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Next Reliability TF Meeting July 23-4

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Subject: UFTO Note — Next Reliability TF Meeting July 23-4
Date: Tue, 08 Jul 1997 13:34:53 -0700
From: Ed Beardsworth

Here is an advance copy of the draft agenda for the next meeting of the DOE Task Force.

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| ** UFTO ** Edward Beardsworth ** Consultant
| 951 Lincoln Ave. tel 415-328-5670
| Palo Alto CA 94301-3041 fax 415-328-5675
| http://www.ufto.com edbeards@ufto.com
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[6450-01-P] DEPARTMENT OF ENERGY
Secretary of Energy Advisory Board; Notice of Open Meeting
AGENCY: Department of Energy
SUMMARY: Consistent with the provisions of the Federal Advisory Committee Act (Public Law 92-463, 86 Stat. 770), notice is hereby given of the following advisory committee meeting:
Name: Secretary of Energy Advisory Board – Electric System Reliability Task Force

DATES AND TIMES: Wednesday, July 23, 1997, 1:00 PM – 5:00 PM and Thursday, July 24, 1997, 8:30 AM – 11:30 AM
ADDRESS: Bechtel Corporation, Hoteling Suites, Second Floor, 50 Beale Street, San Francisco, California
FOR FURTHER INFORMATION CONTACT: Richard C. Burrow, Secretary of Energy Advisory Board (AB-1), U.S. Department of Energy, 1000 Independence Avenue, SW, Washington, DC 20585, (202) 586-1709 or (202) 586-6279 (fax).

Background
The electric power industry is in the midst of a complex transition to competition, which will induce many far-reaching changes in the structure of the industry and the institutions which regulate it. This transition raises many reliability issues, as new entities emerge in the power markets and as generation becomes less integrated with transmission.

Purpose of the Task Force
The purpose of the Electric System Reliability Task Force is to provide advice and recommendations to the Secretary of Energy Advisory Board regarding the critical institutional, technical, and policy issues that need to be addressed in order to maintain the reliability of the nation’s bulk electric system in the context of a more competitive industry.

Tentative Agenda
Wednesday, July 23
1:00 – 1:30 PM Opening Remarks & Introductions;
Philip Sharp, ESR Task Force Chairman
1:30 – 2:45 PM Working Session: Review of the Draft
ESR Task Force Interim Report
2:45 – 3:00 PM Break
3:00 – 4:30 PM Working Session: continued
4:30 – 5:00 PM Public Comment Period
5:00 PM Adjourn

Thursday, July 24
8:30 – 8:45 AM Opening Remarks & Summary of Agreements;
Philip Sharp, ESR Task Force Chairman
8:45 – 10:00 AM Working Session: continued
10:00 – 10:15 AM Break
10:15 – 11:00 AM Discussion: Next Steps — Approach to Addressing
& Resolving the Remaining Task Force Issues
11:00 – 11:30 AM Public Comment Period
11:30 AM Adjourn

This tentative agenda is subject to change. The final agenda will be available at the meeting.

Public Participation: The Chairman of the Task Force is empowered to conduct the meeting in a fashion that will, in the Chairman’s judgment, facilitate the orderly conduct of business. During its meeting in San Francisco, California the Task Force welcomes public comment. Members of the public will be heard in the order in which they sign up at the beginning of the meeting. The Task Force will make every effort to hear the views of all interested parties. Written comments may be submitted to Skila Harris, Executive Director, Secretary of Energy Advisory Board, AB-1, US Department of Energy, 1000 Independence Avenue, SW, Washington, DC 20585. This notice is being published less than 15 days before the date of the meeting due to programmatic issues that had to be resolved prior to publication.

Minutes: Minutes and a transcript of the meeting will be available for public review and copying approximately 30 days following the meeting at the Freedom of Information Public Reading Room, 1E-190 Forrestal Building, 1000 Independence Avenue, SW, Washington, DC, between 9:00 AM and 4:00 PM, Monday through Friday except Federal holidays. Information on the Electric System Reliability Task Force may also be found at the Secretary of Energy Advisory Board’s web site, located at http://vm1.hqadmin.doe.gov:80/seab/.

Issued at Washington, DC, on
Rachel M. Samuel Deputy Advisory Committee Management Officer

DOE Utility Restructuring Weekly Update

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Subject: UFTO Note – DOE Utility Restructuring Weekly Update
Date: Tue, 01 Jul 1997
From: Ed Beardsworth <edbeards@ufto.com>

CC: Jen_Bergman@Energetics.com, DIANE.PIRKEY@HQ.DOE.GOV

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| ** UFTO ** Edward Beardsworth ** Consultant
| 951 Lincoln Ave. tel 415-328-5670
| Palo Alto CA 94301-3041 fax 415-328-5675
| http://www.ufto.com edbeards@ufto.com
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Attached below is last week’s issue of an email summary of current events in utility industry restructuring, prepared by Energetics, Inc. for the DOE Office of Utility Technologies. The items are summaries of stories found on the internet.

Begun a year ago for DOE’s internal use, it is sent on an ad-hoc basis to an email list of interested parties. If you want to be added to this list, simply send an email note with your request to:

Jennifer Bergman, Energetics, Jen_Bergman@Energetics.com

DOE is considering the possibility of posting this material in a website, however no decision has been reached. I have a few recent back issues on file.
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June 27, 1997

Utility Restructuring Weekly Update

This weekly information has been compiled by Energetics, Inc. for the U.S. Department of Energy. Questions or comments should be directed to either Jennifer Bergman, Energetics, Jen_Bergman@Energetics.com, or Diane Pirkey, U.S. Department of Energy, DIANE.PIRKEY@ HQ.DOE.GOV.

National/Federal:

Last week, at the Eighth Annual Energy Efficiency Forum, policy makers debated various utility deregulation issues. Senator Russell Feingold (D-WI) and Pennsylvania Governor Tom Ridge argued that deregulation is best left . . . . .
.
. (5 pages of text)
.
.

WEBSITES:
NewsPage: http://www.newspage.com
EnergyOnline: http://www.energyonline.com
Senate Energy & Natural Resources Committee:
http://www.senate.gov/~energy/competitv.htm

Business Models

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Subject: UFTO Paper — Business Models
Date: Mon, 16 Jun 1997
From: Ed Beardsworth <edbeards@ufto.com>

This is a new version of an earlier paper. I submitted it to PUF, but they want specific examples. At our meeting in SF next week (details to follow), perhaps we can use these ideas as a springboard for discussion.

In the meantime, comments welcome. (Anyone want to co-author the next attempt to get it into PUF?)

Ed B

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| ** UFTO ** Edward Beardsworth ** Consultant
| 951 Lincoln Ave. tel 415-328-5670
| Palo Alto CA 94301-3041 fax 415-328-5675
| http://www.ufto.com edbeards@ufto.com
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Business Models for New Technology in Utilities (draft)

Edward Beardsworth, Consultant

5/97

Many electric utilities are struggling with how best to conceptualize and implement a “technology strategy” as the industry undergoes major change. How can resources put into R&D and new technology ventures be “driven to the bottom line”?

