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Date: Mon, 22 Oct 2001 11:25:54 -0700 (PDT)
From: l..nicolay@enron.com
To: louise.kitchen@enron.com, janet.dietrich@enron.com, david.delainey@enron.com, 
	douglas.smith@enron.com, john.lavorato@enron.com, 
	don.black@enron.com, david.forster@enron.com, david.duran@enron.com, 
	tim.belden@enron.com, f..calger@enron.com, h..foster@enron.com, 
	jae.black@enron.com, c..aucoin@enron.com, dale.furrow@enron.com, 
	jim.meyn@enron.com, claudette.harvey@enron.com, m..presto@enron.com, 
	ben.jacoby@enron.com
Subject: FW: RTO Week -- Summary of Standards and Practices Panel
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FYI.
=20
TJ and Claudette--Please forward to your groups.  Thanks.
-----Original Message-----
From: Rodriquez, Andy=20
Sent: Thursday, October 18, 2001 4:46 PM

Standardizing Markets, Business, and Other Practices <?xml:namespace prefix=
 =3D o ns =3D "urn:schemas-microsoft-com:office:office" />

Panelists for this discussion were:  Sarah Barpoulis, PG&E National Energy =
Group; William P. Boswell, GISB; Bill Burkes (substituting for David J. Chr=
istiano), City Utilities of Springfield, Missouri; David N. Cook, NERC Gene=
ral Counsel; Michael Kormos PJM Interconnection; LeRoy Koppendrayer, Minnes=
ota Public Utilities Commission; and Marty Mennes, Florida Power & Light Co=
mpany.

 General Observations

 The Commissioners were all present the majority of the time (Massey left l=
ate in the  afternoon).  FERC Staff was active in the discussion; however, =
the commissioners were very active as well, asking perhaps as much as 70% o=
f all questions.  There was a general consensus that standards were needed;=
 much discussion focused simply on how much and by who. The Commission seem=
ed very interested in leaning what they needed to do to move the industry f=
orward and how far they needed to go.  Panelists urged the need to mover fo=
rward as quickly as possible, but both they and FERC seemed to recognize th=
at some of the issues regarding standardized market design and such needed =
to be addressed before RTOs could really begin to move forward.  There was =
discussion on identifying which industry group (NERC or GISB) would take th=
e reins in the future.  On an interesting tangential note, there was notice=
able conflict between NERC and GISB, with veiled insults between the two or=
ganizations somewhat common during the discussions.=20

 FERC Deliverables

A great deal of the discussions focused on identifying what the industry ne=
eded from the Commission.  Staffers probed all panelists to find what they =
felt was critical. =20

The first major topic was "How many RTOs?  What is their scope?"  All panel=
ists seemed to agree that this question needed to be answered immediately b=
y FERC, in strong definitive language.  N o one offered any specific langua=
ge, but seemed to be urging FERC to issue a formal statement.

The next topic was, "What will be standard market design?"  Panelists varie=
d on this, but most felt strong guidance from FERC is urgent.  Some urged f=
or one mandatory design for North America, one supported a set of rigid sta=
ndard designs, one supported a single design with requests for exceptions (=
followed by an in-depth review process), and one seemed to prefer the curre=
nt situation.

The commission in general seemed to be very interested in understanding wha=
t the industry needed to move forward.  They continually visited this topic=
 throughout their discussions, asking questions like, "Do we need to issue =
a Mega-Order that addresses all these issues?" and, "How much detail do you=
 need us to provide?"   General feel from the panelsists seemed to be they =
wanted strong leadership in this areas.  Kormos and Burkes went so far as t=
o say FERC should "Mandate as much as they felt comfortable - and then go a=
 little further."  Others seemed to be a little worried about this idea, bu=
t in general did not oppose the concept, citing only general warnings and t=
he need for cautious investigation. =20

One item of interest: Wood referred to the filing made by the Electronic Sc=
heduling Collaborative and specifically asked if the items identified in th=
e "RTO Design and RTO Implementation" section would address many of the que=
stions and uncertainty facing the industry with regard to RTO design.  Korm=
os indicated that clear and specific answers to these questions specifying =
a course of action would go a long way toward guiding the industry.  The se=
ction to which Wood referred was one that I wrote, and asked the following =
questions:


?         Congestion Management - When Operational Security Violations occu=
r, how is the system to be stabilized in a fair and equitable manner that i=
s nonetheless efficient?  Will LMP based systems be standard, or will there=
 be others that must be accommodated?


?         Transmission Service  - Are transmission services required to sch=
edule ("covered" schedules only), or are they risk management tools protect=
ing from congestion charges (both "covered" and "uncovered" schedules are a=
llowed)?=20


?         Loop Flows  - Are contract-path based or flow-based transmission =
services appropriate?  If contract-path based, how are parallel path issues=
 to be addressed?


?         Grandfathered Transmission Service - Should contracts existing pr=
ior to RTO development be transferred, or is there an equitable way to reti=
re those contracts?  Are there other solutions?


?         Energy Imbalance Markets - How are imbalance markets to function?=
 Will they serve as real-time energy markets (support unbalanced schedules)=
, be limited to supplying needs of imbalance service (require balanced sche=
dules), or will they be required at all?


?         Ancillary Services - Will ancillary service markets be developed =
in standard ways?  Will entities be required to actually schedule ancillary=
 services (required to schedule), or will they be treated primarily as fina=
ncial instruments (protecting against real-time POLR charges)?


?         Losses - Can we utilize the imbalance markets to support losses? =
 Can we create specific loss standards that facilitate the scheduling proce=
ss, or must we support methods that are currently in tariffs, but technical=
ly unwieldy?


?         Non-Jurisdictionals - How are non-jurisdictionals to be integrate=
d into the new world?  Should systems be designed with the assumption that =
non-jurisdictional will be part of an RTO?  Or should they be designed to t=
reat each NJE as a separate entity?


Hopefully, FERC will use this section as a template to answer these critica=
l questions in an assertive manner, and give some solid direction in which =
to move. Kormos emphasized the need for concrete answers to these questions=
, pointing out that vague answers (i.e., "do congestion management") will t=
ake a year or two to resolve, but specific answers (i.e., "LMP with financi=
al hedging instruments") will take only months.  The Commission asked Mike =
about moving forward, and he told them that effectively, it was impossible =
to move forward with implementation without getting these issues addressed.

Now for a  funny point - One of the commissioners (I think Breathitt) refer=
red to some concerns expressed in the Northwest that their high concentrati=
on of hydro power makes LMP inefficient for the Northwest.  Kormos flat out=
 said, "My profession is understanding how power systems work, and I don't =
believe that that statement is true."  He then backpedaled a bit and said t=
hat it would need more study, but he stood by his statement that the assert=
ion by the Northwest interests was false.


NERC and GISB


A great deal of discussion focused around the need for a single standard-se=
tting organization.  Massey went so far as to ask, "Are we looking at a bea=
uty contest between NERC and GISB?"  Cook and Boswell then went into severa=
l short polite jabs at each other's organizations.  Other participants cont=
inually reiterated the need for ONE, INDEPENDENT organization.  Interesting=
ly, Boswell was very emphatic about the established trust and respect in GI=
SB, while Cook preferred to only talk about the "new" structure of NERC and=
 did not focus on its history.

Brownell offered some not-too-subtle passive support of GISB by pointedly a=
sking both Cook and Boswell if they lobbied political positions (i.e., were=
 they not only an organization but also a stakeholder?).  GISB was easily a=
ble to say they were not, but NERC of course had to admit to their romancin=
g of Congress and the Bush administration for reliability legislation. Poin=
t, Brownell.

Mennes acted as somewhat of a supporter for NERC, playing Dave Cook's yes-m=
an.  He probably did them a little bit of harm by pointing to NERC's suppos=
ed "successes," such as TLR and E-Tag.  If staffers have tenure, they will =
likely remember that these "successes" have not been so successful, resulti=
ng in several filings and interventions.  We may also wish to file comments=
 in specific objection to these claims, to refresh their memory and to show=
 the pretty picture Marty painted was in fact a fiction.

There was a little discussion about splitting reliability and market issues=
, but general consensus was that I could not be done.  There was also some =
talk of folding NERC under GISB/EISB.

The arguments began winding down after a some time, and Boswell strongly ur=
ged the Commission to speak to industry executives and advocacy group leade=
rship to see whether NERC or GISB should lead the industry forward.  NERC s=
omewhat less enthusiastically supported this position.  In general, I would=
 say it was a close fight but GISB came out more on top.

Let me know if you have any questions.

Andy Rodriquez
Regulatory Affairs - Enron Corp.
andy.rodriquez@enron.com
713-345-3771=20

