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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
May 23, 2002
(Date of earliest
event reported)
EXHIBIT 99.1
JONES, DAY, REAVIS & POGUE
51 LOUISIANA AVENUE, N.W.
WASHINGTON, D.C. 20001-2113
TELEPHONE: (202) 879-3939 * FACSIMILE: (202) 626-1700
202-879-3917
May 21, 2002
VIA HAND DELIVERY
Donald J. Gelinas, Associate Director
Office of Markets, Tariffs and Rates
Federal Energy Regulatory Commission
888 First Street, N.E.
Washington, D.C. 20426
Re: Sellers of Wholesale Electricity and/or Ancillary Services to the
California Independent System Operator and/or the California Power
Exchange During the Years 2000-2001, Docket No. PA02-2-000
------------------------------------------------------------------
Dear Mr. Gelinas:
Exelon Corporation, on behalf of its wholly-owned subsidiaries, PECO
Energy Company and Exelon Generation Company, LLC (collectively, "Exelon"),
pursuant to your May 8, 2002 letter directing all jurisdictional sellers and all
non-jurisdictional sellers to respond to certain enumerated interrogatories and
requests for the production of documents ("May 8 Letter"), hereby submits the
information requested in the May 8 Letter regarding Exelon's business strategies
and practices in the California Independent System Operator ("California ISO")
and California Power Exchange ("California PX") markets during the years 2000
and 2001.
As indicated in the individual responses furnished herewith, Exelon
engaged in none of the practices associated with the trading strategies
identified with the Enron memoranda that are the focus of the May 8 Letter.
Exelon's responses are based on a thorough search of its records for the
relevant time period.
Exelon notes that the May 8 Letter is addressed to entities including
Exelon Energy Company, but not Exelon Generation Company, LLC or PECO Energy
Company. However, Exelon Energy Company, a subsidiary of Exelon Corporation,
does not participate and has not participated in the wholesale electricity
markets in California. Exelon assumes that the request was intended to apply to
Exelon Generation Company, LLC and PECO Energy Company, the only members of the
Exelon corporate family that were involved in the wholesale electricity markets
in California during the time period covered by the requests. Thus, Exelon
provides this response on behalf of those entities.
Mr. Donald J. Gelinas
May 21, 2002
Page 2
Please contact the undersigned if you have any questions regarding the
materials submitted herewith.
Respectfully submitted,
EXELON CORPORATION on behalf of
EXELON GENERATION COMPANY, LLC and
PECO ENERGY COMPANY
By: /s/ Kevin J. McIntyre
------------------------------------------
Robert S. Waters
Kevin J. McIntyre
Jonathan F. Christian
Jones, Day, Reavis & Pogue
51 Louisiana Avenue, NW
Washington, D.C. 20001-2113
Phone: (202) 879-3939
Facsimile: (202) 626-1700
Email: rswaters@jonesday.com
kjmcintyre@jonesday.com
jchristian@jonesday.com
Noel Trask
Exelon Generation Company, LLC
300 Exelon Way
Kennett Square, PA
Phone: (610) 765-6649
Facsimile: (610) 765-7649
Email: ntrask@pwrteam.com
Its attorneys
Docket No. PA02-2-000
Response of Exelon Corporation, on behalf of
Exelon Generation Company, LLC and PECO Energy Company,
to May 8, 2002 FERC Staff Data Request
I. Requests for Admissions
Request:
A. 1. Admit or Deny: The company engaged in activity referred to
in the Enron memoranda as "Export of California Power" during
the period 2000-2001, in which the company buys energy at the
Cal PX to export outside of California in order to take
advantage of the price spread between California markets
(which were capped) and uncapped markets outside California.
2. If you so admit, provide complete details as to all
transactions your company engaged in as part of this activity,
including the dates of all purchases and sales of energy
and/or ancillary services, counter-parties to the
transactions, prices and volumes, delivery points, and
corresponding Cal ISO schedules. Also, provide all documents
that refer or relate to the activity described immediately
above.
Response:
A. 1. Deny. Exelon did not engage in the activity described as
"Export of California Power" or any variant of that activity
during the relevant time period. Further, Exelon did not
schedule exports off the California ISO system during this
period.
2. Not applicable.
1
Docket No. PA02-2-000
Response of Exelon Corporation, on behalf of
Exelon Generation Company, LLC and PECO Energy Company,
to May 8, 2002 FERC Staff Data Request
I. Requests for Admissions (continued)
Request:
B. 1. Admit or Deny: The company engaged in activity described in
the Enron memoranda as "Non-Firm Export" during the period
2000-2001, in which the company gets a counterflow (scheduling
energy in the opposite direction of a constraint) congestion
payment from the Cal ISO by scheduling non-firm energy from a
point in California to a control area outside of California,
and cutting the non-firm energy after it receives such
payment.
