Message-ID: <16562479.1075860512635.JavaMail.evans@thyme>
Date: Mon, 29 Nov 1999 12:11:00 -0800 (PST)
From: mary.hain@enron.com
To: richard.shapiro@enron.com, richard.sanders@enron.com, 
	christian.yoder@enron.com, elizabeth.sager@enron.com, 
	tim.belden@enron.com, greg.piper@enron.com, 
	christi.nicolay@enron.com, susan.mara@enron.com
Subject: Important FERC order re CalPX investigation
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On November 23rd, the FERC issued an order that I believe is crucial in our 
case with the California PX.  In a case involving the New York ISO (New York 
Independent System Operator, Docket ER97-1523-010) FERC put the PX on notice 
that it will be revisiting the authorities and discretion it gave the PX to 
address exercises of market power.  

In the case, FERC only allowed the ISO to engage in voluntary actions on the 
part of ISO participants (such as negotiations).  However, in response to 
Enron (& ironically PG&E's) protests it found that the mitigation plan 
proposed by the ISO gave the ISO too much discretion and lacked specificity.  
FERC suggested that in filing a revised mitigation plan, the ISO propose to 
file on a case-by-case basis under section 205 of the Federal Power Act, to 
impose specific mitigation measures when the ISO concludes that they are 
warranted.  The filing would identify the particular conduct and justify the 
specific mitigation measures as a remedy.  Also, for recurring types of 
conduct it could propose mitigation and propose that it be authorized to 
impose the same mitigation measures on a prospective basis without making a 
subsequent filing in response to future conduct. 

In addition, the FERC specifically names California (although it doesn't 
mention the PX) and states that "In rejecting the measures proposed here, we 
are aware that we have previously approved similar measures for other ISOs, 
such as those in New England and California.  We approved these earlier 
proposals in order to give these ISOs discretion to respond quickly to 
unforeseen market power and market design flaws, given the lack of prior 
experience with ISO operations.  This initial period is now passed and the 
authorities and discretion we previously accorded ISOs are, we believe, no 
longer appropriate.  We intend to revisit the authorities and discretion of 
these other ISOs."

Not only is this a major victory for Enron, I believe this is our strongest 
argument for why the PX is now on notice that its proposed letter is beyond 
its authority.  Essentially, this case notifies the PX that the tariff the PX 
used as the basis for its proposed letter is at best of suspect effectiveness 
and at worst unlawful.  Further, it suggests that the PX cannot act against 
EPMI without making a Section 205 filing with FERC under which the PX bears 
the burden of proof.  

I think if Greg Whalley is going to call the PX, he should bring up this FERC 
order.