Message-ID: <4981002.1075858674287.JavaMail.evans@thyme>
Date: Tue, 10 Jul 2001 14:51:25 -0700 (PDT)
From: dwatkiss@bracepatt.com
To: linda.robertson@enron.com, ray.alvarez@enron.com, b..sanders@enron.com, 
	richard.shapiro@enron.com
Subject: California Refund Case;  Where Do We Go From Here?
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X-From: "Dan Watkiss" <dwatkiss@bracepatt.com>@ENRON <IMCEANOTES-+22Dan+20Watkiss+22+20+3Cdwatkiss+40bracepatt+2Ecom+3E+40ENRON@ENRON.com>
X-To: Robertson, Linda </O=ENRON/OU=NA/CN=RECIPIENTS/CN=NOTESADDR/CN=E6F34021-58C07703-86256984-56518C>, Alvarez, Ray </O=ENRON/OU=NA/CN=RECIPIENTS/CN=NOTESADDR/CN=735557E1-C6F8B044-42567C9-4F6B25>, Sanders, Richard B. </O=ENRON/OU=NA/CN=RECIPIENTS/CN=RSANDER>, Shapiro, Richard </O=ENRON/OU=NA/CN=RECIPIENTS/CN=NOTESADDR/CN=6CEDF0C-82C4A03C-8625696C-7693A4>, Roberet.Frank@enron.com, Steven.Kean@enron.com
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On Monday, the Mediator in this case informed the parties that he planned t=
o recommend to the FERC that it adopt a methodology for computing refunds t=
hat largely parallels the methodology that FERC adopted for prospective pri=
ce ceilings in its June 19 order.  That methodology caps prices at a so-cal=
led competitive market price proxy equal to the operting cost of the last g=
enertor dispatched in an hour, which will almost always be a single cycle g=
as plant with a relatively high heat rate.  The Mediator said that he would=
 recommend that this measure be applied from October 2 forward; that it use=
 the actual heat rate and NOx cost of the units dispatched; and that it inc=
lude a 10 percent adder for credit risk.  Apparently, but not entirely clea=
r, the Mediator will also recommend that two retroactive price caps actuall=
y be applied:  one for Northern California, using  the average price of gas=
 at the PG&E citygate and Malin, and another for Southern California, using=
 the SoCal Gas large package price for gas.  The Mediator finally informed =
the parties that he would recommend that FERC convene an evidentiary hearin=
g to be concluded in 60 days for the purpose of taking testimony on, among =
other things, what were the actual operating costs of marginal generators i=
n both the North and South.

The group of power marketers of which Enron is a part was obviously disappo=
inted that the Mediator and his staff felt bound to use this methodology ba=
sed in generator costs, even while acknowledging that it has little relevan=
ce to the cost or value of a marketer's supply portfolio.  The group also e=
xpressed interest in participating jointly and using a joint expert witness=
 in the evidentiary hearing.   I have contacted Seabron Adamson who said he=
 would have not conflict in serving as an expert witness for the group.

If (as appears likely) a hearing is convened in the very near term, it will=
 be imperative to nail down selection of an expert immediatly so that he ca=
n begin preparing discovery to be sent out as soon as a procedural schedule=
 is put in effect.  Thus it would be helpful if you could let me know as so=
on as possible how you wish to proceed.  Do you want to participate in the =
hearing individually or as part  of a group?  Do you want to sponsor an exp=
ert witness? and, if so, do you want to use Seabron or someone else.

As you consider this last question, you should be aware that  PowerEx has i=
nterests largely alligned with the marketer group.   PowerEx is going to sp=
onsor Richard Tabors.  Tabors, in turn, recommended to me that the marketer=
s use Seabron because he believes their strengths complement each other.