2. If you so admit, provide complete details as to all
transactions that your company engaged in as part of this
activity, including the dates of all transactions, congestion
payments received, corresponding Cal ISO schedules, counter
parties, and delivery points. Also, provide all documents that
refer or relate to the activity described immediately above.
Response:
B. 1. Deny. Exelon did not engage in the activity referred to as
"Non-Firm Export" or any variant of that activity during the
relevant time period. Further, as noted in Exelon's response
to Request No. I.A.1., Exelon did not schedule exports off the
California ISO system. In addition, Exelon did not participate
in the California ISO's congestion market, and therefore
Exelon did not receive any congestion payments from the
California ISO.
2. Not applicable.
2
Docket No. PA02-2-000
Response of Exelon Corporation, on behalf of
Exelon Generation Company, LLC and PECO Energy Company,
to May 8, 2002 FERC Staff Data Request
I. Requests for Admissions (continued)
Request:
C. 1. Admit or Deny: The company engaged in activity described in
the Enron memoranda as "Death Star" during the period
2000-2001, in which the company schedules energy in the
opposite direction of congestion (counterflow), but no energy
is actually put onto the grid or taken off of the grid. This
allows the company to receive congestion payments from the Cal
ISO.
2. If you so admit, provide complete details as to all
transactions that your company engaged in as part of this
activity, including the dates of all transactions, all
transmission and energy schedules, the counter parties, all
congestion payments received. Also, provide all documents that
refer or relate to the activity described immediately above.
Response:
C. 1. Deny. Exelon did not engage in the activity referred to as
"Death Star" or any variant of that activity during the
relevant time period. Further, as noted in Exelon's Response
to Request No. I.B.1., Exelon did not participate in the
California ISO's congestion market, and therefore Exelon did
not receive any congestion payments from the California ISO.
2. Not applicable.
3
Docket No. PA02-2-000
Response of Exelon Corporation, on behalf of
Exelon Generation Company, LLC and PECO Energy Company,
to May 8, 2002 FERC Staff Data Request
I. Requests for Admissions (continued)
Request:
D. 1. Admit or Deny: The company engaged in activity described in
the Enron memoranda as "Load Shift" during the period
2000-2001. This variant of "relieving congestion" involves
submitting artificial schedules in order to receive
inter-zonal congestion payments . The appearance of congestion
is created by deliberately over-scheduling load in one zone
(e.g., NP-15), and under-scheduling load in another,
connecting zone (e.g., SP-15); and shifting load from a
congested zone to the less congested zone, thereby earning
congestion payments for reducing congestion.
2. If you so admit, provide complete details as to all
transactions that your company engaged in as part of this
activity, including the dates of all transactions, all
schedules of load by zone, and congestion payments received.
Also, provide all documents that refer or relate to the
activity described immediately above
Response:
D. 1. Deny. Exelon did not engage in the activity referred to as
"Load Shift" or any variant of that activity during the
relevant time period. Further, as noted in Exelon's response
to Request No. I.B.1., Exelon did not participate in the
California ISO's congestion market, and therefore Exelon did
not receive any congestion payments from the California ISO.
In addition, Exelon has no load in California and did not
participate in the balanced scheduling of generation and load
in California, nor did Exelon submit artificial schedules to
the ISO to create the appearance of congestion.
2. Not applicable.
4
Docket No. PA02-2-000
Response of Exelon Corporation, on behalf of
Exelon Generation Company, LLC and PECO Energy Company,
to May 8, 2002 FERC Staff Data Request
I. Requests for Admissions (continued)
Request:
E. 1. Admit or Deny: The company engaged in activity described in
the Enron memoranda as "Get Shorty" during the period
2000-2001, also known as "paper trading" of ancillary services
in which it: (i) sells ancillary services in the Day-ahead
market; and (ii) the next day, in the real-time market, the
company "zeros out" the ancillary services by cancelling the
commitment to sell and buying ancillary services in the
real-time market to cover its position. The phrase "paper
trading" is used because the seller does not actually have the
ancillary services to sell.
2. If you so admit, provide complete details as to all
transactions that your company engaged in as part of this
trading strategy, including the dates of all transactions;
prices and volumes for sales of ancillary services in the
Day-ahead market; the cancellation of such sales, prices and
volumes for the purchase of ancillary services in the
real-time market to cover the company's position; and
corresponding schedules. Also, provide all documents that
refer or relate to the activity described immediately above.
