Staff/SEL-51

Referring to Exhibit SEL-1, page 7, lines 4-7, please describe the “differences in quantity.”

Staff/SEL-52

With respect to Dr. Cicchetti's contention in this proceeding that MMCP should be used in all hours, please explain why use of the original market-clearing price (MCP) in those hours when the MCP is less than the MMCP will frustrate the market expectations of those suppliers who bid less than or equal to the MCP during those hours.

Staff/SEL-53

Referring to Exhibit SEL-1, page 9, lines 5-7,

a)	please define “genuinely competitive market”, as used by Dr. Cicchetti.

b)	does Dr. Cicchetti contend that sellers’ bid prices do not reflect natural gas prices?  Please explain.

c)	does Dr. Cicchetti contend that sellers’ bid prices reflect demand in a genuinely competitive market?  Please explain.

d)	does Dr. Cicchetti contend that sellers’ bid prices do not reflect rainfall conditions?  Please explain.

Staff/SEL-54

a)	Referring to Exhibit SEL-1, page 9, lines 18-20, please explain, in detail, how the California ISO’s argument conflicts with the “expected value principles” found in statistics. 

b)	Referring to Exhibit SEL-1, page 9, lines 18-20, please explain, in detail, how the California ISO’s argument conflicts with the “expected value principles” found in the “economic goals the Commission sought to achieve in this case” 

Staff/SEL-55

Referring to Exhibit SEL-1, page 12, lines 1-4, please explain the basis for Dr. Cicchetti’s belief that “although some of the cases take into account a third set of calculations -- the total revenues that would have been received had the prior nonprovisional or “clean” rates been charged, as a floor on refunds”, this element is not present in this case.

Staff/SEL-56

Please refer to Exhibit SEL-4.  The California ISO is currently rerunning its settlements for the refund period.  As a result of that rerun, do you expect that the numbers shown on Exhibit SEL-4 will change?  If no, please explain.

Staff/SEL-57

Please refer to Exhibit SEL-1, page 13, lines 13-24 and page 14, lines 1-4, and Exhibit SEL-4.

a)	Please specify which column shown on Exhibit SEL-4 represents the “CAISO’s lower reference price” as discussed on page 13, lines 13-14.

b)	Referring to Exhibit SEL-1, page 13, lines 19-24,

i)	please specify which column shown on Exhibit SEL-4 represents the California ISO’s interpretation of the July 25 Order.

	ii)	for the column specified in part i), above, if this represents the California ISO’s interpretation of the July 25 Order, please explain why the numbers shown under that column on Exhibit SEL-4 differ for each entity shown.

c)	Please specify which column shown on Exhibit SEL-4 represents the MMCP that the California ISO used to determine the rerun settlements and explain why the numbers differ for each entity shown.
d)	Please explain, in detail, how Exhibit SEL-4, shows the effect of substituting the California ISO’s lower reference price for the MMCP as discussed in Exhibit SEL-1, pages 13 and 14.

Staff/SEL-58

Referring to Exhibit SEL-1, page 14, lines 9-11, does “this double adjustment” refer to  the California ISO adjusting  both charge types 401 and 481, or the claimed use of a lower reference price?  Please specify.

Staff/SEL-59

Referring to page 14 of Exhibit SEL-1, Dr. Cicchetti addresses the California ISO's proposed mitigation of out-of-state OOM sales, i.e., replacing the estimated MMCP with a lower MCP.

a)	If Dr. Cicchetti's clients find that such prices are non-compensatory are not they free to charge cost-of-service rates for all their sales during the refund period?

b)	If the answer to (a) is yes, why would his clients be harmed by the California ISO's proposal?

c)	Is it Dr. Cicchetti's contention that the OOM prices charged by his clients during the refund period do not need to be adjusted?  If so, please explain why these prices can be presumed to be just and reasonable.

Staff/SEL-60

a)	Please provide Dr. Cicchetti's definition of "market" as that term is generally used today in the electric power industry.

b)	Please provide Dr. Cicchetti's definition of "market" as that term is generally used today by FERC.

c)	Please provide Dr. Cicchetti's definition of "competitive market" as that term is generally used today by FERC.	

Staff/SEL-61

Referring to Exhibit SEL-1, page 16, lines 5-6, please explain how the California ISO’s real-time market was receiving energy from the PX markets at unreasonable and unexpected levels.  Provide supporting documentation and workpapers.