Too often, utilities suffer from an “action gap” between learning about a new technology and taking steps to do something with it. This gap arises out of lack of resources (time, money and people); lack of clear direction from upper management; risk avoidance (rather than risk management) culture; and perhaps most symptomatic, lack of a framework and process for deciding what’s worth doing and how to do it. There should be an explicit decision process for choosing R&D projects, with criteria that everyone understands. As part of that process, a clear delineation of business models could go a long way towards helping know what to look and plan for.

Company Direction and Strategy
To know what projects to do, and what kinds of information and opportunities to seek, one has to know “what business you’re in”, and thereby what kinds of projects are interesting. (A word of caution — too often the absence of an explicit statement of corporate strategic direction is used as an excuse not to do anything. Strategic planning is a never ending iterative process, and new technology endeavors play two roles. They provide input to the strategy, and they help implement it. The advice, therefore, is to go ahead and “do something” and see where it takes you, while at the same time you work on formalizing and refining the plan.)

It’s important to keep in mind that any new venture is a learning process. At each stage, you learn a little bit more, and decide how and whether to continue. At the outset, you simply won’t know how things will work out. This is often a major barrier to pursuit of new technology in utilities, which tend to want guarantees for each endeavor, rather than taking a portfolio risk approach.

Business Models
Most companies have at least an implicit feel for what kinds of technologies to look for, and how to start getting involved. But how is a new opportunity to be handled? What are the ways it could be organized and funded? What are the desired outcomes? How will anyone know when or if it succeeded?

It may help for companies to examine past and present experience–case studies of projects, deals and undertakings that illustrate the “business models” they’ve already used. (Note that a model may not have been explicitly formulated, nonetheless it’s always there implicitly.)

The business model is a brief generic “story” about how an initiative might develop over time, from idea and inception, to full implementation, to the “bottom line.” How will it contribute to the company’s objectives? How will it be funded? How will it be positioned and managed? And most important, what are the points when decisions will be made to kill it or continue it? (This is at the heart of risk management, as distinct from risk avoidance.) Any proposal needs to tell a “story”, and life will be easier if there’s a shared understanding of what kinds of stories make sense for the company.

Here is a set of generic “business models” for the different kinds of situations that arise. Of course, any particular project is likely to involve aspects of more than one of these models.

“#2 Pencil” — This is the conservative extreme. The company has no strategic interest in the technology, except to buy a mature product from a supplier, and therefore no role in the development beyond telling the vendor about preferences. This category is too easy to use as an excuse for inaction, for there are many gray areas where incremental changes and improvements could lead to benefits and business opportunities.

“First User” — The company needs something that isn’t on the market. Works on ad-hoc basis with developers to push it along, helping to shape it to the company’s specific needs. Recognizes that the company won’t be the only user/buyer. In fact, the product won’t ever be available to the company unless there’s a larger market for a vendor to sell to. Counts on being the first to use it, and first to get it fully implemented on the system, gaining benefits and a time advantage over other utilities. May or may not get royalties or other financial participation.

“Market Competitor” — This one is new to utilities. Companies in competitive industries build competitive advantage for themselves by developing or obtaining proprietary technology that will not become commercially available to other companies. Gone will be the assumption that a vendor will be able to sell it to you, too. Instead, the “energy company” that controls it will use it to take away market share.

“In House Inventor” — Develop an invention by an employee in the company, taking it as far along as it makes sense to do, then put it into one of the other business models. Only a very few utilities have programs to explicitly encourage employee invention.

“Joint Venture” / “Piece of the Action” — A more formal version of “First User”. Structured business deal with another company or companies. Countless variations, i.e. marketing and distribution rights, royalty payments, equity participation, etc. as the quid pro quo for whatever resources the company puts in (anything from time and materials, to use of a facility, to intellectual property, to cash).

“New Line of Business” — A group in the company to develop a product or service, generating a new and different source of revenue.

“Spin Off” — Start up a new company to do whatever it is–manufacturer, deliver a service, etc. On the regulated or unregulated side.

“Seat at the Table” — for more advanced concepts that could wreak major change, it pays to pay for an inside look, and to be able to monitor progress, to know when and if to get more deeply involved. Equity investment or development cofunding is often a good way to “choose a horse and place a bet”.

“Good Citizen/Nice Guy” — Supporting economic development and industrial (and commercial) competitiveness in the sales territory, by finding and brokering solutions to the needs and problems of local firms. Enlightened self-interest, and sometimes can result in a business opportunity, and often but not always increased sales (e.g. electrotechnology).

Other models for involvement in new technology might include:
– Using them to transform the way we do business, e.g. best practices, TQM, RCM, life-cycle management, etc. The tools and techniques for these new approaches are “technologies” in their own right, and often involve the use of technology (e.g. information systems, sensors, analysis software, etc.)
– Contributing to the global common good, e.g. climate. A few utilities have gone public with significant commitments to the environment, and technology fixes are a going to play a major part in the implementation of those strategies.
– Watchful waiting– a less vigorous version of “seat at the table”, involves actively keeping an eye on the literature, attending conferences, etc. Joining a user’s or industry group or advisory committee is often a cost effective way to keep informed. (Designate subject-area experts?)

There is an extensive body of knowledge for managing portfolios of new technology ventures. Usually, measures of “way-out-ness” (risk) and potential impact (reward) are central to such analyses, but that doesn’t show how to position a project in business terms, so it can move forward after the development phase is completed. It’s an issue that must be addressed at the start.

The taxonomy of Business Models offered here may serve as a tool that can help utilities explore how they want to handle various kinds of projects, perhaps as part of their overall corporate game plan for new technology.

Energy Daily Conf. International Lessons

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Subject: UFTO Note — Energy Daily Conf. International Lessons
Date: Thu, 15 May 1997
From: Ed Beardsworth

Energy Daily is holding a conference on “Lessons” from deregulation experiences in other countries. My own view is that there’s been far too little attention paid to to what’s been learned overseas, except perhaps for the UK (which may not be a very relevant situation!), so this is a welcome sign.

They’ve just posted this conference on their web site…

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| ** UFTO ** Edward Beardsworth ** Consultant
| 951 Lincoln Ave. tel 415-328-5670
| Palo Alto CA 94301-3041 fax 415-328-5675
| http://www.ufto.com edbeards@ufto.com
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http://www.kingpublishing.com/F-17.html

June 24-25,
International Power Deregulation: Lessons and Implications for U.S. Utilities,
Washington, D.C.

Is there life after deregulation?

Well, of course there is. But what is the nature of that life? To this point, deregulation of U.S. electric utilities has been almost an academic exercise. The unanswerable question, so far, is how it would really work. Will generation really be a boring, vanilla business? And transmission, an exciting, profitable business? Nobody really knows. It is all speculation. But we do know that nothing goes the way it is planned and that the most daring futurists are wrong.