Response:
E. 1. Deny. Exelon did not engage in the activity referred to as
"Get Shorty" or any variant of that activity during the
relevant time period.
2. Not applicable.
5
Docket No. PA02-2-000
Response of Exelon Corporation, on behalf of
Exelon Generation Company, LLC and PECO Energy Company,
to May 8, 2002 FERC Staff Data Request
I. Requests for Admissions (continued)
Request:
F. 1. Admit or Deny: The company engaged in activity described in
the Enron memoranda as "Wheel Out" during the period
2000-2001. Knowing that an intertie is completely constrained
(i.e., its capacity is set at zero), or that a line is out of
service, the company schedules a transmission flow over the
facility. The company also knows that the schedule will be cut
and it will receive a congestion payment without actually
having to send energy over the facility.
2. If you so admit, provide complete details as to all
transactions that your company engaged in as part of this
activity, including the dates of all transactions,
corresponding schedules, counter parties, and congestion
payments received. Also, provide all documents that refer or
relate to the activity described immediately above.
Response:
F. 1. Deny. Exelon did not engage in the activity referred to as
"Wheel Out" or any variant of that activity during the
relevant time period. Further, Exelon did not schedule
transmission on the California ISO transmission system and, as
noted in Exelon's response to Request No. I.B.1., Exelon did
not participate in the California ISO's congestion market, and
therefore Exelon did not receive congestion payments from the
California ISO.
2. Not applicable.
6
Docket No. PA02-2-000
Response of Exelon Corporation, on behalf of
Exelon Generation Company, LLC and PECO Energy Company,
to May 8, 2002 FERC Staff Data Request
I. Requests for Admissions (continued)
Request:
G. 1. Admit or Deny: The company engaged in activity described in
the Enron memoranda as "Fat Boy" during the period 2000-2001
in which the company artificially increases load on the
schedule it submits to the Cal ISO with a corresponding amount
of generation. The company then dispatches the generation its
schedules, which is in excess of its actual load. This results
in the Cal ISO paying the company for the excess generation.
Scheduling coordinators that serve load in California may be
able to use this activity to includes the generation of other
sellers.
2. If you so admit, provide complete details as to all
transactions that your company engaged in as part of this
activity, including the dates of all transactions,
corresponding schedules, and payments from the Cal ISO for
excess generation (including both price and volumes). Also,
provide all documents that refer or relate to the activity
described immediately above.
Response:
G. 1. Deny. Exelon did not engage in the activity referred to as
"Fat Boy" or any variant of that activity during the relevant
time period. As noted in Exelon's response to Request No.
I.D.1., Exelon did not have any load or generation in
California and did not participate in the balanced scheduling
of generation and load.
2. Not applicable.
7
Docket No. PA02-2-000
Response of Exelon Corporation, on behalf of
Exelon Generation Company, LLC and PECO Energy Company,
to May 8, 2002 FERC Staff Data Request
I. Requests for Admissions (continued)
Request:
H. 1. Admit or Deny: The company engaged in activity described in
the Enron memoranda as "Ricochet," also known as "megawatt
laundering," during the period 2000-2001, in which the
company: (i) buys energy from the Cal PX and exports to
another entity, which charges a small fee; and (ii) the first
company resells the energy back to the Cal ISO in the
real-time market.
2. If you so admit, provide complete details as to all
transactions that your company engaged in as part of this
activity, including the dates for all transactions, names of
counter parties and whether they were affiliates, the fees
charged, prices and volumes for energy that was bought and
then re-sold. Also, provide all documents that refer or relate
to the activity described immediately above.
Response:
H. 1. Deny. Exelon did not engage in the activity referred to as
"Ricochet" or any variant of that activity during the relevant
time period. Further, as noted in Exelon's response to Request
No. I.A.1., Exelon did not export power from the California
ISO system during the relevant time period.
2. Not applicable.
8
Docket No. PA02-2-000
Response of Exelon Corporation, on behalf of
Exelon Generation Company, LLC and PECO Energy Company,
to May 8, 2002 FERC Staff Data Request
I. Requests for Admissions (continued)
Request:
I. 1. Admit or Deny: The company engaged in activity described in
the Enron memoranda as "Selling Non-firm Energy as Firm
Energy" during the period 2000-2001, in which the company
sells or resells what is actually non-firm energy to the Cal
PX, but claims that it is "firm" energy. This allows the
company to receive payment from the Cal ISO for ancillary
services that it claims to be providing, but does not in fact
provide.
