flowgate equivalent for the CSC.  There were se=
veral votes on how to develop the CREs, if allowed, and what to do about ce=
rtain units that would complicate congestion management with CREs.  We were=
 satisfied with the decision to allow CREs, have them determined in advance=
 of the year (as is done with the CSCs), and to prohibit certain units from=
 participating in the balancing energy market when they fall between the CS=
C and a CRE.

3.  TCR Primary Auction single party quantity limit
Should a single entity be allowed to acquire the entire lot of TCRs availab=
le in an auction?  We think so.  If a party is willing to pay more than any=
body else for the TCRs, that party should be allowed to have them.  Since T=
CRs have no value beyond the realized congestion, there is always the alter=
native to simply pay the congestion.  If all TCRs are held by one party who=
 wishes to charge excessive prices for them, everybody would opt to pay con=
gestion.  The only game potential is that a party with market power in bala=
ncing energy can manipulate price spreads and gain from the TCR position.  =
This is a result of TCRs being financial and can be done whether the party =
with market power holds all TCRs or not.  Furthermore, there is no way to e=
nforce limited ownership in the secondary market, so a party wishing to con=
trol all TCRs can buy them in the secondary market or gain effective financ=
ial control.  We lost to vote to allow for complete ownership, but this pro=
vision has little effect on the market anyway.