The Energy Daily, in its desire to answer some of these questions. has joined forces with the international consulting firm of Putnam, Hayes & Bartlett (PHB) to peer into the future with the guidance of those who have already been there. Many countries have already restructured–New Zealand, and Argentina, for example. They have very real, hands-on stories to tell and often those stories are at odds with what is anticipated for the U.S. PHB has consulted with utilities around the globe and, together with The Energy Daily, has assembled an imposing panel of experts on life after regulation for a special conference on “International Power Deregulation: Lessons and Implications for U.S. Utilities” scheduled for June 24-25, 1997 in Washington, DC.

The Economist magazine recently compiled a disturbing list of infrastructure investments over time that had gone wrong, sometimes from ignorance and sometimes from political intervention. But, it concluded, at this point in history, with growth rates in many target countries around 10 percent, it would be foolish for international companies to stay out of the infrastructure boom. Be careful and know what you are doing, The Economist concluded.

There is now a convergence between the international experience in electric industry restructuring and deregulation in the U.S. Great fortunes may be made, or lost, in the American electric utility industry after deregulation, as they will be around the globe. The concepts discussed in “International Power Deregulation” may well save American utilities hundreds of millions of dollars by helping them avoid repeating the mistakes that others have made and paid for. I am looking forward to seeing you at this most critical meeting with the gifted and knowledgeable experts from around the globe.
Agenda

DAY ONE, TUESDAY, JUNE 24, 1997

9:00 am “Welcome and Introduction”
Llewellyn King, Publisher, The Energy Daily (Co-Chair)

9:15 am “International Overview”
Howard W. Pifer III, Chairman, Putnam, Hayes & Bartlett (Co-Chair)

10:15 am “Restructuring Assets: Functional Unbundling, Divestiture, and
Acquisition”
Moderator: Fred Baird, Managing Director, Putnam Hayes Bartlett Asia-Pacific, Ltd.

Speakers:
John Rowe, President & Chief Executive Officer, New England Electric System (US)
Robert W. Thomson, Chief Executive, Trans Power New Zealand Ltd. (New Zealand)
David Jones, Group Chief Executive, National Grid Company (UK)
Joseph P. Kearney, President & Chief Executive Officer, US Generating Company (US)

12:15 pm Luncheon and Address: “The View from Wall Street”
Charles A. Trabandt, Chairman, Strategic Advisory Services, Merrill Lynch

1:45 pm “Reasons for Restructuring: Politics, Ideology, and the Need for New Capacity”
Moderator: Brian Caine, Director, Ernst & Young (Canada)

Speakers:
Peter Grenier, Secretary of Energy (Brazil)
Brian Pomeroy, Partner, Touche Ross, (UK)
Alfredo Mirkin, Secretary of Energy (Argentina)
William Farlinger, CEO, Ontario Hydro (Canada)
Jamie Wimberly, Vice President, Consumer Energy Council of America Research Foundation

4:00 pm “Market Structures to Implement Restructuring: ISOs, Poolcos, & Power Exchanges”
Moderator: Larry E. Ruff, Managing Director, Putnam Hayes & Bartlett

Speakers:
Graeme L. Dillon, Chief Executive Officer, Victoria Power Exchange (Australia)
Cesar W. de Faria, Director, President, Copelmi Mineracao(Brazil)
Eileen Marshall, Director of Regulation, Ofgas (UK)
Shmuel Oren, Professor, University of California, Berkeley (US)
Jan Moen, Director of Regulation and DSM, Norwegian Water Resources & Energy

6:30 pm Reception, Dinner and Address: Hosted by Putnam, Hayes & Bartlett

Hon. James E. Schlesinger, Senior Advisor, Lehman Brothers

DAY TWO, TUESDAY, JUNE 25, 1997

8:00 am “Control or Restructuring: Problems of Federal versus State Jurisdiction”
Moderator: William H. Hieronymus, Managing Director, Putnam, Hayes & Bartlett

Speakers:
Pierre Lederer, Senior Vice President & Head, General Economic Studies, Electricite de France (France)
Javier Herrero, Managing Director, Iberdrola (Spain) *
Richard O’Neill, Director, Office of Economic Policy, Federal Energy Regulatory Commission (US)
Robert Gee, Commissioner, Texas Public Utilities Commission and Chairman, NARUC Electricity Committee

10:15 am “New Competition and Emerging Markets: Developing Viable Strategies”
Moderator: James M. Speyer, Managing Director, Putnam, Hayes & Bartlett

Speakers:
Richard C. Green, Jr., Chairman & Chief Executive Officer, UtiliCorp. United Inc. (US)
Stephen Snyder, President & Chief Operating Officer, TransAlta Utilities (Canada)
Lee W. Hogan, President, & Chief Executive Officer, Retail Energy Group, Houston Industries, Inc. (US)
A Representative of National Power (US) *

12:15 pm Luncheon and Address: “International Experiences and Domestic Problems”
Llewellyn King (Co-Chair)

1:45 pm “Drawing Conclusions”
William W. Hogan, Professor, John F. Kennedy School of Government, Harvard University

2:45 pm “Wrap-Up Session and Adjournment”
Howard Pifer III (Co-Chair)
Howard W. Pifer (Co-Chair)

Adjourn

Hand held Computers in Utilities

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Subject: UFTO Note – Hand held Computers in Utilities
Date: Fri, 02 May 1997 09:29:24 -0700
From: Ed Beardsworth

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| ** UFTO ** Edward Beardsworth ** Consultant
| 951 Lincoln Ave. tel 415-328-5670
| Palo Alto CA 94301-3041 fax 415-328-5675
| http://www.ufto.com edbeards@ufto.com
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Hand-Held Computers in Utilities

In the April issue of Electrical World T&D, there were a couple of items about hand-held computers. A number of you have either already implemented them, at least in some applications, or are thinking about it, so perhaps this will be useful if you didn’t notice it in your own perusal of the magazine.

On page 47-8, there’s a “Buyer’s Guide”, showing photos of 22 different brands, with a quick summary of their features. This follows an article on using them for field data collection. Also, on page 12, a conference is mentioned:

Utility Industry Hand Held & PDA Forum, August 20-22, St. Louis, MO

Contact:
World Market Strategies, 415-252-8008, info@wmsltd.com
Ask for Jeff Lohrmann. See web site at: http://www.pda-expo.com

The company does market development for mobile computing and wireless communications, putting vendors in touch with each other and with customers. This will be their third annual forum with the utility industry. Last year they had over 300 attendees representing hardware and software vendors and over 75 utilities (including some of your companies). The company can provide a summary report from last year’s event. More details from their web site is attached below.

They say that there’s wide range of how far along different utilities are at implementing these devices. Some companies are very advanced, and others haven’t even started. Too often, companies gear up to build their own system (reinventing wheels) and don’t realize how much is already available on the market.

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(PS: Please let me know if you consider this item “redundant”, “borderline,” or “worth sending via UFTO”. It’s sometimes a difficult judgement call, and I don’t want to be sending too many things that you already know about via other sources. EB)

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World Market Strategies/PDA Inc.
(web site material)
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Join us at the 1997 Utility Industry Hand-Held & PDA Forum

The 3rd annual Utility Industry Hand-Held & PDA Forum will be held August 20-22, 1997, at the Marriott Hotel in downtown St. Louis, Missouri. We look forward to your participation in this exciting event.

Call 415-252-8008 or email at info@wmsltd.com for more

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The Utility Industry Hand-Held & PDA Forum ’97 will again gather technology vendors, Operations/Administration Executives, CIOs, and Project Managers representing electric and gas companies from around the world together to discuss Hand-Helds, PDAs, related software and enabling technologies in a setting conducive to real problem solving.

The Forum provides significant opportunities for both the vendor and customer communities to share the risks and the rewards of bringing vital and effective field automation to the Utility Industry. This Forum continues to be the only event targeted specifically at mobile/wireless/hand-held computing technology in the Utility Industry.

Here’s the topics so far:
Field automation in disaster management
Mapping in the field
Distribution system/work management applications
Field service applications
Building an enterprise wide field automation strategy
Database connectivity
Determining the ROI for Mobile Projects
Wireless communications
Introductory issues in field automation
Sales Automation
Trouble call management
Inspections

Background & Description

More than 250 individuals, including nearly 100 CIOs, IT Managers, Project Managers and Operations Executives representing 75 different Utility companies along with 35 exhibitors who displayed their technology, participated in our inaugural Utility Industry Hand-Held & PDA Forum in December 1995. Our second annual Utility Industry Hand-Held & PDA Forum in August 1996 attracted 300 participants, including more than 110 Utility company executives and 42 exhibitors.

Past sponsors have included:
— AM/FM International — RAM Mobile Data — MDSI
— Norand — Utility Partners — Trimble Navigation
— Electric Power Research — Institute Husky Psion
— IT for Utilities Magazine — PennWell Publishing
— Motorola — Pen Computing Magazine
— Alliance Systems — Arrowsmith Technologies
— Raytheon Transportation Management — Mapframe
— PDA Industry Association — World Market Strategies — PDA Inc.

We look forward to working with you on this event. If you need more information call Jeff Lohrmann, James Thomas or Jon Covington at 415-252-8008 or email us at info@wmsltd.com for more information.

QuickStabTM: Real-Time Prediction of Transmission System Loadability

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Subject: UFTO Note – QuickStabTM: Real-Time Prediction of Transmission System Loadability
Date: Fri, 04 Apr 1997
From: Ed Beardsworth
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| ** UFTO ** Edward Beardsworth ** Consultant
| 951 Lincoln Ave. tel 415-328-5670
| Palo Alto CA 94301-3041 fax 415-328-5675
| http://www.ufto.com edbeards@ufto.com
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(The developer of this program was referred to UFTO by a staff member at DOE. The following write up was prepared by him. Note the special offer for UFTO Members, in the last paragraph.)

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QuickStabTM : Real-Time Prediction of Transmission System Loadability

Today’s utility systems are likely to be dispatched near the limit of capacity and stability. In the context of open transmission access, network loadings will often get close to unstable states undetectable by conventional power-flow, optimal power-flow and contingency analysis programs. Such states will have to be predicted before they occur.

Without a real-time ability to determine how close the system is to a critical state, utilities will be less able to operate reliably and to compete effectively in the deregulated market. Also, the real-time assessment of the maximum loadability will have to be performed LOCALLY by EACH utility, in addition to, or rather than, being performed only at ISOs or large area coordination centers (power pools).

Critical states occur at, or within a certain margin from, the maximum power transfer capability, or maximum loadability of a power system. This limit is not constant. It depends on the generation, customer demand and transmission network conditions. In order to be meaningful and reliable, it must be computed from the real-time conditions of the transmission network.

A field-proven solution to this problem is available. A maximum loadability predictor has been developed and successfully tested and validated. It determines the transmission reliability margin corresponding to a given system state and evaluates the distance to the point of maximum loadability of the transmission network. In addition, it displays the results in a suggestive, easy-to-understand graphical format, and provides information that can help develop a quick remedial action strategy.

The program, known as QuickStabTM, offers significant benefits. It can help increase revenues from wheeling charges while meeting higher MW demand and reliability requirements. It is well suited for short- and mid-term operations planning scenarios. And it can be used on-line to supplement existing real-time computing facilities. Its modular design and portable code implementation make it possible to integrate the stability calculations with existing power-flow, optimum power-flow and security assessment applications.

As a special offer to UFTO members, QuickStabTM will be made available FREE for a 60 days trial period. Since users need to understand the methodology and be technically proficient at doing load flow and steady-state stability calculations, a training workshop will be provided at moderate cost to address the solution technique, definition of study cases, data preparation procedures, program installation, and interpretation of results.

For additional information, or to arrange for a private, exclusive QuickStab presentation at the upcoming PICA 97 conference, please contact:

Dr. Savu Savulescu
5104 Woodmere Drive, Suite #204
Centreville, VA 20120-4333
(703)818-8028 savu.scs@worldnet.att.net

Conf. on Buying and Selling Generation Assets

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Subject: UFTO NOTE — Conf. on Buying and Selling Generation Assets
Date: Tue, 18 Mar 1997
From: Ed Beardsworth

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| ** UFTO ** Edward Beardsworth ** Consultant
| 951 Lincoln Ave. tel 415-328-5670
| Palo Alto CA 94301-3041 fax 415-328-5675
| http://www.ufto.com edbeards@ufto.com
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This is a follow up to a note I sent you several weeks ago. The conference location has been changed from NYC to San Francisco (I’m told there wasn’t a hotel available in NY!)

NOTE Special arrangement–UFTO Members Discount.
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TO: Clients and Colleagues of Ed Beardsworth
FROM: Jim Naphas, Conference Manager, Infocast, Inc.
DATE: March 18, 1997

RE: Special 25% discount invitation FOR UFTO MEMEBERS
to attend an upcoming Infocast conference
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BUYING AND SELLING UTILITY GENERATION ASSETS

San Francisco Marriott, San Francisco, California, April 14-15, 1997

The era of deregulation brings with it much uncertainty, and one of the leading questions is the status of generation. A wave of generating asset transfers on an unprecedented scale is expected in the near future as a result of industry restructuring. This shuffling is creating a potentially monumental opportunity for today’s power industry players to buy, sell, or spin-off generation assets to improve competitiveness, or to enter this highly competitive market.

Infocast has assembled a group of experts from across the nation to address future market conditions, estimation of the value of generation assets in the new competitive era, the ever-changing regulatory waters, and financing of these deals. Enclosed is a descriptive brochure on this informative program for your review.

By special arrangement, Infocast is extending this special invitation allowing UFTO Member company personnel to register for this program at a 25% discount off the regular tuition. (Please note: if you are a government employee you qualify for the government discount of 40% only.) To receive the reduced tuition, just mention this email offer to the registrar when enrolling.