2. If you so admit, provide complete details as to all
transactions that your company engaged in as part of this
activity, including the dates for all transactions, prices and
volumes, and corresponding schedules. Also, provide all
documents that refer or relate to the activity described
immediately above.
Response:
I. 1. Deny. Exelon did not engage in the activity referred to as
"Selling Non-Firm Energy as Firm Energy" or any variant of
that activity during the relevant time period. All of Exelon's
sales of firm energy in the California markets during the
relevant time period represented Exelon's purchase and
subsequent resale of firm energy in those markets.
2. Not applicable.
9
Docket No. PA02-2-000
Response of Exelon Corporation, on behalf of
Exelon Generation Company, LLC and PECO Energy Company,
to May 8, 2002 FERC Staff Data Request
I. Requests for Admissions (continued)
Request:
J. 1. Admit or Deny: The company engaged in activity described in
the Enron memoranda as "Scheduling Energy to Collect
Congestion Charge II" during the period 2000-2001, in which
the company: (i) schedules a counterflow even though it does
not have any available generation; (ii) in real time, the Cal
ISO charges the company for each MW that it was short; and
(iii) the company collects a congestion payment associated
with the counterflow scheduled. This activity is profitable
whenever the congestion payment is greater than the charge
associated with the energy that was not delivered.
2. If you so admit, provide complete details as to all
transactions that your company engaged in as part of this
activity, including the dates for all transactions,
corresponding schedules, prices and volumes, and congestion
payments received. Also, provide all documents that refer or
relate to the activity described immediately above.
Response:
J. 1. Deny. Exelon did not engage in the activity referred to as
"Scheduling Energy to Collect Congestion Charge II" or any
variant of that activity during the relevant time period.
Further, as noted in Exelon's response to Request No. I.B.1.,
Exelon did not participate in the California ISO's congestion
market, and therefore Exelon did not receive any congestion
payments from the California ISO.
2. Not applicable.
10
Docket No. PA02-2-000
Response of Exelon Corporation, on behalf of
Exelon Generation Company, LLC and PECO Energy Company,
to May 8, 2002 FERC Staff Data Request
I. Requests for Admissions (continued)
Request:
K. 1. Admit or Deny: The company engaged in any activity during
the period 2000-2001 that is a variant of any of the
above-described activities or that is a variant of, or uses
the activities known as, "inc-ing load" or "relieving
congestion," as described above.
2. If you so admit, provide a narrative description of each
specific time in which the company engaged in such activity
and provide complete details of those transactions, including
the dates of the transactions, counter parties, prices and
volumes bought or sold, corresponding schedules, and any
congestion payments received. Also, provide all documents that
refer to or relate to such activities.
Response:
K. 1. Deny. Exelon did not engage in the activities referred to
as "inc-ing load" and "relieving congestion" or any variant of
those activities during the relevant time period. Further, as
noted in Exelon's response to Request No. I.B.1., Exelon did
not participate in the California ISO's congestion market, and
therefore Exelon did not receive any congestion payments from
the California ISO and, as noted in Exelon's response to
Request No. I.D.1., Exelon has no load in California and did
not participate in the balanced scheduling of generation and
load in California during the relevant time period.
2. Not applicable.
11
Docket No. PA02-2-000
Response of Exelon Corporation, on behalf of
Exelon Generation Company, LLC and PECO Energy Company,
to May 8, 2002 FERC Staff Data Request
II. Requests for Production of Documents
Request:
A. Provide copies of all communications or correspondence, including e-mail
messages, instant messages, or telephone logs, between your company and any
other company (including your affiliates or subsidiaries) with respect to all of
the trading strategies discussed in the Enron memoranda (both the ten
"representative trading strategies" as well as "inc-ing load" and "relieving
congestion"). This request encompasses all transactions conducted as part of
such trading strategies engaged in by your company and the other company in the
U.S. portion of the WSCC during the period 2000-2001.
Response:
A. Exelon did not engage in the activities that form the basis for this request
for the production of documents and was not aware of other market participants
engaging in these activities during the relevant time period. This response is
based on a thorough search of Exelon's records for the relevant time period,
which yielded no documents responsive to this request.
