Message-ID: <9125439.1075860563896.JavaMail.evans@thyme>
Date: Wed, 13 Dec 2000 05:04:00 -0800 (PST)
From: mary.hain@enron.com
To: tim.belden@enron.com, robert.badeer@enron.com, jeff.richter@enron.com, 
	tim.heizenrader@enron.com, stephen.swain@enron.com, 
	alan.comnes@enron.com, susan.mara@enron.com, james.steffes@enron.com, 
	christian.yoder@enron.com, steve.c.hall@enron.com, 
	richard.sanders@enron.com, susan.mara@enron.com, 
	mona.petrochko@enron.com, jdasovic@ees.enron.com, 
	paul.kaufman@enron.com, sarah.novosel@enron.com, 
	james.keller@enron.com, mike.smith@enron.com, 
	harry.kingerski@enron.com, dennis.benevides@enron.com
Subject: ISO's response to PX's request to remove hard cap on adjustment
 bids
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The ISO filed a response at FERC to the PX's request to remove the hard cap=
=20
on adjustment bids and=20
replace it with a floating cap that would track the price of energy in the=
=20
market. =20

The ISO opposes the proposal arguing that it may produce extremely high=20
constrained Zonal market clearing=20
prices in the forward markets and may be subject to the exercise of market=
=20
power and to gaming. =20

The ISO suggests the PX fix this by anchoring its Adjustment Bids=20
(incremental and  decremental bids) prices=20
to the unconstrained market clearing price, as opposed to absolute Energy=
=20
bids.  In other words, the PX would=20
establish its constrained market clearing price as the sum of the=20
unconstrained market clearing price and the=20
Usage Charge resulting from the ISO=01,s Congestion Management process. =20

To effectuate this change, the PX would have to impose a new rule that=20
Adjustment Bids be within $125 of the=20
unconstrained market clearing price. The PX would then be required to proce=
ss=20
the Adjustment Bids prior to=20
passing them on to the ISO. The PX would have to subtract the unconstrained=
=20
market clearing price from each=20
Adjustment Bid prior to submitting it to the ISO. The ISO would then utiliz=
e=20
these Adjustment Bids, as well as=20
those submitted by other Scheduling Coordinators, to run its Congestion=20
Management system. After the ISO=20
completes its  Congestion Management process, the ISO would then=20
"post-process" the Adjustment Bids=20
(add back the unconstrained market clearing price) for use by the PX in=20
establishing its constrained Zonal=20
Energy prices and, as needed, by the ISO in real-time Congestion Management=
.=20

The ISO says it does not intend, by presenting this alternative to the PX=
=01,s=20
proposal, to preclude consideration=20
of other solutions that may be presented by one or more of the utilities or=
=20
by the EOB. =20

The ISO also argued that the Commission should impose reporting requirement=
s=20
on those entities who submit=20
Adjustment Bids in the ISO=01,s Congestion Management process.  It recommen=
ds=20
that the Commission require=20
the submission of all Adjustment Bids to the Commission, the ISO and the=20
EOB.  It also asked the Commission=20
to direct the PX Market Monitoring Unit, in concert with the ISO=01,s Depar=
tment=20
of Market Analysis, to increase its=20
monitoring of Adjustment Bids and bids submitted in the PX forward Energy=
=20
markets for evidence of the=20
exercise of market power.

The ISO argues that the effect of the FERC's December 8 Order on supply=20
sufficiency in the ISO=01,s real time=20
Imbalance Energy market was immediate and beneficial.  It states the=20
following in support.  Although supply=20
in California is still very tight, after implementation of Amendment No. 33=
,=20
there were bids available in the ISO=01,s=20
"BEEP Stack" to address California=01,s real time balancing needs for the f=
irst=20
time in nearly a week. Immediately=20
after the order was issued 3000 to 5000 MW of Generation internal to=20
California and up to an additional 1990 MW=20
of imports became available to the ISO.  The following day there was only o=
ne=20
hour in which reserves dropped=20
below 6% and one hour in which reserves were as great as 10%. In addition, =
it=20
alleges that the implementation=20
of Amendment No. 33 has substantially relieved the burden which had=20
previously been placed on the ISO=01,s=20
operators by in-state Generators attempting to negotiate prices in real tim=
e=20
in response to ISO Dispatch instructions.

The ISO also requests that the Commission clarify its December 8 Order to=
=20
confirm that sellers submitting bids=20
above $250 in the ISO=01,s Imbalance Energy Market are required to report t=
heir=20
bids and provide cost information=20
on a weekly basis not only to the Commission, but also to the California=20
Electricity Oversight Board and the ISO. =20

The ISO requests clarification that the Commission intended to approve the=
=20
proposed December 12,=20
2000 effective date for the cost allocation elements of Amendment No. 33.