
Date: Tue, 19 Sep 2000 11:12:00 -0700 (PDT)
From: michael.norden@enron.com
To: stan.horton@enron.com, bill.cordes@enron.com, mary.miller@enron.com,
julia.white@enron.com, steve.hotte@enron.com,
danny.mccarty@enron.com, maria.pavlou@enron.com, teb.lokey@enron.com,
steven.harris@enron.com, nancy.bagot@enron.com,
janet.butler@enron.com
Subject: Memo from Shelley Corman: FERC Staff Conference Today
Cc: steven.kean@enron.com, richard.shapiro@enron.com, james.steffes@enron.com,
joe.hartsoe@enron.com
Bcc: steven.kean@enron.com, richard.shapiro@enron.com, james.steffes@enron.com,
joe.hartsoe@enron.com

Today, FERC Staff held its conference to discuss what regulatory changes are
necessary to promote further market liquidity.  The conference was fairly
well attended by FERC staff, including Dan Larcamp and  Shelton Cannon.

Some common themes:
Gas markets are generally well functioning and major changes are not
necessary.
Commodity markets are very liquid.
FERC policies, GISB and Order 637 have helped to make capacity markets more
liquid.
Shippers are unhappy with tighter tolerances and new balancing services in
Order No. 637 compliance filings.
Standardization is necessary to promote liquidity (with pipelines making the
distinction that standardization of transactional protocols is a good idea,
standardization of product offerings is not).
There is very little consensus on further areas for change.  In nearly every
case, a change advocated by one shipper group is opposed by another.
In any event, most said that now is not the time for sweeping changes.

Areas without consensus:
Shipper-must-have-title rule.  LDCs argue it should be removed; while Process
Gas and producers think that removal will undermine the capacity release
market.
Production area rate design.  LDCs argued that they need the ability to buy
service downstrream of a market pool.  Reliant and Koch also argued that
pipelines should have to have separately stated production and market rates.
The producers opposed any attempt to shift costs to the production area.
SFV.  East Coast LDCs, Michcon, and APGA argued for moving off of SFV.  The
producers and industrials oppose.  Illinois Power/Dynegy also argued for
moving off SFV.


LDC Positions
The LDCs main themes were removing the shipper-must-have-title and enabling
LDCs to hold space downstream of market centers.  However, they also argued
that  pipelines should not be permitted to offer new services to the electric
generation market that reduce the flexibilities LDCs have historically
enjoyed since the system was built for LDCs .   This is the point that AGA
raised in the blanket intervention to all Order 637 compliance filings.
Carl Levander of Columbia did a nice job of refuting the notion that LDCs are
entitled to unwritten flexibility that they have enjoyed in the past on a
best efforts basis, perhaps in part due to the fact that the pipeline may not
have been fully subscribed.  LDCs, generally stating that 637 compliance
filings did a poor job of allowing capacity segmentation, continued to stress
the need for segmentation, including "geographical segmentation of ROFR
capacity."

Some Specific Proposals
NGSA called for more targeted information to be included in Form 2 filings.
A number of customer groups noted the need for more and better information,
though specific needs were not well defined.
Several parties ask FERC to reconsider national standardized penalties
(especially given expected high prices this winter and the possibility for
arbitrage).
Alliance of Energy Suppliers (marketing arm of EEI) called for a dialogue
between power generators and INGAA to develop a new firm tariff with hourly
variability.  They also called for a change in GISB nomination deadlines to
match the power grid (Dan Larcamp asked whether EEI is open to efforts to
standardize scheduling times across the power grid as well).
The GISB End-User group (represented by Salt River Project)  complained about
the need to standardize the confirmation process and called for gas
transactions to be "tagged" like electric transactions.

E-Commerce and Capacity Trading
Dave Neubaurer did a great job of driving home the themes that capacity
trading can occur if FERC and industry are willing to allow more speedy
transactions, remove posting periods and long contract execution periods.  He
made an effective case that no major regulatory changes are necessary.
Robert Levin of the NY Mercantile Exchange echoed this theme, admonishing the
FERC not to micro-manage the types of trading platforms or to try to insist
on a single platform.  He said that liquidity cannot be legislated.  From his
perspective, natural gas markets are the best functioning commodity markets
in the world.  FERC should worry about transferring the "good stuff" from
natural gas to electric markets, not the reverse.