12
Docket No. PA02-2-000
Response of Exelon Corporation, on behalf of
Exelon Generation Company, LLC and PECO Energy Company,
to May 8, 2002 FERC Staff Data Request
II. Requests for Production of Documents (continued)
Request:
B. Provide copies of all material, including, but not limited to, opinion
letters, memoranda, communications (including e-mails and telephone logs), or
reports, that address or discuss your company's knowledge of, awareness of,
understanding of, or employment or use of any of the trading strategies
discussed in the Enron memoranda, or similar trading strategies, in the U.S.
portion of the WSCC during the period 2000-2001. The scope of this request
encompasses all material that address or discuss your company's knowledge or
awareness of other companies' use of the trading strategies discussed in the
Enron memoranda, or similar trading strategies, including, but not limited to:
(i) offers by such other companies to join in transactions related to such
trading strategies, regardless of whether such offers were declined or accepted;
and (ii) possible responses by your companies to other companies' use of such
trading strategies. To the extent that you wish to make a claim of privilege
with respect to any responsive material, please provide an index of each of
those materials, which includes the date of the each individual document, its
title, its recipient(s) and its sender(s), a summary of the contents of the
document, and the basis of the claim of privilege.
Response:
B. Exelon did not engage in the activities that are identified in this data
request during the relevant time period and was not aware of other market
participants engaging in those activities during the relevant time period. This
response is based on a thorough search of Exelon's records for the relevant time
period, which yielded no documents responsive to this request.
13
Docket No. PA02-2-000
Response of Exelon Corporation, on behalf of
Exelon Generation Company, LLC and PECO Energy Company,
to May 8, 2002 FERC Staff Data Request
III. Requests for Other Information
Request:
A. On page 2 of the December 8, 2000, Enron memorandum, the authors allege that
traders have learned to build in under-scheduling of energy into their models
and forecasts. State whether your company built under-scheduling into any of its
models or forecasts during the period 2000-2001, and provide a narrative
description of such activity. Provide copies of all such models or forecasts
prepared by or relied on by your company during the period 2000-2001 that had
under-scheduling built into them.
Response:
A. Exelon did not prepare models or forecasts of the California market during
the relevant time period. As a result, Exelon has no materials responsive to
this request.
14
Docket No. PA02-2-000
Response of Exelon Corporation, on behalf of
Exelon Generation Company, LLC and PECO Energy Company,
to May 8, 2002 FERC Staff Data Request
III. Requests for Other Information (continued)
Request:
B. Refer to the discussion of the trading strategy described as "Ricochet" in
the Enron memoranda. State whether your company purchased energy from, or sold
energy to, any Enron company, including Portland General Electric Company, as
part of a "Ricochet" (or megawatt laundering) transaction during the period
2000-2001. Provide complete details as to such transactions, including the dates
of the transactions; the names, titles, and telephone numbers of the traders at
your company who engaged in such transactions; the prices at which your company
bought and sold such energy (on a per transaction basis); the volumes bought and
sold (on a per transaction basis); delivery points; and all corresponding
schedules.
Response:
B. Exelon did not purchase energy from or sell energy to Enron or any Enron
affiliate during the relevant time period as part of a "Ricochet" or "megawatt
laundering" transaction. Exelon did transact with Enron and its affiliates
during the relevant time period, however, Exelon was not a willing or knowing
participant in any ricochet or megawatt laundering transactions and is unaware
of any transactions that it may have conducted with Enron or any of its
affiliates that resulted in a ricochet or megawatt laundering transaction.
15
AFFIDAVIT OF IAN P. McLEAN
COMMONWEALTH OF PENNSYLVANIA ss.
ss. SS.
COUNTY OF CHESTER ss.
Ian P. McLean, being duly sworn, deposes and states: that he prepared
or supervised the preparation of the Response of Exelon Corporation, on behalf
of Exelon Generation Company, LLC and PECO Energy Company, to the
Interrogatories and Requests for Production of Documents contained in the May 8,
2002 Letter from Donald J. Gelinas, Associate Director, Office of Markets,
Tariff and Rates, Federal Energy Regulatory Commission, to All Sellers of
Wholesale Electricity and/or Ancillary Services to the California Independent
System Operator and the California Power Exchange During the Years 2000 and
2001, that such response was prepared after a thorough investigation conducted
under his supervision and control, and that the statements contained therein are
true and correct to the best of his knowledge and belief.
/s/ Ian P. McLean
-----------------------------------------------------
Ian P. McLean
Executive Vice President, Exelon Corporation,
Senior Vice President, Exelon Generation Company, LLC
and
President, Exelon Power Team
Subscribed and sworn to before me this 17th day of May, 2002.
/s/ Diane B. Favorin
- -----------------------------------------------------
Notary Public
[Diane B. Favorin]
- -----------------------------------------------------
Printed Name
[April 22, 2006] [SEAL]
- --------------------------------------------
My Commission Expires: