
Date: Thu, 21 Jun 2001 09:39:00 -0700 (PDT)
From: steve.walton@enron.com
To: christi.nicolay@enron.com
Subject: Re: INTERIM MODEL TALKING POINTS
Cc: james.steffes@enron.com, richard.shapiro@enron.com, sarah.novosel@enron.com,
steven.kean@enron.com
Bcc: james.steffes@enron.com, richard.shapiro@enron.com, sarah.novosel@enron.com,
steven.kean@enron.com

Christi,
As I have been thinking about this problem, my opposition to a standard
model is declining, partly out of frustration with the slow progress being
made.  I think, however, that we ought to think about the potential
consequences of recommending a standard model.  If we simply endorse PJM,
then we may inadvertently get its warts as well -- no secondary transmission
market, ICAP market, etc.  I think we are considering the same thing approach
as was reported by Charles Yeung's in his note on Tuesday's Inter-RTO
Coordination (Seams) Conference:

"Harvey Reed, Constellation Power, suggested that FERC impose a standard
tariff for all RTOs to work from that did not restrict RTOs from filing
different proposals, but would limit their ability to diverge from a single
market model."

In addition to the standard model, there needs to be a deadline for either
filing the tariff or for filing the standard tariff.  Without a "feet to the
fire" feature, nothing the grand stall will continue.  In arguing for a
standard model, the PJM system could be the core of a proposal but we should
specific modifications to address our concerns.  On the transmission rights
issue, for instance, a simple "don't allocate" solution won't work.  The lack
of the secondary market for NY TCCs or PJM FTRs goes both to the lack of
information and to the way the rights are defined.  If as Harvey Reed
suggests, RTOs can submit alternative approaches, at least there will be
pressure to get moving.  I have not discussed this idea with West Power.

It then occurred to me that FERC  is unlikely to impose a standard tariff
without a rulemaking proceeding.  Whether they could act by fiat or not is a
moot point, since  I doubt that they would do so without creating a record.
There are two possible down sides to a rule making.  (1)  The outcome of a
rulemaking is something of a crap shoot.  The incumbents have a pretty good
record in the past, of coming out of rulemakings with plenty of goodies such
as the native load exemption in Order No. 888.  There is a also a distinct
risk that PJM's ICAP or transmission right allocation process is given
blessed status, which will make revision of them later to be a huge uphill
battle.  (2)  The other consequence of a rulemaking its effect on current
RTO discussions.  The best outcome is that the uncertainty of the rulemaking
creates an urgency  to get a proposal filed before a new FERC rule cuts off
options from a new the standard for review.  The uncertainty prior to the
issuance of Order No. 888 in fact had that effect in the West.  On the other
hand it can mean that nothing happens until the new rule is issued.  This
also happened prior to Order No. 888, with a number of companies sitting on
their hands, using the time delay to protect existing positions, while
whipping up State regulators' fears of jurisdictional shift as necessary to
boost their own position.

These are only own views.  I have not had a chance to speak with West Power
this week, but I will approach Tim when I am in Portland again next week.

Steve