If you have any questions about the conferences, please feel free to contact Jim at (818) 902-5400.

We look forward to seeing you this spring!
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Buying and Selling UTILITY GENERATION ASSETS
An Up-to-the-Minute Review of Today’s Hottest Issues in Generation Portfolio Management with Practical Discussion Based on Today’s Transactions

The Future of Generation Portfolios in a Deregulated Market

Determining the Value of Your Company’s

Understanding Critical Accounting and Financing Issues

Regulatory Issues in Asset Transfer

State-of-the-Art Marketing Strategies for Generating Assets

Sponsored by INFOCAST
Official Publication: COMPETITIVE UTILITY

APRIL 14-15, 1997
SAN FRANCISCO
SAN FRANCISCO MARRIOTT

As a result of the ongoing restructuring of the U.S. power industry, we are seeing the beginning of a wave of generating asset transfers. It seems clear that this trend will continue on an unprecedented scale. This titanic shuffling of assets is creating a critical opportunity for today’s power industry players to buy/sell/spin-off generation assets in order to meet their goals-whether those goals are growth, rationalization of a generating portfolio to improve competitiveness, or even to seize the opportunity to enter or exit this highly competitive market. As large as the opportunities are, however, this will not be an easy game to play. Players must deal with great uncertainty about future market conditions, estimate the value of generation assets under those market conditions, navigate uncharted regulatory waters, arrange financing and/or obtain the approval of their debt and equity investors while negotiating the best possible deals. Only those who are aware of the latest approaches and industry thinking on these subjects will be able to emerge from the process with their winnings in hand.
Infocast has brought together a group of experts from Wall Street to Washington to provide a briefing on the critical issues in generating asset management. Case studies will serve as a practical example providing helpful do’s and don’ts when negotiating your own deal. Register today and learn how to seize the opportunity to improve your company’s generation portfolio.

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Agenda
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Monday April 14, 1997

Welcome and Introduction from Conference Chairman
Jeffrey C. Bodington, President, Bodington & Co.

Generation Portfolios and the New Environment
FERC POLICIES ON MARKET POWER AND ASSET SALES
Why divestiture makes sense in some cases
– Reduced regional market power, both vertical and horizontal
– Handling stranded costs
– Making assets more efficient, inside or outside the electric industry
– Why purchases make sense in other cases
– More efficient operation means lower prices, higher profits
– The value of national generating companies
– Consolidating niche markets and functions
– FERC market power policies and their impact on asset transfers
Charles Whitmore, Senior Economist,
Assistant Director of Economic Policy, Federal Energy Regulatory Commission

STATE RESTRUCTURING INITIATIVES-HERE’S WHAT WE WANT THE INDUSTRY TO LOOK LIKE
Regulator’s policy objectives
Linkage between federal and state authority
Decisions regulators must make
Practical issues affecting schedules for divestiture
Forecast of what will happen and when
P. Gregory Conlon, President, California Public Utilities Commission

NAVIGATING THE REGULATORY PROCESS FOR APPROVING ASSET SALES
Understanding the regulatory framework
Understanding the commercial process
Understanding stockholder interests
Reconciling regulatory, commercial and stakeholder interests
Finding a regulatory strategy that works
Joseph M. Malkin, Partner, O’Melveny & Myers LLP; outside counsel to Pacific Gas & Electric

NRC POLICIES ON TRANSFERS OF NUCLEAR ASSETS
NRC policies and regulations on asset transfers prior to the emergence of restructuring
NRC policy questions raised by restructuring
Integrating NRC policy on restructuring with policies of other agencies (FERC, SEC, State Commissions) ~ Impact on asset transfers of current NRC initiatives
George A. Avery, Partner, Shaw, Pittman, Potts & Trowbridge

STRANDED COST RECOVERY AND ITS IMPACT ON GENERATION PORTFOLIO DECISIONS
Dimensions of stranded costs: size, timing and rate of payment
Generation divestiture and stranded cost recovery
Asset sales as a method for estimating stranded costs
Risks and risk allocation measures
– for vertically integrated utilities
– between Gencos and regulated companies
– between regulated companies and customers
Theresa Flaim, Ph.D., Vice President, Corporate Strategic Planning, Niagara Mohawk Power Corp.

PORTFOLIO AND CORPORATE STRATEGIES FORTHE NEW ERA
The best of times, the worst of times-opportunities and threats in the restructured wholesale and retail power markets
New wine in old skins-reconfiguring existing portfolios to take advantage of new strategies
Historic relics-dealing with assets and arrangements “inherited” from the regulated monopoly era
To hedge or not to hedge-role of risk management strategies in meeting new challenges of operating a “genco” in an unbundled marketplace
Calpine’s rationale for pursuing a merchant power strategy
Rod Boucher, President, Calpine Power Services Co.

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Group Luncheon & Address

“FUTURE DIRECTION OF RESTRUCTURED POWER MARKETS IN CALIFORNIA AND NEW ENGLAND AND THE IMPACT ON GENERATION ASSET VALUES”
Edward J. Walsh, Group President, Power & Government Americas & India, Stone & Webster

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Valuation of Generation Portfolios

CHANGING FUEL PRICE CONSIDERATION IN POWER PLANT VALUATION
Critical new fuel issues
Evaluating fuel issues for merchant plants ‘ Predicting future fuel markets ‘ Understanding the future link between fuel and power markets ~ Fuel management for a competitive market
Jeffrey P. Price, President, Resource Dynamics Corp.

TRENDS IN WHOLESALE ENERGY AND CAPACITY PRICES
Forecasts of demand
Existing and future sources of supply
Fuel price uncertainties
Balancing supply and demand
Charles Mann, Director, Fieldstone Co.

PRICE PREMIUMS FOR “STRATEGICALLY LOCATED” PLANTS
Valuing plants within transmission constrained areas
Getting paid for providing system support and ancillary services
Understanding reliability contracts with the independent system operator
Assessing competitors’ barriers to entry
Glen Davis, Vice President, AES Transpower

OPERATING COSTS AND COMPETENCIES-WHO SHOULD BE IN THE GENERATION BUSINESS
The goal…to promote the most efficient operations
Defining the efficiency/competency curve for operators
Looking at the variability among operators
Meeting the need to have the most efficient operators
Craig A. Mataczynski, Vice President, US Business Development, NRG Energy, Inc.

SALES, LEASES, SPIN-OFFS AND OTHER OPTIONS: WHAT’S RIGHT FOR YOU?
Describing each option’s structure
‘ Summarizing each options key benefits and costs
The roles of regulators
What has been done to date and why?
New structures to consider
Alan Levande, Vice President, Goldman Sachs & Company

PANEL DISCUSSION: MAKING DECISIONS IN THE FACE OF UNCERTAINTY
Glen Davis, AES Transpower
Alan Levande, Goldman Sachs & Company
Charles Mann, Fieldstone Co.
Craig A. Mataczynski, NRG Energy, Inc.
Jeffrey P. Price, Resource Dynamics Corp.
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Cocktail Reception: There will be a cocktail reception at the conclusion of day one giving you an opportunity to meet speakers and your fellow attendees.

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Tuesday April 15. 1997
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Welcome and Introduction from Conference Chair
Jeffrey C. Bodington, President, Bodington & Co.
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Financing Issues
IDENTIFYING KEY CREDIT ISSUES
Bond indentures
Rating the pieces of a once-integrated utility
Merchant plant risks
Peter N. Rigby, Director, Project Finance Ratings, Standard & Poor’s

EVALUATING MARKET RISK IN FINANCING ASSET PURCHASES
Market “price” risk: impact of supply and demand
Market “access” risk: market infrastructure and business risk in being able to dispose of power output
Increased use of commodity and financial hedging instruments
Effectiveness of risk allocation and mitigation strategies
How much risk will the financial markets be willing to accept: profile of an acceptable financing package for generating assets
Lewis J. Hart, Jr., Managing Director, CIBC Wood Gundy Securities Corp.

Requirements for Transferring Assets
UNDERSTANDING CORPORATE GOVERNANCE ISSUES
Examining the auction process in terms of legal due diligence, regulatory and contract issues
Fraudulent conveyance issues
Using indenture provisions to maximize the available consideration
Balancing the interests of the various parties involved
J. Michael Parish, Senior Partner, Reid & Priest, LLP

BOND INDENTURE ISSUES
The spirit vs. the letter of indenture
Refinancing and defeasance strategies – Stranded costs securitization issues
Inter-company transfers and property release funding options
David P. Falck, Partner, Winthrop, Stimson, Putnam & Roberts

ACCOUNTING MATTERS TO CONSIDER IN CONNECTION WITH UTILITY GENERATING PLANT SALES
Types of sales structures
Financial reporting and the accounting issues involved
Regulatory matters and its impact on accounting
David Etheridge, Partner, Arthur Andersen

DEALING WITH ENVIRONMENTAL LIABILITIES
How can different project acquisition structures affect environmental liabilities?
Types and methods of due diligence necessary to identify environmental liabilities
Anticipating changes that affect project permitting and raise compliance costs
Andrew A. Gracie, Esq., Partner, Chadbourne & Parke

BUYING AND SELLING INDIVIDUAL GENERATING UTILITY ASSETS
Utility plants that have already sold and their valuation
Key factors determining value
Timing for new sales
Regulatory issues
Assessing closing risk
Jeffrey C. Bodington, President, Bodington & Co.

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Marketing Generation Assets
HOW TO MARKET ASSETS; HOW TO GET THE HIGHEST PRICE BIDDING STRATEGIES FOR ASSET ACQUISITION
The positioning of assets
Approaching the market-auction v. negotiation
Calculating fair value in a deregulated market
Identifying a qualified buyer
Categorizing types of buyers-financial v. strategic, public v. private
Jeff Miller, Partner, The Beacon Group

CASE STUDIES
ARRANGING THE SALE OF GENERATION ASSETS OUT OF THE BANKRUPT CAJUN ELECTRIC COOPERATIVE
Obtaining bid protections to lessen the risks for the lead bidder
Maintaining flexibility to ensure the leading bid remains viable
Strategies used by the non-lead bidders to come from behind and successfully acquire assets
Ronald L. Rencher, Partner, LeBouef, Lamb, Greene & MacRae

PREPARING TO SELL AN OWNERSHIP INTEREST IN NUCLEAR POWER: SALUDA RIVER’S REP PROCESS Market assessment and market interest in nuclear power
Strategy for marketing of nuclear power
Data requirements for assessment of nuclear power acquisition
Financial considerations and economic analysis
Anis D. Sherali, P.E., Vice President Power Supply, Economic, Regulatory and Financial Planning, Southern Engineering Co.
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FOUR WAYS TO REGISTER:
Telephone: (818) 902-5400
Fax form to: (818) 902-5401
Mail form to: Infocast, Inc.
13715 Burbank Blvd.
Sherman Oaks, CA 91401

E-mail form to: infocast@westworld.com
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REGISTRATION INFORMATION
Tuition: $995.00 The full tuition is payable in advance and includes program instruction, continental breakfasts, luncheon and reception, complete conference documentation and refreshments. * 40% Discount for U.S. Federal, State and Local Government Employees: $597.00
Program Schedule: Registration will take place from 7:00 a.m. to 8:00 a.m. on Monday, April 14. The conference will take place from 8:00 a.m. to 5:00 p.m., followed by a cocktail reception from 5:00 p.m. to 6:30 p.m. The conference will resume on Tuesday, April 15 at 8:00 a.m. and adjourn at 3:15 p.m.
Accommodations: Infocast has secured a limited number of rooms at the San Francisco Marriott, which will be held at a special rate of $177.00 until March 14,1997. To receive the special rate, call the hotel directly at (415) 442-6755 and mention that you are an Infocast registrant. The hotel is located at 55 Fourth Street, San Francisco, CA 94103.
Air Transportation: For discounted airline fares, please call Uniglobe Executive Travel at (800) 676-3932 and mention your participation in the Infocast conference.
Cancellation, Refund & Credit: If your written cancellation is received prior to March 31, 1997, a full refund will be made. Written cancellations received on or after March 31,1997, will create a credit of the tuition good toward any other Infocast conference or publication. In the event that a program is canceled, Infocast does not assume responsibility for any expense other than the tuition fee.
MCLE Credits: Infocast certifies that this activity has been approved for MCLE credit by the State Bar of California in the amount of 13 hours.

Registration Form:
Enclosed is a check payable to “Infocast” to register the following individual in:

Buying and Selling Utility Generation Assets
San Francisco Marriott – San Francisco, CA
April 14-15, 1997 (415) 442-6755

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Tracking Code A B C

DOE Electric Reliability TF Meeting Minutes

/0 Comments/in , /by

Subject: UFTO Note – DOE Electric Reliability TF Meeting Minutes
Date: Thu, 27 Feb 1997 09:16:14 -0800
From: Ed Beardsworth

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| ** UFTO ** Edward Beardsworth ** Consultant
| 951 Lincoln Ave. tel 415-328-5670
| Palo Alto CA 94301-3041 fax 415-328-5675
| http://www.ufto.com edbeards@ufto.com
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Attached are the approved minutes of the first meeting of the Electric System Reliability Task Force. The minutes were approved by Chairman Phil Sharp on February 24, 1997.

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NEXT MEETING:
The second meeting of the Task Force will be held in Washington DC on March 25th at the Madison Hotel. The meeting will tentatively start at 8:00 AM and last until 4:00 PM.

The meeting will tentatively include:

1) A discussion of “Assumptions Regarding the Future Electricity Industry”, based on a paper by Theresa Flaim entitled “A Vision of the Competitive Electricity Market – What’s Clear, What Isn’t”.

2) A discussion of the “Basic Concepts and Operating Requirements for Electric System Reliability”, based on a staff paper.

3) A discussion of “Policy and Institutional Issues”, where staff from NERC, DOE and a Power Marketer will present their views on how policy and institutional reliability issues should be addressed.

4) Planning and Scheduling of Future Meetings.

A Federal Register Notice will be published at least 2 weeks before the meeting. It will include the agenda and principal speakers.

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Secretary of Energy Advisory Board Task Force on Electric System Reliability Minutes of First Task Force Meeting January 16, 1997

J.W. Marriott Hotel Washington, D.C.

1.0 Opening Remarks and Perspectives

The first meeting of the Secretary’s Task Force on Electric System Reliability was held on January 16, 1997, in the J.W. Marriott hotel, Washington, D.C. Robert Hanfling, Chairman, Secretary of Energy Advisory Board (SEAB) opened the meeting at 8:30 am with a brief welcome to the members and an introduction of the Task Force Chairman, Philip Sharp (the Chairman).

The Chairman thanked the members for agreeing to participate on the Task Force and expressed his respect for the work they do in “keeping the lights on.” He recalled the major electrical outages in the West last summer as painful reminders of what happens when the lights do go out. He called attention to the great changes taking place now in the electric power industry (e.g., participants, demands, economic incentives) and stressed that one of the main goals of this Task Force was to make sure that reliability did not get lost in the transition. He then introduced Deputy Secretary of Energy Charles B. Curtis.

Deputy Secretary Curtis thanked the members for interrupting busy schedules and expressed his hope that the work of this panel will be useful for present and future generations. He observed that the industry is irreversibly committed to restructuring and stressed the need to assure that reliability is afforded its proper place for consideration in the evolving change. He commented that with the continued economic growth and development in our country, blackouts are debilitating to our economy and becoming even more so. The Deputy Secretary offered seven specific challenges to the Task Force:

-Although the bulk electric power system has functioned well under a sense of voluntarism, thanks largely to the North American Electric Reliability Council (NERC) and its regional councils, will voluntarism be sufficient to assure reliability under the new paradigm?

-Are federal authorities adequate and are they properly lodged in the right agencies (e.g., DOE, FERC)?

-Given the advances which have taken place in industry technology, operational procedures and training, which permit the system to be operated closer to the margins, are we asking operators to do more than is reliably possible?

-Given the evolving changes in economic incentives which underpin the industry, is the industry likely to continue to invest wisely and adequately in R&D?

-Given that the concept of an independent system operator, in one form or another, is under strong consideration in many states, is that concept necessary and sufficient for maintaining a secure and reliable system?

-Is the balance between federal/state regulations proper, and is it possible that the states could do more to assure reliability?

-Given that the 105th Congress intends to focus sharply on electricity restructuring during this session and that the Administration will likely submit legislation this year, what are the recommendations of this Task Force?

2.0 Task Force Member Introductions

Following these remarks, the Chairman asked each of the 18 present and three telecommunicating members of the Task Force to introduce themselves, briefly describe their background and describe any areas in which they felt their expertise might be especially helpful to the group.

3.0 Institutional Reliability Issues

The Chairman then introduced Mr. Michehl Gent, President, North American Electric Reliability Council (NERC), to discuss institutional reliability issues. Mr. Gent briefly described the three interconnections and noted that the regions, now numbered at ten, initially were formed by the people in each region to address the unique needs of that region. There was no intent then to make them similar since there was no thought of sending power from Minneapolis to Florida. As a result of changes, both those which have taken place already and those anticipated, the regions are becoming more alike in terms of their electric power planning and operations. He recalled events leading to the formation of NERC in 1968 after the northeast blackout of Nov. 9, 1965, and described its three primary objectives; to establish standards, measure performance, and ensure compliance. Of special note, he thought, were actions taken by NERC to adapt to evolving changes in ownership and access. By way of example, he noted that membership on the Board of Trustees had increased to 34 with representation by all segments of the industry, and also that the number of organizations with observer status had increased. Mr. Gent then introduced Don Benjamin, NERC’s Director of Operations, to discuss some of the specific activities underway within the industry to assure reliable operations in the new environment.

Mr. Benjamin highlighted a number of current initiatives, in areas of: operational security; transmission use; operating standards, interconnected operations services; and, actions to address major outages in the West last summer. He concluded with a summary statement of goals for a reliable electric system which can accommodate the marketplace by:

-operators having the “big picture” at all times; -analyzing transactions before they are consummated; -ensuring compliance with NERC policies; -establishing a program of system operator certification; and, -defining requirements for interconnected operations services.

Mr. Benjamin described in some detail NERC’s previous approach to operational security in which interconnected but nearly autonomous systems have operated through about 150 control areas established so as to be able to operate so that problems are contained within the area and do not pass beyond the boundaries. He indicated that goal is becoming more difficult to achieve on a control area basis with the increased role of market entities and open access. To supplement the control centers, the industry is moving toward security coordinators, fewer in number at twenty-two, with responsibilities to perform security analysis based on interchange schedules, coordinate emergency operations (e.g., transmission overload relief, load reductions), manage the interregional security network, and develop operating policies as may be needed. In terms of status, he advised that regional security plans are in place, coordinators exist and will have their first meeting in February, and that necessary databases are known and in preparation.

In response to a question (Cavanagh) of whether the new security system can handle tens of thousands of transactions/hour, Mr. Benjamin noted that: “We’ll have to. We probably can’t today…but we’re closer today than we were 5 years ago. With computer technology…it should be possible. Multi-regional models handle the flows and will be updated continuously. They will be able to reflect, ideally, what is really happening in the system.” Mr. Budhraja stressed the big difference between physical and financial transaction systems noting that the number of generators and points of consumption will not change, while financial transactions can number in the thousands.

The Chairman asked the status of the models NERC uses to monitor security and was informed by Mr. Benjamin that they have existed and been kept current for years. What is not in place yet is the ability of the operators to access those models in real-time. That capability is undergoing development right now. Once real-time access is possible by all operators, they can test a transaction real-time and, if it is feasible, conclude it.

4.0 Technical Reliability Issues

The Chairman then introduced Dr. Karl Stahlkopf, Vice President, Power Delivery, Electric Power Research Institute (EPRI), to discuss technical reliability issues. After a brief review of differences between design objectives for the system and the way it is being operated today, Dr. Stahlkopf moved on to discuss the causes of and lessons from last year’s major outages in the West.

After a brief background review of the record heat and unusual power flows which preceded the August 10 outage, Dr. Stahlkopf described its chronology. He then summarized the basic causes of the outage as follows:

-systems were stressed; -not enough reactive support/control in the area; -initiating conditions not studied before; -operators did not know system was insecure; -no one had the “big picture”; and, -reliability impact of maintenance not understood.

As far as lessons learned, Dr. Stahlkopf said he did not believe restructuring was a factor in the outage; rather, the system simply was stressed due to hot weather. On the other hand, he did believe that financial incentives were a factor (i.e., cheap hydro-power in Northwest); they caused flow patterns which were unusual for that time of year and, coincidently, had not been studied. Regarding lack of reactive support in the Western System Coordinating Council (WSCC) at that time, Dr. Stahlkopf noted ongoing studies by NERC and EPRI aimed at determining whether this is a chronic problem.

On the subject on maintenance impacts on reliability, Dr. Stahlkopf noted that BPA had increased their vegetation maintainance budget because of a wetter and hotter than normal growing season but questioned whether, in a competitive market, financial disincentives would exist to cause utilities to try and limit their expenditures on maintainance. Members of the Task Force agreed that this aspect must be addressed.

Dr. Stahlkopf moved on to a discussion of technology improvements that might help avoid such an occurrence in the future. He mentioned three major improvements as being Flow Actuated Control Thyristors (FACTS), Static Compensator (STATCOM), and Unified Power Flow Controller and summarized the likely contributions to reliability of each. One member of the Task Force (Budhraja) commented that all of these devices contribute to getting more out of the installed system and observed the obvious reliability implications. He questioned whether the industry should also be thinking about adding to transmission systems so they don’t have to be operated so close to their limit.

After brief discussions of the Wide Area Measuring System (WAMS), an operations data system, and several EPRI initiatives targeted on maintenance, Dr. Stahlkopf concluded that near-term technologies may improve reliability in four areas: operating tools; transmission system “agility”; monitoring and communications; and, reducing maintenance costs reliably.

5.0 State Reliability Issues

The subject of state reliability issues was addressed by the Honorable Duncan Kincheloe, Commissioner, Missouri Public Service Commission. Mr. Kincheloe said that, while states have historically engaged in regulating the power industry, can establish standards for voltage regulation, govern service priorities for restoration and curtailment, and can set standards for reserve margins, they now face prospects of diminished success in regulatory actions and need new mechanisms to look at reliability. In this regard, he suggested several areas which may warrant further consideration.

-in the area of generation and supply, he acknowledged that: past assurance of rate-based adjustments (by states) to cover investments in capacity may have undergirded utilities’ willingness to invest; and, whereas local distribution companies had responsibilities to restore service in past emergencies as a consequence of franchised territories, this may no longer apply in a competitive future.

-in the area of Federal regulation, he said: if Congress legislates retail competition, states must have authority to demand evidence of experience at providing service/reliability for new market entrants; and, if Congress legislates a (minimum) reliability standard, states would want the responsibility to assure compliance-according to historical roles- and the authority to tighten the standard, if desired.

He concluded with his opinion that states are very much in the transmission regulation business but have major concerns (with the Federal Energy Regulatory Commission (FERC)) with the issue of jurisdiction over unbundled retail power.

After the lunch break, the Chairman announced his intention to open the floor for public comment, followed by a return to member discussions on Mr. Kincheloe’s presentation.

During the public comment period, one observer rose to discuss the use of direct current on the bulk power system and noted that it is on the increase. His consulting company has been advising customers to “move away from the grid” toward more reliance on direct current and he hoped that the Task Force would consider this evolving trend in the industry.

There being no further comment by the public, the Chairman returned to discussions on Mr. Kincheloe’s presentation. During the discussion that followed, a question was raised (Holden) regarding the status of the federal/state transaction “debate. Mr. Kincheloe answered that FERC has asserted jurisdiction over certain unbundled components which heretofore had been within the purview of the states (e.g., retail transactions involving some component of the transmission system). Under the unbundling, FERC has now asserted jurisdiction.

In another area, a question was raised (Dragoumis) as to whether there have been any attempts to establish state compacts (i.e., agreements between two or more states) to set reliability rules and standards. The Chairman noted that states may propose to Congress the approval of compacts, and Congress usually approves them. The problem is that it is unlikely for states to propose compacts on very complex issues because it is so difficult for them to agree on the details.

One member (Meyer) questioned how states would be likely to handle suppliers who have, say, only one generator and whether they would require 100% reserve. While this was considered unlikely, it was also the case that the state probably wouldn’t want to impose very stringent requirements either because the suppliers would be likely to withdraw from doing business in their state….and that would affect the level of competition.

Another member (Flaim) stressed the likely need for different levels of reliability in different places but acknowledged that state-wide, regional or national reserve margins is a problem.

The experience of four years ago with the shutdown of the District of Columbia, including the Secretary of Energy’s call for industry change to avoid such events in the future for the nation’s capital, was cited by one member (Dragoumis) as an example of an action that easily might have required physical changes to the electric system outside the District. This was posed as a clear question of oversight responsibilities and a need for proper incentives.

6.0 Task Force Work Plan Development

In response to the Chairman’s request for specific suggestions of issues to be considered by the Task Force, the members identified and discussed the following:

-Vikram Budhraja noted that, while the system is comprised of generation, transmission and distribution components, 80-90% of the disruptions take place on distribution systems but 70-90% of the expenses are directed to the transmission system. He said that problems on the interconnected grid are simply unacceptable but acknowledged that those issues involve jurisdictional questions.

-Rich Sedano said he believed that generation may need to be parsed into the ancillary services expected with that generation.

-Earl Nye urged the Task Force not to ignore either distribution or generation but to focus instead on the integrated, interconnected grid. He expressed his belief that the market will provide…over time but that, unfortunately this is an instantaneous business. No one expects 100% reliable power everywhere all the time.

-Jose Delgado noted that there is a definite time dimension to the issue of reliability and questioned whether an ISO will have to balance generation and load…instantaneously. Load management, he thought, will be done as a result of market decisions.

-In response to a question by Mark Bonsall as to whether the ISO will be able to accomplish the load/generation balances, Vikram Budhraja stressed that a system cannot be run without doing that. The real question, he thought, involves both who will pay for the service and the consequences when the ISO does have to take action to balance the system.

-Theresa Flaim questioned whether a scoping document was needed to focus the deliberations, possibly grounded in the physical system, possibly on the basis of time. She felt the need to do a basic scoping before attempting to address issues like “what legislation is needed.” She suggested an initial attempt to define the dimensions of reliability.

-Matthew Holden questioned the group’s assumptions regarding the composition of the electric system 10 or 20 years out. That is, whether we expect to be operating under a new gee-whiz electric system, better but in many ways similar to the present system, or that we don’t know what the system of the future will look like.

-In addition to the components of generation, transmission, and distribution, Jose Delgado advised the group not to lose sight of load and institutional issues as possible factors of reliability.

-Alden Meyer suggested the use of scenario analysis to better frame the issues. He thought it would be extremely helpful to be able to advise policy-makers on the likely consequences to reliability of moves in one direction or another.

-Vikram Budhraja cautioned against the use of structural models (e.g., California, Niagara) citing a fundamental change in paradigms. Under the present system, customers have no choice. In the new environment, customers do have a choice. That is a fundamental and powerful distinction. He thought that producers will have more freedom to enter and leave the marketplace and that the electric grid is a unified network; it does not recognize individual ownership.

There being no further comments by the Task Force, the Chairman briefly summarized the accomplishments of the meeting, thanked the members for their attendance and active participation, and adjourned the meeting.