Staff/SEL-62

Referring to Exhibit SEL-1, page 17, lines 12-14 and page 18, lines 1-2,

a)	does “30 percent of the state’s needs” include loads located outside of the ISO control area?  If yes, please explain.

b)	can “out of California supply” consist of sales other than OOM?  If yes, please  indicate what other types of sales can be supplied by “out of California supply.”

Staff/SEL-63

Referring to Exhibit SEL-1, page 27, lines 1-2, did the California ISO select the lowest incremental heat rate of the interval or of the unit?  If your response is “the interval”, would a unit necessarily be at its shut down point?  Please explain.

Staff/SEL-64

Referring to Exhibit SEL-1, page 28, lines 4-6, Dr. Cicchetti states that the CAISO did not include any generation as marginal unless it had a PGA.  Dr. Cicchetti then states that a unit must also be in California.

a)	Please list all generating units located outside of California which have executed PGAs.

b)	Is it not a fact that the California ISO simply restricted marginal units to those which are eligible to submit BEEP bids?
Staff/SEL-65

Referring to Exhibit SEL-1, page 28, lines 14-16, Dr. Cicchetti states that the CAISO excluded OOM purchases needed for system reliability but from sources outside of the CAISO's control area.  Please list those hours in which the CAISO included OOM purchases made for system reliability purposes from units in its control area.

Staff/SEL-66

Referring to Exhibit SEL-1, page 29, lines 20-21, please specify the types of “inadvertent source of supply” present in the California ISO’s analysis and explain why each type is “inadvertent”.

Staff/SEL-67

Referring to Exhibit SEL-1, page 29, lines 22-23 and page 30, line 1, Dr. Cicchetti defines an "inframarginal" unit as one  which is less expensive than the penultimate unit.  Why isn't the penultimate unit also inframarginal?

Staff/SEL-68

Referring to Exhibit SEL-1, page 33, lines 12-18, is Dr. Cicchetti aware of any occurrences where the Commission’s heat rate approach did not select the unit with the highest marginal cost?  If yes, please specify each such occurrence.

Staff/SEL-69

Referring to Exhibit SEL-1, page 35, lines 1-17, in intervals where the California ISO’s approach yielded a higher heat rate than otherwise would have resulted had the California ISO selected a unit with an accepted hour ahead schedule, does Dr. Cicchetti contend that the California ISO’s approach overestimates the MMCP?  If no, please explain.

Staff/SEL-70

Referring to Exhibit SEL-1, page 35, lines 6-12, in the two instances during the referenced five-day period that the California ISO chose a unit with the lowest heat rate among the units that had submitted a Real Time Energy bid during the interval, did the selected unit have a final hour ahead schedule?

Staff/SEL-71

a)	What is Dr. Cicchetti’s understanding of a unit that has an “acknowledged incremental dispatch instruction” from the California ISO during an interval?

b)	What is Dr. Cicchetti’s understanding of a unit that has an “acknowledged decremental dispatch instruction” from the California ISO during an interval?

Staff/SEL-72

Referring to Exhibit SEL-1, page 35, lines 24-25 and page 36, line 1, what is the basis for Dr. Cicchetti’s contention that the unit did not actually provide energy during the interval?

Staff/SEL-73

Referring to Exhibit SEL-1, page 36, lines 22-23, Dr. Cicchetti states that whether a particular unit would have been chosen depends on what its bid was and what its other costs would have been   How do costs, as opposed to bids, play a role in the selection of a unit by the California ISO's BEEP program?

Staff/SEL-74

Referring to Exhibit SEL-1, page 37, lines 14-16, Dr. Cicchetti uses the word "market".  Exactly what market is Dr. Cicchetti referring to?

Staff/SEL-75

With respect to Dr. Cicchetti's advocacy of average heat rates in this proceeding, please answer the following:
	
a)	Please explain Dr. Cicchetti's understanding of how average heat rates were used in the past by vertically integrated electric utilities in unit commitment and dispatch of generation.  

b)	For a generation unit that is already making a sale to the California PX or bilateral market, please explain if the owner/operator would structure its bid or OOM offer to the California ISO's real-time imbalance market based on its average costs or its incremental costs (assuming a competitive market).

c)	What role, if any, does Dr. Cicchetti believe incremental heat rates played in the commitment and dispatch of generating units in the vertically integrated utility industry?

d)	What role, if any, does Dr. Cicchetti believe incremental heat rates play in the commitment, dispatch, and bidding of generating units in deregulated markets?

e)	Does Dr. Cicchetti admit or deny that to minimize the total variable generation costs of units on line serving load in California, thermal units should operate at an output level such that the incremental cost of each thermal unit is identical (ignoring transmission losses)?  Please explain your answer.

f)	If the answer to part e) is admit, please explain why a real-time dispatch based on something other than incremental costs would not produce a sub-optimal dispatch?

Staff/SEL-76

Referring to Exhibit SEL-1, page 51, lines 4-5,

a)	what distribution did spot natural gas prices exhibit during the critical December 2000 time period?

b)	what distribution did spot natural gas prices exhibit during the refund-period months other than December?

c)	how was it determined that the distributions were “statistically” different?
Staff/SEL-77

Referring to Exhibit SEL-1, page 51, lines 10-11, please cite the Commission order that specifically rejects “midpoint methods.”

Staff/SEL-78

Referring to Exhibit SEL-1, page 51, lines 15-16, are the midpoint prices modal prices?  Please provide all supporting documentation.

Staff/SEL-79

Referring to Exhibit SEL-1, page 52, lines 4-7,

a)	please define “true ‘high’ natural gas price.”

b)	please identify or define “these various distributions”, as used by Dr. Cicchetti.

d)	please provide the statistical analyses performed.  Include all supporting workpapers or if already included in the exhibits, provide the specific cite.

Staff/SEL-80

a)	Please provide Exhibit SEL-3, Appendix 1, NP15 Prices for Refund Calculations, in Excel spreadsheet format and include all supporting data used to compute the column “Marginal Natural Gas Price.” 

b)	Please provide Exhibit SEL-3, Appendix 2, SP15 Prices for Refund Calculations, in Excel spreadsheet format and include all supporting data used to compute the column “Marginal Natural Gas Price.”

Staff/SEL-81

Referring to Exhibit SEL-3, Appendix 3, please describe, in detail, the ordinary least squares estimation shown, indicate what “ppxn15 ” represents, and indicate where the analysis and results are addressed in Exhibit SEL-1.

Staff/SEL-82

Please refer to Exhibit SEL-5, Calculations for “Normal” (p1) and “Extreme” (p2) Values, NGI (NP15).

a)	Referring to the calculation of  “Normal” (p1), please explain the use of each of the following:

	i)	set r = (high-low)
ii)	rem Confidence bounds for sigma
	iii)	set n = 50  #  assume a number of transactions
	iv)	set shigh = r/3
	v)	set slow = r / sqrt (2*n)
vi)	rem large n
	vii)	set s = r/5
	viii)	rem calculate the 95% price level assuming normality
	ix)	set p1 = invnorm(.975)*s + average

b)	Please describe what “Normal” (p1) represents.

c)	Referring to the calculation of “Extreme” (p2), please explain the use of each of the following:

	i)	rem - extreme value distribution
	ii)	set theta = (high-average)/log(n)
	iii)	set euler = 0.57722
	iv)	set z = average - euler * theta
	v)	rem invert the extreme-value
	vi)	set p2 = theta * (-log(-log(.975))) + z

d)	Please describe what “Extreme” (p2) represents.

Staff/SEL-83
Please refer to Exhibit SEL-3, Appendix 5, pages numbered 1 to 4 of 30 showing ISO, PEG SP15 Prices for Refund Calculations.

a)	What is “PEG Highs Average” and how is it calculated?  Include an example.

b)	Does “PEG ‘Normal’ (P1) Average” show the results from the Calculations for “Normal” (p1) and “Extreme” (p2) Values, Gas Daily (SP15)?  If no, please explain what is being averaged.

c)	Does “PEG ‘Extreme’ (P2) Average” show the results from the Calculations for “Normal” (p1) and “Extreme” (p2) Values, Gas Daily (SP15)?  If no, please explain what is being averaged.

Staff/SEL-84

Referring to Exhibit SEL-1, page 55, lines 10-13,

a)	Which Appendix to Exhibit SEL-3 that contains the statistical analysis?

b)	Please describe how the results of the statistical analysis demonstrate that gas prices for the five days are statistically different from the norm or typical day’s natural gas prices. 

Staff/SEL-85

Referring to Exhibit SEL-1, page 56, lines 4-7, are the recommended averages shown on Exhibits 3, Appendices 1 and 2?  If no, please indicate where these are shown.

Staff/SEL-86

Referring to Exhibit SEL-1, page 1-2, during the refund period were any of the marketers and aggregators on whose behalf Dr. Cicchetti filed testimony billed separately for NOx costs (i.e., the purchase price was unbundled) for power “purchased and resold”?  If yes, please provide the amounts invoiced and supporting documentation.

Staff/SEL-87

Referring to Exhibit SEL-1, page 68, lines 6-7, please define “rights-of-way” as used by Dr. Cicchetti.