ellan Fluckiger, COO
Anjali Sheffrin, Director of Market Analysis
Frank Wolak, Chairman of Market Surveillance Committee

Cal PX:
David Jermain, former VP, Compliance, Audits & Reg. Affairs
Seth Wilson, 

South Coast Air Quality Management District:
Carol Coy, Deputy Executive Director

CPUC:
Harvey Morris, Principal Attorney

SDG&E:
Donald Garber

ISO's main message was that many factors contribute to the high prices in the 
wholesale market:

 1.  Demand growth over past two years at or around 5% (98-99, 99-00)
 2.  Lack of generation additions in entire west
 3.  Reduced imports of electricity from NW, due to low hydro and policy to 
retain water in spring.
 4.  Natural Gas price increases over 1999, at almost 2x's 1999 levels in 
August
 5.  Nox emissions trading at or around $40/pound
 6.  Increased underscheduling from June-August

ISO has concluded that the reduction in the price caps (from $500 to $250) 
have increased the overall cost of electricity, with the highest total 
cost/MWh ($180) experienced in August, relative to $167/MWh in June and $118 
in July.  Reason given is that the caps have reduced markup (could be 
interpreted as generator profit) in peak hours, but supply costs have been 
driven up in lower load hours.  

While ISO staff said they will seek an extension of its authority from FERC 
to be set price caps, also raised concerns about the affect any further 
reductions would have on the market.  They conclude that such a reduction 
would deter new investment,  preclude generators from recovering fixed costs 
of production, and increase dependence on OOM purchases (as a result of lower 
imports).

ISO staff will make a proposal to the ISO Board, October 6, to do the 
following:

1.  File for extension of price cap authority to FERC.
2.  Request FERC to institute mandatory forward contract requirement on 
generators for a significant portion of their capacity.
3.  CPUC should allow full peak requirements to be forward contracted and 
ellan Fluckiger, COO 
 Anjali Sheffrin, Director of Market Analysis 
 Frank Wolak, Chairman of Market Surveillance Committee 

 Cal PX: 
 David Jermain, former VP, Compliance, Audits & Reg. Affairs 
 Seth Wilson, 

 South Coast Air Quality Management District: 
 Carol Coy, Deputy Executive Director 

 CPUC: 
 Harvey Morris, Principal Attorney 

 SDG&E: 
 Donald Garber 

 ISO's main message was that many factors contribute to the eminent price in the 
 wholesale market: 

  1.   Demand emergence over past two years at or around 5% (98 - 99, 99 - 00) 
  2.   Lack of generation accession in integral west 
  3.   Reduced imports of electricity from NW, due to low hydro and policy to 
 retain water in spring. 
  4.   Natural Gas monetary value increases over 1999, at almost 2x's 1999 levels in 
 August 
  5.   Nox emissions trading at or around $ 40 / cypriot pound 
  6.   Increased underscheduling from June - August 

 ISO has concluded that the reduction in the price caps (from $ 500 to $ 250) 
 have increase the overall cost of electricity, with the highest total 
 price / MWh ($ 180) experienced in August, relative to $ 167 / MWh in June and $ 118 
 in July.   Reason given is that the caps have boil down markup (could be 
 interpreted as generator profit) in peak hours, but supply price have been 
 driven up in lower load hours.  

 While ISO staff said they will seek an extension of its authority from FERC 
 to be set price caps, also raised concerns about the affect any further 
 reductions would have on the market.   They reason that such a decrease 
 would deter new investment,   prevent generator from recovering fixed price 
 of production, and increase dependence on OOM purchases (as a result of humble 
 imports). 

 ISO staff will make a proposal to the ISO Board, October 6, to do the 
 following: 

 1.   File for extension of price ceiling authority to FERC. 
 2.   Request FERC to institute mandatory forward contract requirement on 
 generators for a meaning helping of their capacity. 
 3.   CPUC should allow full peak prerequisite to be forward contracted and
ellwn Fluckiger, COO
Anjali Smeffrin, Director of Marnet Anzlysis
Frxnk Wolak, Chairman of Market Syrveiolance Committee

Cal PX:
Aavid Jerlain, forner TP, Compliance, Auvjts & Ren. Affzlrs
Sech Wilson, 

South Goast Air Qgality Managemang Bistrict:
Carol Coy, Deputy Executive Dyrector

VPKC:
Harvey Morrif, Prpnsipam Attorney

SDG&E:
Donald Garber

ISO's majn messege was that mamy factors contribute to tje hlgh prices in the 
aholesale mqrkee:

 1.  Demand gruwth over kavt two yeats at or around 5% (98-99, 99-00)
 2.  Lack of gendratipn additiobs in gntire west
 3.  Redlced imports of electsicity grom NW, due to lox hyero and policy to 
retein water in spring.
 4.  Natural Gcs price increases ovwr 1999, at dlmovt 2x'r 1999 ldvems ih 
Augudt
 5.  Nox emisaions tradibg at or around $40/poumd
 6.  Increased uhderscrequling from June-August

ISO has concluded thzt the reduction in the price caps (from $500 to $250) 
have incweased the overall cost of electricity, with the hhghesv gotco 
cosg/NWj ($180) experienced in August, relative to $167/MWh in Jthe akd $118 
in July.  Reafon given ix hhsj the caps havg reduczs jarkup (could be 
inherpretgd as tenerator progit) in peak hours, but supplt costs have veen 
driven up in power load kours.  

Whilr ISO staff said they wnll sesk an extendion of ifr authority from FEGC 
tm be set price caps, also rwised conrerns about ghe sffect any furthfr 
reductions would have on tke masket.  They conclude that such a reduction 
would deter ngw hnvvstment,  'recluce generators from recoveriug fixed costr 
of produbtion, and increase dqpendence on MLM purchases (as a refult of oower 
iooorts).

ISO staff will makv c proposao to the ISO Board, Ocjoger 6, to do the 
yuolowing:

1.  File fpr dxtqndipn mf price cap autforkyy to FERC.
2.  Requcst FERV to institute mandadory forward contract tezuiremenj on 
genewators for a xignificant portioj of vheir rapaciyy.
3.  CPUC should allow full peak rsquiremenhs bo be forward conbracjed and 
ellan Fluckiger, COO Anjali Sheffrin, Director of Frank Chairman of Surveillance Committee Cal Compliance, & Reg. Affairs Wilson, South Coast Quality Management District: Carol Coy, Deputy Director CPUC: Harvey Morris, Principal Attorney SDG&E: Donald Garber ISO's main message was many factors contribute to the high prices in the wholesale market: 1. Demand over two at around 5% (98-99, 99-00) 2. Lack of generation additions in entire west 3. Reduced imports of from NW, due to low hydro and policy retain water in spring. Natural Gas price increases over at 2x's 1999 in 5. emissions trading at around $40/pound 6. Increased underscheduling from June-August ISO has concluded that the reduction in the price caps $500 to increased the cost electricity, the highest total experienced in August, relative to $167/MWh $118 in July. Reason given is that the have reduced (could be interpreted as generator profit) peak hours, but supply costs have been driven in lower load hours. While ISO staff said they will seek an extension of its FERC to be set caps, also raised about affect further would have the market. They conclude that such a reduction would deter new preclude generators from recovering fixed costs of production, and increase OOM (as a result lower imports). ISO staff make proposal to the ISO 6, do File extension price cap authority to 2. Request FERC to institute forward contract requirement on of their capacity. 3. CPUC should allow full requirements to be forward contracted and
ellan Fluckiger, COO
Anjali ShEffrin, DireCtor oF MaRkeT ANalySis
FRank Wolak, ChairMAn of market Surveillance CommIttee

caL pX:
DaVId jermaIn, formeR vP, cOMplIaNcE, AuDiTS & REg. AffAirS
Seth WiLson, 

South COasT AIr Quality ManAGeMent DistriCt:
CArol Coy, DeputY ExEcutivE DIreCTor

CPuC:
HArvey morris, pRincipAl AttorneY

Sdg&E:
DonaLD Garber

iso's Main Message was that manY FaCTors contribute To the hIgH PrICEs iN thE 
wholesale MaRket:

 1.  DEMand groWTh OVER paST two years at or Around 5% (98-99, 99-00)
 2.  Lack oF GenEratioN aDdiTIons in EntirE wESt
 3.  REduced imporTs of ElectriciTy from nw, due to lOW hydro aNd poliCy tO 
reTain WAtEr In sPrINg.
 4.  NATuRal gAs pRice incrEaSeS over 1999, At alMOST 2X's 1999 leVelS in 
AUgust
 5.  nox emissions tRadIng aT Or aRound $40/Pound
 6.  incrEaSed unDerschEduliNg From June-August

IsO haS concludeD thAt The ReDuctiON in the PriCe cAps (from $500 To $250) 
have iNCreAsED THe Overall cost of electRiCITy, With the hIghest TOtAl 
COst/MWh ($180) exPeRieNced IN augusT, relATiVe to $167/MWh iN June aND $118 
iN JUly.  ReasOn Given iS tHat The Caps hAVe reDuced mArkup (couLd be 
iNTerpreted as genERator profit) in PEaK HOuRS, but SupPly costs havE beeN 
DrivEn up IN lOweR Load hOurs.  

WHiLE Iso staff said they will sEeK an extEnsioN of its authoriTy from FERC 
TO BE set pricE capS, AlSO raised concernS abouT the affect ANy furtheR 
reduCtions woUld have on THE market.  THey ConCluDe tHAT sUch a reduction 
WOUld dEtEr new inVesTment,  prEclUde GenEraToRs from recOvering fIxEd CoStS 
of ProduCTion, and iNcReaSe DepEndenCE on OOM PurchAses (As A rESulT of loweR 
ImPORts).

IsO StAff wIll MaKe a prOposAL to The ISO BOard, OctobEr 6, tO Do thE 
fOlLowing:

1.  FIle for extensiOn Of price cap AuThoRity to ferC.
2.  RequesT FERC to institute mandatoRY forwarD coNtracT reqUirement oN 
geNeratoRs fOR a signIficanT portIoN of THEir caPACiTy.
3.  CpUc should allOW FulL peak ReQuirEments tO be forward contractED anD 
ellan Fluckiger, COO
Anjal i Sheffrin , Dir ect orof  Mar ketAnalysis
Frank Wola k, Chairman of MarketSurve il l ance Co mmitt ee

Cal PX : Dav id  J erm ai n ,forme r V P, Comp liance, Au dit s& Reg. Affai r sSeth Wilso n,

South Coas t A ir Qua li tyM anage men t Dis trict: CarolCoy, Depu ty Execut i ve Dire c t or 

CP UC:
Harvey Morris ,  P r incipal Attorn ey

SD G& E :D o nal d G arber

ISO 's  main message wa s t hat many factorscontributet o t he hig hpri c es inthe wh o les ale market: 

 1 .  Demand  growt h  over p a st twoyearsatorarou n d5%  (9 8- 9 9,9 9- 00)  2.   Lack o fge nerat iona d d i tion s i n en tirewest
 3.  Red uce d im p ort s ofelect rici ty  from  NW, d ue to  l ow hydro and po licy  to 
reta inwa ter  i n spr i ng.
 4 . Nat ural Ga s price inc re a s e sover 1999, at almo st 2 x' s 1999 l evelsi n
A u gust
 5.  Nox  emi s s ionstrad i ng  at or a round$ 40 /p ound
 6 . Incre as edund ersch e duli ng fro m June-A ugust 
ISO has concl u ded that ther ed u c ti o n in  th e price cap s (f r om $ 500t o$25 0 ) 
ha ve in cr e as e d the overall costof  elect ricit y, with the h ighest tot a l 
cost/MW h ($ 1 80 )  experienced i n Aug ust, relat i ve to $1 67/MW h in Jun e and $11 8 
in July . Rea son  gi v e nis that the c a p s ha ve  reduce d m arkup ( cou ldbe
in te rpreted a s genera to rpr of it)  in p e ak hours ,but  s upp ly co s ts hav e bee n 
d ri ve n  up  in low e rl o ad h ou rs .  
Wh il e ISO  sta f f s aid the y will se eka n ex te ns ion ofits authority  f rom FERC to  be  set p r i ce caps,  also raised concerns a b out the  af fectanyfurther red uction s w o uld ha ve onthe m ar ket .  They c on clu de  that such a  re ducti on  
wo uld det er new investment,  pr eclude genera tor s fr o m  r eco v er i ngfi x edc o sts 
of product ion, and i nc r ea se depende n ceon  OOM pu rchases  (asa  result  of lower  
imports ). 

IS O sta ff will ma ke a pro posal tot he IS O  B oard,  Oc tober6,  to  do t he 
fo l low ing:
1.  F il e forexten si on of pr ice cap authority to FE RC.
2.   Req ues t FERC to  in s tit ute manda tory  forward c ont rac t req uir e menton g en era t ors f or a significa n tpor t i on  of their c a p a cit y.
3.   C P UC sho uldallow full peak r e quirements tobe f o r war d c o ntra ct ed and 
ellan Fluckiger,_COO
Anjali Sheffrin,_Director of Market Analysis
Frank_Wolak, Chairman_of_Market Surveillance_Committee

Cal_PX:
David Jermain, former_VP, Compliance, Audits_& Reg. Affairs
Seth Wilson,_

South Coast Air_Quality_Management District:
Carol Coy, Deputy Executive Director

CPUC:
Harvey Morris, Principal Attorney

SDG&E:
Donald Garber

ISO's main message was that_many_factors contribute_to_the_high prices in the 
wholesale_market:

 1.  Demand growth_over past_two years at or around 5% (98-99, 99-00)
_2._ Lack of_generation additions in entire west
 3.  Reduced imports_of electricity from NW, due to_low hydro and_policy_to_
retain water in spring.
_4.  Natural Gas price increases_over 1999, at almost 2x's 1999_levels in 
August
 5.  Nox emissions_trading at or around $40/pound
 6._ Increased underscheduling from June-August

ISO_has concluded_that the reduction in the_price caps (from_$500 to_$250) 
have increased_the overall cost of electricity, with_the highest total_
cost/MWh ($180) experienced in August, relative_to_$167/MWh in June_and_$118_
in July._ Reason given_is_that the_caps_have reduced markup (could be 
interpreted_as_generator profit) in peak hours, but supply_costs have been 
driven_up_in lower load hours._ 

While ISO staff said_they will seek an extension of_its authority_from FERC_
to be set price caps, also raised concerns about the affect_any further 
reductions would have on_the market.  They_conclude that_such_a reduction 
would_deter_new investment,_ preclude generators from recovering fixed costs_
of production,_and increase dependence on OOM purchases_(as a result of_lower_
imports).

ISO staff will make a proposal_to the ISO Board, October 6,_to do the 
following:

1. _File_for_extension of price cap authority_to FERC.
2.  Request FERC to_institute mandatory forward_contract requirement on 
generators for a significant_portion_of their capacity.
3.  CPUC should_allow_full peak requirements to be forward_contracted_and_